UNIVERSITY 

OF  CALIFORNIA 

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LIBRARY 


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1 


A  TREATISE 


.  LAW  OF  PARTNERSHIP, 

INCLUDING  ITS 

APriiCATION  TO  COMPANIES. 

FOURTH  EDITION. 

BY 

THE  HON.  Sill  NATHANIEL  LINDLEY,  KNT. 

ONE  OF  THE  JVDOES  OF  UER  MAJESTY'S  RIOB  COURT  OF  JUSTICE. 

ASSISTED  BY 

SAMUEL  DICKINSON, 

OF    LINCOLN'S    INN,    ESQ.,    BABItlSTER-AT-LAW. 


EDITED  AND  ANNOTATED  BY 

MARSHALL  D.  EWELL,  LL.  D. 


IN  TWO  VOLUMES. 
VOL.  II. 


CniCAGO: 
CALLAGHAN  &  COMrANY. 

1881. 


Entered  according  to  Act  of  Congress,  in  the  year  18S1, 
BY  CALLAGHAN  &  COMPANY, 

In  the  OOice  of  the  Librarian  of  Congress,  at  Washington,  T>.  C. 


V-<o4^- 


Stereotyped  and  Printed  by 
The  Chicago  Lfgal  News  Company. 


LAW  OF  PAllTNERSHIP, 

ETC. 
SECTION  III,  CHAPTER  ITT,  BOOK  TI. 


OF    SET-OFF. 

Closely  connected  with  the  subjects  discnssod  in  the  two  preced- 
ing sections,  is  the  right  of  a  defendant  to  set  up,  in  opposition  to 
the  claim  made  against  him,  a  counter-claim,  which  the  defendant 
might  himself  make  the  subject  of  a  crocs-action  against 
the  plaintiff.  The  power  of  a  defendant  *todothis  is  much  *o03 
more  extensive  tlian  it  was;  for  by  Order  XIX,  rule  3,  a 
defendant  may  set  off  or  set  up  by  way  of  counter-claim  any  right 
or  claim,  wlicther  to  a  definite  amount  or  not;  but  provision  is 
made  for  disallowing  a  cross-claim  if  it  cannot  be  conveniently 
disposed  of  in  the  particular  action  in  which  it  is  set  np.  A  short 
account,  however,  of  the  law  as  it  stood  before  this  alteration,  may 
still  be  useful. 


1.     Of  set-off  hii  and  against  partnerships. 
\  I 

The  right  of  setting  off  one  claim   against   another  appears  only 

to  exist  at  common  law,  where  a  person  seeks  to  avail 

,.  1/./.  T  ^       ^  •  -  lii'l.  Set-off  at  law. 

lumselfoi  a  lien  on  goods  his  possession,  but  ot 
which  he  is  not  the  owner.  I  Jut,  by  statute  2,  Geo.  2,  c.  22,  it  is 
enacted  "  that  where  there  are  mutual  debts  between  the  plaintiff 
and  the  defendant,  or  if  either  party  sue  or  be  sued,  as  executor  or 
administrator,  where  thero  arc  mutual  debts  between  the  testator 
or  intestate  and  either   party,    one   debt   may    be   set   against  the 

703 


(p(ol75(o 


*504  BET-OFF.  [book  H. 

other."  (■y)  The  statute,  it  will  be  observed,  only  mentions  mutual 
debts,  and  this  expression  has  been  held  to  be  confined,  first,  to  debts 
in  the  narrow  sense  of  the  word,  i.  e.,  definite  and  ascertained  sums 
of  mone)',  owing  by  each  party  to  the  other  («);  and,  secondly,  to 
debts  owing  to  and  by  each  party  in  one  and  the  same  capacity,  {y) 

Courts  of  equity,  although  governed  in  questions  of  set-oif  by 
princi])les  similar  to  those  which  governed  courts 
equuy^^'"'  *504  of  law,  *  went  further  than  courts  of  law  in  ap- 
plying those  principles;  admitting  set-off  in  some 
cases  where  courts  of  law  did  not,  and  disallowing  it  in  others 
where  they  did.  (2) 

The  combined  effect  of  the  rules  at  law  and  in  equity  on  the  sub- 
iiuics  as  to  jectof  set-off  so  fiir  as  it  is  necessary  to  allude  to  them 
sct-ofi'.  jj^  ^^Q  present  treatise  was  as  follows  : 

1.  Joint  debts  owing  to  and  by  the  same  persons  in  the  same 
right  could  be  set  off  both  at  law  and  in  equit3^ 

2.  Se])arate  debts  owing  to  and  by  the  same  person  in  the  same 
right  could  also  be  set  off"  both  at  law  and  in  equity. 

3.  Debts  not  owing  to  and  by  the  same  persons  in  the  same  right 
could  not  be  set  off  either  at  law  or  in  equity.  But  in  considering 
whether  debts  were  so  owing,  courts  of  law  regarded  the  legal  right, 
whilst  courts  of  equity  regarded  the  equitable  right;  and  this  led  to 
the  following  amongst  other  important  practical  and  different  results. 

If  a  covenant  was  entered  into  by  one  partner  only,  and  he  was 
sued  on  the  covenant,  he  could  at  law  set  off  a  debt  due  from  the 
plaintiff  to  himself  alone  ;  or  if  he  sued  on  the  covenant,  a  debt 
due  from  him  alone  conld  be  set  off  against  his  demand,  (a)     But 

(v)  2  Geo.  2,  c.  22;  and  see  8  Geo.  2,  not  belonging  to  it  in  different  charac- 

c.  24,  as  to  setting  off  simple  contract  ters,  so  as  to  preclude  it  from  setting  off 

debts  against  specialty  debts.  what  was  due  from  it  to  its  bankers  on 

{x)  See  Castelli  v.  Boddington,  1  E.  one  account  against  what  was  due  to  it 

&  B.  66  an  I  879;  Attwooll  v.  AttwoU,  by  its  bankers  on  the  other  accounts. 

ib.  23;  Luckiew.  Bushby,  13  C.  B.  864;  {z)    See,   generally,  as  to  set-off  in 

and  Hutchinson  v.  Sydney,  10  Ex.  438.  equity,  Rawson  v.  Samuel,  Or.  &  Ph. 

(y)  See  Hutchinson  v.  Sturges,  Willes,  161 ;  Clark  v.  Cort,  ib.  154  ;  Freeman  v. 
261 ;  Watts  V.  Rees,  9  Ex.  696,  and  11  Lomas,  9  Ha.  109.  See,  also,  Hunt  r. 
ib.  410;  Mardall  v.  Thelusson,  6  E.  &  Jessel,  18  Beav.  100,  as  to  set-off  be- 
B.  976.  In  Pedder  v.  Mayor  of  Pres-  tween  creditors  and  tiTistees  of  credi- 
ton,  12  C.  B.  N.  S.  535,  moneys  belong-  tors'  deeds.  See,  also,  Agra  &  Master- 
ing to  a  corporation,  but  raised  for  dif-  man's  Bank  v.  Hoffman,  5  N.  R.  214, 
ferent  purposes,  and  kept  in  its  name  sed  gu.  this  case, 
at  different  accounts,  were  treated  as 

704 


CHAP.  III.]  BETWEEN   PARTNERS    AND    NON-PARTNERS.  *o05 

in  equity  this  would  not  have  been  allowed  if  he  was  really  suin^' 
or  being  sued  as  a  trustee  fur  the  firm. 

Again,  if  a  surviving  partner  was  sued  at  law  for  a  non-partner- 
ship debt,  he  could  set  off  a  partnership  debt  owing  by  sc-t-oBi.y  and 
the  plaintiff  to  him  and  his  late  co-partners  (i)';  and  in  ingpurtnere.^' 
an  action  by  a  surviving  partner  for  adebtdue  to  himself  separately, 
the  defendant  could  set  off  a  debt  due  to  himself  from  the  plaintiff 
and  his  late  partners,  (c)" 

In  equity,  however,  this  could  not  have  been  done  ;  for  althouo-h, 
on  the  principle  that  a  debt  due  from  a  firm    is   due 
from  all  the  partners  severally  as  well  as  jointlv,   a  Kni-iu. 
creditor  of  the  firm  was  in  equity  regarded  as  a  creditor  of 
its  deceased  '^'members,  yet  wheii  a  creditor  of  a  firm  sought     *505 
to  obtain  payment  of  his  debt  out  of  the  estate  of  a  deceased 
partner,  that  creditor  could  not  set  off  a  debt  due  from  him    to  the 
deceased  on  a  separate  account,  but  must  pay  this  last  debt  in  full, 
and  then,  as  regards  the  debt  in  respect  of  which  he  sued,   rank  as 
any  other  creditor  of  the  firm  against  the  assets  of  the  deceased,  (d) 
It  is  obvious  that  if  in  such  a  case  the  two  debts  were  set   against 
each  other,  the  separate  creditors  of  the  deceased  would  be  pavino- 
a  joint  creditor  of  the  firm,  unless  the  assets  of  the  deceased  were 
sufficient  to  pay  both  classes  of  creditors  in  full. 

On  the  other  Iiand,  debts  Nvhich  M-ere  really  debts  owing  to  and 
by  a  firm  could  be  set  off  in  equity  although  not  at  law.  Thus  in 
Smith  V.  Parkes  (e)  a  firm  of  three  partners  covenanted  ^   . , 

^   '  *  Smith  V. 

to  pay  a  certain  sum  of  money  to  the  defendant  Parkes,   Parkes. 
who  was  indebted  to  the  firm  in  certain  other   sums   on   another 
account.     By  the  death  of  two  of  the  members  of  the  firm,    the 
plaintiff  Smith  had  become  the  sole  surviving  partner,  and  he  was 
sued  by  Parkes  on  the  covenant,  and  judgment  was  obtained.     It 

(o)  See  Fletcher  v.  Dyche,  2  T.  R.  32,  vivor,stating  that  deceased  was  indebted 
(b)  Slipper  v.  Sidstone,  5  T.  R.  493  ;  to  the  firm  more  than  the  amount  of  the 
Golding-  V.  Vaughan,  2  Chitty,  436.  mortgage,  and  that  it  was  agreed  that 
'Harrisr.  Pearce,  oBradw.  (lU.)  622.  it  should  bo  applied  to  the  use  of  the 
A.S  to  set-off"  between  the  surviving  firm,  and  that  he  had  so  applied  it;  the 
partner  and  the  administrator  of  the  de-  administrator  was  injoined   from  pro- 
ceased  partner,  see  Mack  v.  Woodruff,  ceoding  in  the  suit.     Williams  r.  Stev- 
37  111.  570.  ens.  5.  N.  J.  Eq.  119. 

One  of  two  partners  assigned  a  mort-  (r)  French  r.  Andmde,  6  T.    R.    582. 

gage  to  the  other,  and  died.    His  admin-  -Hanis  v.  Peavce,  5  Bradw.  (111.)  622. 

istrator  sued  the  survivor  for  the  amount  (d)  Addis  v.  Knight,  2  Mer.  117. 

of  the  mortgage,  on  a  bill  by  the  sur-  (e)  16  Be.  115. 

705 


*505 


SET-OFF. 


[book  II. 


was  held  tliat,  notwithstanding  the  judgment  and  its  effect  at  law, 
Smith  Avas  entitled  in  equity  to  set  off  against  the  judgment  debt 
the  amount  of  what  was  due  from  Partes  to  the  late  firm  ;  and  it 
was  also  held  that  Smith  had  this  right  not  only  as  against  Parkes, 
but  also  against  persons  to  whom  he  had  assigned  the  debt  due  to 
him. 

4.  Except  under  special  circumstances,  a  debt  due  to  or  from 
settingofr  Several  persons  jointly  could  not  be  set  off  against  a 
aRiihist^separ-     debt  due  fVom  or  to  one  of  such  persons  separately.  (  /") ' 

ate  and  ince  ,  .         .  ,  .      \t/    / 

vena.  This  rule,  which  is   really   involved   in    the    last,    also 


(/)  See  Kinnerly  v.  Hosack,  2  Taunt. 
170;  Cheetham  v.  Crook,  McLel.  &  Y. 
307;  VuUiaray  v.  Noble,  3  Mer.  618; 
See,  also,  Jebsen  v.  East  and  West  In- 
dia Dock  Co.  L.  R.  10,  C.  P.  300. 

'  The  private  debt  of  one  co-pai-tner 
cannot  be  set  off  against  a  co-partner- 
ship demand.  Powrie  v.  Fletcher,  2 
Bay,  146;  Ladue  v.  Hart,  4  Wend.  583. 

The  holder  of  a  claim  against  an  in- 
dividual member  of  a  firm,  who  pur- 
chases from  such  member  what  he 
knows  to  be  partnership  goods,  cannot, 
in  an  action  by  the  partners  or  their 
assignee  for  the  amount  of  such  goods, 
plead  such  claim  either  in  payment  or 
set-off  against  the  partners,  unless,  by 
their  assent,  the  co-partnership  property 
was  delivered  in  payment  of  the  indi- 
vidual partner's  debt.  Wise  v.  Copley, 
36  Ga.  508.  See,  also,  Warder  v.  New- 
digate,  11  B.  Mon.  174;  ante,  277, 
note. 

Partners  may  set  oflP  claims  held 
jointly,  but  not  individually.  Sager  v. 
Tupper,  .38  Mich.  259. 

See,  however,  Jones  v.  Jones,  12  Ala. 
244. 

A  member  of  a  firm  may,  with  the 
assent  of  his  co-partners,  set  off,  in  an 
action  against  them  individually,  a  debt 
due  to  the  firm  by  the  plaintiff  in  the 
action.  Proof  of  the  account  and  of  the 
assent  of  partners  to  its  use  are  all  that 
is  required;  it  is  not  necessary  that  the 
axxount  should  be  assigned  to  the  de- 

706 


fendant.  Montz  v.  Morris,  80  Pa.  St. 
392. 

According  to  the  construction  placed 
upon  the  statute  of  Alabama,  allowing 
partners  to  be  sued  severally,  it  does 
not  authorize  a  demand  due  by  the  finn 
to  be  set  off  against  a  separate  debt  due 
to  one  of  the  partners.  Hoyt  r.  Mur- 
phy, 18  Ala.  316. 

In  an  account  between  the  adminis- 
trator of  a  partner  deceased,  insolvent, 
and  a  surviving  partner,  the  individual 
claim  of  the  survivor  against  the  de- 
ceased cannot  be  taken  into  the  account 
and  deducted  from  the  balance  in  the 
survivor's  hands.  Beny  v.  Powell,  18 
ID.  98. 

By  operation  of  law  a  partnership 
debt  is  not  extinguished  or  compensated 
by  the  indebtedness  of  the  crecUtor  to 
one  of  the  partners ;  although  such  part- 
ner may,  by  way  of  defense  or  by  excep- 
tion, as  it  is  tenned  in  the  practice  of 
Louisiana,  offset  or  oppose  the  compen- 
sation of  his  demand  to  that  of  the  cred- 
itor.    Beauregard  t\  Case,  91  U.  S.  134. 

Defendant  purchased  certain  cattle  of 
plaintiff,  supposing  that  they  were  the 
property  of  E.  and  the  plaintiff  as  co- 
partners. At  the  request  of  E.  he  sub- 
sequently took  up  a  note  signed  by  both 
E.  and  the  plaintiff  as  makers,  although 
in  fact  plaintiff  was  but  a  surety,  as  a 
matter  of  fact  there  was  no  co-partner- 
ship existing  between  E.  and  the  plain- 
tiff:   Held,  1.  That  E.  and  the  plain- 


CIIAI'.  III.  ! 


BETWEKN    PARTNERS    AND    NON-PARTNERS. 


>00 


prevailed  both  at  law  and  in  equity  {(/\  and  was  of  great  import- 
ance to  partners.  It  scarcely  requires  to  be  pointed  out  that  to 
allow  a  set-oft'  of  such  debts  would  be  to  enable  a  creditor  to  ob- 
tain payment  of  what  is  due  to  him  from  persons  in  no  way 
*indebted  to  him.  As  a  rule,  therefore,  a  debt  owing  by  one  *500 
of  the  members  of  a  firm  could  not  be  set  oft'  at  law  aL'^ainst  a 


tiff  were  not  bound  to  join  in  an  action 
for  the  purchase  price  of  the  cattle.  2. 
That  the  defendant  should  have  made 
inquiry  whether  in  fact  the  plaintiff  was 
principal  on  the  note.  3.  That  there 
being  no  partnership  in  fact,  defendant 
could  not  set  off  his  payment  of  the 
debt  of  E.  against  the  claim  of  plain- 
tiif.     Euix  r.  Hays,  48  Iowa,  86; 

It  has  been  held  that  a  defendant 
may  set  up  in  his  defense,  under  the 
general  issue,  that  the  plaintiff  is  one 
of  a  partnership,  and  that  the  firm  is 
indebted  to  him  in  a  larger  sum  than 
that  which  the  plaintiff  demands,  it  be- 
ing a  part  of  the  same  transaction. 
Buckingham  v.  Bm-gess,  3  McLean, 
364. 

A,  the  partner  of  B,  assigned  all  his 
interest  in  the  parinership  effects  to  B, 
with  power  to  settle  and  compromise: 
Held,  that  B  might  set  off  a  debt  due 
to  the  finn  against  a  debt  due  by  him- 
self alone.  Craig  V.  Henderson,  2  Pa. 
■^t.  261. 

Where  one  partner  executed  a  bond  in 
the  name  of  tjie  finn,  under  seal,  for  a 
debt  due  by  the  firm,  in  an  action  by  the 
obligee  on  such  bond:  Held,  that  a 
debt  due  by  the  obligee  to  the  firm  was 
a  good  set-off,  notwithstanding  the 
plaintiff  was  allowed  to  enter  a  tiol. 
pros,  as  to  one  of  the  fii-m,  and  proved 
that  only  the  partner,  retained  lus  de- 
fendant, signed  the  instnuncnt.  Sellers 
V.  Streator,  5  Jones  L.  261. 

The  plaintiff,  one  partner  of  a  fii-m, 
upon  a  dissolution  thereof,  sold  all  his 
interest  in  the  property  and  debts  due 
the  fimi  to  the  defendant,  the  other 
partner,  and  the  defendant  gave  the 


plaintiff  a  promissory  note  and  a  bond 
of  indemnity  against  the  liabilities  of 
the  firm:  Ilchl,  that  the  defendant 
could  not  sot  off  against  said  note  an  ac- 
count due  from  the  plaintiff  to  the  firm, 
at  its  dissolution.  Lesure  r.  Norris,  11 
Cush.  328. 

Where  a  partner  retired  from  the 
firm,  and  a  new  firm  was  formed,  which 
undertook  to  pay  the  debts  of  the  old 
firm,  but  failed,  leaving  debts  of  the 
old  firm  unpaid  which  the  re  tiling  part- 
ner had  to  pay:  Held,  that  he  might 
set  off  such  payment  against  a  bond 
which  he  had  given  to  the  new  firm, 
and  which  they  had  assigned  to  A  for 
value.     Hupp  v.   Hupp,  6  Graft.  310. 

Action  liy  two,  as  partnei-s,  for  goods 
sold  and  delivered.  The  defendant 
showed  that  both  had  boarded  together 
with  him,  and  each  had  told  him  that 
"  what  one  might  call  for  would  Ije  the 
same  as  if  both  should  order  it,"  and 
filed  his  counter  claim  for  liquors  and 
cigars,  fumished  each  while  they  were 
boarding  with  him,  and  it  was  allowed 
in  defense,  pro  ictnto.  Hartung  r.  Sic- 
cardi,  3  E.  D.  Smith,  560. 

In  Jones  r.  Blair,  57  Ala.  457,  the 
court  disapproves  the  intimation  in  Tay- 
lor V.  Bass,  5  Ala.  110,  that  the  mere 
assent  of  the  other  partners,  to  the  ex- 
clusive use  and  appropriation  of  a  debt 
due  the  firm  by  one  of  the  partners, 
may  convert  such  debt  into  a  proper 
subject  of  set-off  by  him,  when  sued 
alone  on  an  individual  liability. 

[g)  It  cannot  be  done  in  equity  even 
in  cases  of  fraud,  see  Middleton  r.  Pol- 
lock, 20  Eq.  515. 

707 


*507  SET-OFF.  [book  II. 

debt  owing  to  iiim  and  liis  co-partners  (A)  :  nor  could  a  debt  owing 
to  one  of  the  members  of  a  firm  be  set  oiF  against  a  debt  owing  b}^ 
him  and  his  co-partners,  {i)  And  this  rule  applied  even  where  one 
partner  only  had  been  dealt  with,  and  the  debts  sought  to  be  set 
against  each  other  were  a  debt  owing  by  him,  and  a  debt  owing  to 
liim  and  others,  but  arising  out  of  transactions  with  him  alone. 

This  last  point  is  well  illustrated  by  Gordon  v.  Ellis,  (k)  There, 
an  action  was  brought  by  three  partners  for  the  recov- 
ery from  the  defendant  of  money  received  by  him  for 
goods  of  the  plaintiffs  sold  by  the  defendant  on  their  account. 
The  defendant  pleaded  in  effect  that  he  had  been  employed  by  A. 
only,  that  A.  sent  the  goods  for  sale  as  if  they  were  his  own,  and 
that  the  goods  were  sold  by  the  defendant  as  A.'s  goods,  and  that 
A.  was  indebted  to  the  defendant  in  a  larger  amount  than  that 
sought  to  be  recovered  in  the  action.  It  was  admitted  that  if  B. 
and  C.  had  by  their  conduct  induced  the  defendant  to  believe  that 
A.  was  the  sole  owner  of  the  goods  in  question,  and  to  deal  with 
A.  on  that  supposition,  the  defendant  would  have  had  a  good 
defense  to  the  action;  but  it  was  held  that,  as  the  defendant  did 
not  allege  that  such  had  been  the  case,  his  plea  was  a  mere  attempt 
to  set  off  a  debt  due  from  one  member  of  the  firm  against  a  debt 
due  to  the  firm  itself,  and  was  bad. 

In  strict  analogy  to  the  rule  which  obtained  at  law,  it  has  been 
decided  in  equity  that  if  the  members  of  a  fii'm  have  separate 
private  accounts  M'ith  the  bankers  of  the  firm,  and  a  balance  is  due 
to  the  bankers  from  the  firm  on  the  partnership  account,  the  bank- 
ers have  no  lien  for  such  balance  on  what  may  be  due  from  them- 
selves to  the  members  of  the  firm  on  their  respective  separate  ac- 
counts; and  that  the  debt  due  to  the  bankers  from  the  part- 
*507  ners  jointly  cannot  be  set  ofi"  Against  the  debts  due  from 
the  bankers  to  the  partners  separately.  (Z) 

The  Judicature  acts  have  extended  the  equitable  principles  of 
Effect  of  Judi-  ^et-ofi"  to  all  actions  in  the  High  Court  (7?x);  and  not- 
catureacts.        withstanding  the  rules  relating  to  joint  and  to  several 

(Jt)  Gordon  v.  Ellis,   2    C.    B.   821;  7  Man.  &  Gr.  607,  where  it  will  be  ob- 

France  v.  White,  8  Scott,  257.  served  the  plea  was  materially  different. 

(i)  Arnold  V.  Bainbridge,  9  Ex.  153;  (l)  See  Watts  v.  Chiistie,   11  Beav. 

McGillivray  v.  Simson,  2  Car.  &  P.  320;  546  ;  Cavendish  v.  Geaves,  24  ib.  173. 
Boswell  V.  Smith,  6  C.  &  P.  60.  {m)  See  §§  24  and  25  of  the  Judica- 

(A-)2.C.  B.821;  and  see  the  same  case,  tore  act,  1873. 

708     ■ 


CHAP.  III.]  BETWEEX   PAKTNEES    AND    NOX-PARTXERS.  *50S 

claims  (/?.),  it  is  apprehended  tliat  the  old  rule  precluding  the  set- 
off of  a  joint  a^^ainst  a  separate  debt,  or  vice  versd^  is  still  in 
force,  (o) 

To  the  general  rule  wliicli  precludes  the  set-oif  of  a  debt  due  to 
a  lirni   against  a  debt  owing  by  one  of  its   members,   Exceptions  to 
and  vice  versa,  there  are,  however,  a  few  exceptions.        general  mie. 

If  it  can  be  shown  that  all  parties  concerned  liave  expressly  or 
impliedly  af'reed   that  a  debt  owinij:  by  one  of  them 

r  -J      t->  .  1.  Agreement. 

only  shall   be  set  off  against  a  debt  owing  to  them  all 

or  vice  versa,  effect  will  be  given  to  that  agreement,  and  the  appli- 
cation of  the  general  doctrine  in  question  will  thereby  be  precluded. 
Kegard,  therefore,  must  be  had  to  any  agreement  which  the  parties 
themselves  may  have  come  to,  and  to  their  course  of  dealing  with 
each  other.  (^;) 

So  if  a  joint  and  several  promissory  note  is  made  by  partners, 
and  one  of  them  sues  the  payee  for  some  separate  demand,  the  de- 
fendant can  set  off  the  note;  for,  ex  hypothesis  it  is  the  several  note 
01  the  j^artner  suing  him.  {q) 

An  agreement  by  one  partner  that  a  debt  diie  from  himself  sep- 
arately shall  be  set  off  against  a  debt  due  to  him  and  his  co-part- 
ners jointly  IS,  prima  facie  a  fraud  on  them  ;  and  a  set-off"  founded 
on  such  an  agreement  cannot,  it  is  apprehended,  be  maintained  in 
the  absence  of  special  circumstances,  rendering  such  an  agreement 
binding  on  the  other  partners,  (r) 

*  Another  exce]ition   occurs  where  one  partner  has  been     *508 
allowed  by  his  co-])artners  to  act  as  if  he  were  a  principal 
and  not  an  agent  of  the  firm. 

It  has  l)(;en  seen  that  dormant  partners  may  join  their  co-part- 
ners in  suing  on  conti-acts  entered  into  in  form  with  the   sot-ofr where 

^  .  tlRTeiis  11  iliir- 

latter  only.     But  dormant  partners  cannot,  by  coming  mam  partner, 
forward  and  suing  on  such  contracts,  deprive  the  defendant  of  any 
riirht  of  set-oft*  of  which  he  mio^ht  have  availed  himself  if  the  non- 

(»)  Orel.  xvi.  IT.  1,  3,  5,  ante.  p.  484.  307  ;  Kinnerly  v.  Hosack,  2  Taunt.  170. 

(o)  However,   in    Manchester,    Shef-  {q)  See  Owen  r.  Wilkinson,  5  C.  B. 

field  &  Line.  Rail.  Co.  v.  Brooks,  2  Ex.  N.  S.  526. 

J).  243,  a  separate  debt  was  allowed  to  (r)  Wallace  r.  Kelsall,  7  M.  &  W. 

be  pleaded  liy  way  of  set-off  to  an  ac-  204,  is  the  other  way,  but  is  to  be  e.\- 

tion  for  a  joint  debt.     This  can  hardly  plained  by  the  old  technical  rules  of 

have  been  right.  pleading,  which  are  now  abolished,  see 

(;))  See  Vulliamy  v.  Noble,  3  Mer.  aute,  p.  471  ;  Piercy  t'.  Fynney,  12  Eq. 

593  ;  Dowman  r.  Matthews,  Proc.  in  Ch.  69  ;  Nottidge  v.  Pritchard,  2  CI.  &  Fin. 

580 :  Cheetham  r.  Crook,  McLel.  &   Y.  379. 

709 


*509  SET-OFF.  [book  H. 

dormant  partners  only  had  been  plaintiiis.     This  was  held  by  Lord 
Kenyon  in  Stracey  v.   Decy(s),  where  the  plaintiffs 

Stracey  v.  Decy.   ^  -r^  -,       -,  ^w'  r 

Stracey,  Koss  and  others,  were  in  partnershi])  as  grocers, 
and  Eoss  was  the  only  person  who  appeared  to  the  public  as  con- 
cerned in  the  partnership  business.  Tlie  defendant  had  dealt  with 
Koss,  and  had  become  indebted  for  grocery  supplied  by  him.  On 
the  otlier  hand,  tlie  defendant  had  expended  money  for  Ross,  and 
had  done  so  on  the  supposition  that  the  monies  thus  expended 
could  be  set  off  against  what  was  due  for  the  grocery.  The  plain- 
tiffs, however,  contended  that  this  set-off  could  not  be  made;  but 
Lord  Kenyon  held  that  as  the  defendant  had  a  good  defense  by  way 
of  set-off  against  Eoss,  and  had  been  by  the  conduct  of  the  plain- 
tiffs led  to  believe  that  Koss  was  the  only  person  he  contracted 
with,  they  could  not  pull  off'  the  mask  and  claim  payment  of  debts 
supposed  to  be  due  to  Koss  alone,  without  allowing  the  defendant 
the  same  advantages  and  equities  in  his  defense  as  he  would  have 
had  in  an  action  brought  by  Koss  solely,  {t)  In  this  case,  all  the 
partners  except  Koss  were  dormant,  and  by  the  terms  of  the  agree- 
ment into  which  all  had  entered,  Koss  alone  was  to  be  the  apparent 
trader.  His  co-partners  were  therefore  simply  in  the  position  of 
undisclosed  principals,  and  were  treated  accordingly  by  the  Court. 
In  Gordon  v.  Ellis  (u),  which  has  been  before  referred  to,  an 
Cases  where  one  ^^^^^^P^  was  made  to  extend  the  principle  on  which  Lord 
feendeauwita!  Kcnyou  decided  Stracey  v.  Decy,  to  all  cases 

Gordon  t;  Ellis  *^09  in  which  One  *partner  Only  transacts  the  busi- 
ness of  the  firm,  and  becomes  himself  indebted 
to  the  person  with  whom  he  deals.  But  it  was  held,  and  it  is  con- 
ceived rightly,  that  a  person  liable  to  be  sued  by  a  firm  cannot  set 
off  a  debt  due  from  one  only  of  its  members,  on  the  ground  that 
he  only  was  dealt  with  by  the  defendant,  unless  it  can  be  shown 
that  the  other  members  of  the  firm  induced  the  defendant  by  their 
conduct  to  treat  their  co-partner  as  the  only  person  with  whom  the 
defendant  had  to  do.  (xy 

(s)  7  T.  R.  361,  note,  and  2  Esp.  469.  («)  2  C.  B.  821,  avfe,  p.  506. 

See,  too,  Teed  v.  Elworthy,  14  East,  213,  (x)  See  Ramazotti  v.  Bowring,  7  C. 

and  De  Mautort  v.  Saunders,  1 B.  &  Ad.  B.  N.  S.  851 ;  Bonfield  v.  Smith,  12  M. 

398,   overruling  Dubois    v.   Ludert,    5  &  W.  405  ;  ante,  p.  482  ;  and  Baring  v. 

Taunt.  609.  Corrie,  2  B.  &  A.  137. 

(0  See  George  v.  Clagett,  7  T.  R.  359;  '  Where  an  action  is  brought  by  one 

Bonies  v.  Imperial  Ottoman  Bank,  L.  of  two  partners  of  a  law  firm  for  busi- 

R.  9  C.  P.  38.  ness  which  has  uniformly  been  done  in 

710 


CHAP.  III.]  BETWEEN    PAUTNKliS    AXD    XoN-rAKTNKKS.  *510 

Bat  here  a^ain  it  is  to  be  observed,  tliat  if  tlie  debt  due  from  one 
partner  can  be  treated  as  due  from  the  linn,  that  debt  maybe  set 
oft'  against  another  debt  due  to  it.  This  is  ilhistrated  by  the  same 
case  vt'  Gordon  v.   Ellis  (y),  where  in  an  action   by  a 

,.  ,.  1         ,      •     i.'  1        1    /■       1  I.  1       G  jrdun  i;.  Ellis. 

iirm  lor  money  due  to  it  irom  the  deiendant  for  goods 
of  the  firm  sold  by  liim,  the  latter  was  held  entitled  to  set  off  a 
debt  due  to  him  fur  an  advance  made  by  him  to  one  of  the  partners 
on  account  of  those  goods.  The  Court  thoULdit  that  although  the 
money  was  advanced  to  one  ])artner  only,  the  defendant  had  a  right 
to  treat  it  as  an  advance  to  the  tirm  made  on  that  partner's  requi- 
sition, whilst  acting  within  the  scope  of  his  apparent  authority  as 
agent  of  the  firm.  In  point  of  ftict,  the  defendant,  instead  of  wait- 
ing until  he  had  sold  the  goods,  and  then  handins:  over  the  inonev 
produced  by  their  sale,  made  a  payment  on  account;  and  he  sought 
nothing  more  than  to  have  the  amount  so  prepaid  deducted  from 
the  sum  for  which  he  sold  the  fjoods. 

It  sometimes  happens  that  in  order  to  avoid  a  defense  of  set-off, 
a  plaintift'  who  is  indebted  to  a  firm  sues  one  of  its  Attempt  to 
members  alone  for  a  debt  owing  to  the  phiintifi"  by  the  sulnljoue"^^^ 
tirni.     In  such  a  case,  the  defendant  may  require  his  P'*""*^''- 
co-partners  to  be  joined,  (s)      Again,  if  a  firm  holds  the  note  of  a 
person  to  whom  it  is  itself  indebted,  and  in  order  to  deprive  him 
of  his  right  of  set-ofi",  indorses  the  note  to  one  of  its  mem- 
bers, and  he  alone  sues  on  *  it,  a  defense  disclosing  the  facts     *510 
and  setting  oft'  the  debt  owing  to  the  defendant  by  the  firm 
will  be  good,  (a) 

The  provision  of  the  Judicature  acts  relating  to  the  assignment 
of  debts  {ante,  p.  IST)  has  greatly  facilitated  defenses  set-ofrwhere 

n        .       re       -i  ^-i  1  ,  ,  .  tliLTc  lias  been 

i)y  way  oi  set-oii  wJiere  tliere  has  been  a  change  m  a  uu  aisigumeut. 
firm.  The  ])rinciples  applicable  to  such  cases  are  well  illustrated 
by  the  following  decision. 

In  Cavendish  v.  Geaves  (b),  the  plaintift'  was  indebted  on  bonds 
to  a  firm  of  bankers.     Many  changes  in  the  firm  took  ^ 

•^  ^  Cavendish ». 

place,  and  the  bonds  in  question  were  on  each  change  leaves. 

the  name  of  the  party  suing,  a  sot-off  so  doing  ;  the  old  practice  was  to  pleaxl 

mil  be  allowed  of  a  demand  against  in  abatement.     See  Staokwood  r.  Dunn, 

tl;ie  firm.    Piatt  v.  Halen,   23  Wend.  3  Q.  B.  823,  and  Bonfield  v.  Smith,  12 

456.  M.  &  W.  40.-). 

(//)  7  Man.  &  Gr.  607.  (o)  Tuller  r.  Roe.  1  Peake,  N.  P.  260. 

{z)  Ord.  xvi.  r.  13.     But  see  23  &  24  {b)  24  Beav.  163.     See,  also.  .Teif.Mys 

Vict.  c.  126,  §20,  as  to  the  necessity  of  v.  Agra  and  Ma^iterman's  Bank,  2  Eq. 

711 


^^511  SET-OFF  [book  II. 

assii^ned  by  the  old  to  the  new  firm.  The  plaintift'  had  an  acconnt 
with  the  hank  as  one  of  its  customers,  and  when  the  bank  stopped 
payment  a  balance  was  owing  to  him  on  that  account;  but  the 
bonds  had  been  previously  assij^iied  to  third  parties,  without  notice 
however  to  the  plaintiff.  The  question  then  arose,  whether,  not- 
withstanding the  various  changes  in  the  firm,  and  the  assignment 
of  the  bonds,  the  plaintiff  was  entitled  to  set-off  against  the  debt 
due  from  him  on  the  bonds,  the  amount  due  to  him  as  a  customer 
of  the  bank,  and  it  was  held  that  he  was.  The  judgment  in  this 
case  is  peculiarly  instructive,  and  the  following  extract  from  it  is 
submitted  to  the  reader  without  apology. 

"If  a  customer  boiTOW  money  from  his  bankers  and  give  land  to  secure  it,  and 

„_.  ,  ,  .  afterwards  on  the  balance  of  his  general  banking  account,  a  balance 
Enect  of  assign-  "  "  i       1 1  • 

monts  and  of      is  due  to  the  customer  from  the  same  bankers  who  are  the  obligees 

on  V^f  ht  'of  ^'^^  of  the  bond,  a  right  to  set  off  the  balance  against  the  money  due  on 

set-ofl.  ^]jg  bond  will  exist  both  at  law  and  in  equity. 

"  If  the  firm  were  altered  and  the  bond  assigned  by  the  original  obligees  to  the 

new  firm,  and  notice  of  that  assignment  were  given  to  the  debtor,  and  if  after  this 

a  balance  were  due  to  hun  from  the  new  firm  (the  assignees  of  the  bond),  then  no 

right  of  set-off  would  exist  at  law,  because  the  assignment  of  the  chose  in  action 

would  be  inoperative  at  law,  and  the  obligees  of  the  bond,  and  the  debtor  on  the 

general  account  would  be  different  persons  ;  but  as  in  equity  the  persons  entitled  to 

the  bond,  and  the  debtors  on  the  general  account,  would  be  the  same  persons,  a  right 

to  set-off  would  exist  in  this  Court,  and  the  customer  would  in  equity  be  entitled  to 

set  off  the  balance  due  to  him  against  the  bond  debt  due  from  him. 

*511        *  "  If  after  the  bond  had  been  given  it  had  been  assigned  to  strangers, 

and  no  notice  of  the  assignment  had  been  given  to  the  original  debtor 

(the  obligor  of  the  bond),  then  his  rights  would  remain  the  same.     Thus,  if  the 

^       „  assignment  had  been  made  to  the  stranger  before  any  alteration  of 

Effect  of  as-  .  . 

sijjnments  and    the  finn,  then  the  right  of  set-off  would  stiU  remain  at  law,  where 

olrri^h't  ot'^set^  *^®  obligees  of  the  bond  and  the  debtors  on  the  general  account 
oft".  would  be  the  same  persons,  and  in  equity  also  if  the  matter  on  ac- 

count were  brought  here,  as  the  assignees  of  the  chose  in  action  would  be  bound 
by  the  equities  affecting  their  assignors. 

' '  But  if  notice  of  the  assignment  had  been  given  to  the  original  debtor,  no  right 
of  set-off  would  exist  in  this  court  for  the  balance  subsequently  due  by  the  bankers 
to  the  obligor;  because  the  persons  entitled  to  the  bond  would,  as  the  obligor  knew, 
be  different  persons  from  the  debtors  to  him  on  the  general  account,  with  whom  he 
had  continued  to  deal. 

"  If  the  assignment  of  the  bond  had  been  made  to  the  new  firm  with  notice  to 
the  obligor  they  would,  if  delators  on  the  general  account,  be  liable  to  the  same 
rights  of  set-off  in  equity  as  if  they  had  been  the  obligees. 

"If,  after  the  alteration  of  the  finn,  and  after  the  assignment  of  the  bond  to 

674  ;  and  as  to  set-off  at  law  as  against  assignment,  Watson  v.  Mid-Wales  Rail, 
the  assignee  of  a  debt  after  notice  of  the      Co.  L.  R.  2  C.  P.  593. 

712 


CIIAl'.   III.]  B^:T\VEEN    TARTXERS    AND    X0N-1'\RTNEKS, 


112 


the  new  firm,  with  notice  to  the  debtor  or  ol>lig:or  of  that  assi>?nment,  an  assign- 
ment had  been  made  of  the  bond  to  strangers,  and  no  notice  of  that  second  jussign- 
ment  given  to  the  obligor,  then  the  rights  of  set-olf  would  still  remain  to  him  in 
equity  as  against  the  first  assignees,  of  whose  assignment  he  had  notice,  and  the 
second  assignees  would  in  equity  be  bound  by  it,  because,  as  I  have  stated,  the 
assignees  of  the  bond  take  it  subject  to  all  the  equities  which  affect  the  a-ssignors." 
The  court,  after  layin','  down  these  general  propositions,  camo  to  the  conclusion 
on  the  evidence  in  the  case,  that  the  plaintiff  w<xs  informed  that  the  successive 
fiiTOs  with  which  he  dealt  as  customers,  were  his  creditors  in  respect  of  the  bonds, 
but  that  he  had  no  notice  of  their  assignmrmt  by  the  finn  which  stopped  pajTnent 
to  the  holders  of  th?m,  and  that  therefore  he  was  entitled,  even  as  against  such 
holders,  to  set  off  what  was  due  to  him  as  a  customer  of  the  bank  when  it  stopped 
payment. 

Tlic  iibove  decisions  are  sufficient  to  show  tliat  in  allowing  debts 
to  be*  set  o!f  against  each  other,  courts  of  equity  went  far  l)eyond 
courts  of  law,  although  they  did  not  introduce  any  new  principle 
of  set-off.  The  truth  of  this  was  still  more  apparent  from  the  cases 
in  which  set-off  was  not  allowed,  one  of  the  debts  being  joint  and 
the  other  several  only. 


2.  Of  set-off  hy  atxd  against  companies. 

In    actions   between    companies   on   the    one  hand    and    non- 
members  on  the  other,  there  is  little  to  be  said  upon  sct-ofTwhena 

cumpany  sues 

the  subject  of  set-off,  except  that   the  ordinary  rules  a  member. 
are  applicable. 

*It  is  only  when  a  company  sues,  or  is  sued  by,  one  of  its  *512 
own  members,  orl)y  some  person  claiming  under  him,  or 
when  one  member  of  a  compaiiy,  having  obtained  judgment 
against  it,  seeks  to  enforce  such  judgment  against  a  co-member,  or 
when  a  company  is  being  wound  up,  that  questions  of  set-off 
present  peculiar  difficulties.  These  are  matters,  however,  wliich 
will  be  more  conveniently  discussed  hereafter,  and  the  only  obser- 
vation wliich  requires  to  be  made  here  is,  that  in  actions  between  a 
company  on  the  one  hand  and  one  of  its  own  members  on  the  other, 
the  member  is  so  far  treated  as  a  stranger  to  the  company,  that 
cross  debts  existing  between  him  and  the  company  may  be  set  off 
against  each  other  (c),  but  that  cross  demands  between  himself 
and  other  members  individually  cannot  be  gone  into.  As  regards 
incorporated  companies,  this  follows  from   the  circumstance  that 

(c)  Ganiet  Mining  Co.  r.  Sutton,  3  B.  k  Sm.  321. 

713 


^513  SET-OFF    BY   AND    AGAINST    COMPANIES.  [bOOK  II. 

they  are  distinct  from  the  members  composing  them;  and  as  regards 
unincorporated  companies,  it  follows  from  the  doctrine  that  a  debt 
due  from  or  to  several  persons  jointly  cannot  be  set  off  against  a 
debt  due  to  or  from  some  or  one  of  them  only. 

Moreover,  if  a  member  of  an  unincorporated  joint-stock  cora- 
set-off  where  V^^Y  ^^  ^  Creditor  of  the  company,  and  is  in  a  position 
suls™nothlr  *^  ^^^  *^®  Other  members  or  any  of  them,  it  is  no  de- 
fngbythecom-  fsuse  that  if  the  company  were  wound  up,  and  its  ac- 
^^^^''  counts  taken,  the  plaintiff  would  be  found  indebted  to 

the  company  as  a  shareholder  thereof.  In  such  a  case  as  that  now 
supposed,  the  plaintiff  sues  as  a  non-member;  and  if  bis  demand 
is  one  capable  of  being  enforced,  he  will  not  be  prevented  from  en- 
forcing it,  simply  because  in  his  character  of  member  he  is  indebted 
to  his  co-shareholders.  This  is  well  illustrated  by  a  case  before 
Lord  Cottenham,  which  may  be  conveniently  noticed  here,  although 
it  will  have  to  be  referred  to  again  in  connection  with  another  sub- 
Rheamv  j^^*'     ^^  ^^^  ^^^®  ^^  question,  E.heam  v.  Smith  (d), 

Smith.  ^-^Q   plaintiff  and  one  of  the  defendants    were   mem- 

bers of  an  unincorporated  joint-stock  company;  the  defendants 
were  the  bankers  of  the  company,  and  had  sued  the  plaintiff" 
for  a  debt  due  by  the  company  to  the  defendants  as  bank- 
ers.    The   plaintiff   thereupon    filed    a   bill    against    the   bankei's 

and  the  company,  upon  the  ground  that  he  ought  not, 
*513     *as  between  himself  and  the  bankers  (one  of  whom   was  a 

shareholder),  to  pay  more  than  what,  on  taking  the  ac- 
counts of  the  company,  would  be  found  to  be  due  from  the  plain- 
tiff' in  respect  of  the  debt  in  question.  The  bill  accordingly 
prayed  that  the  accounts  of  the  company  might  be  taken,  and 
its  affairs  wound  up,  and  that  provision  might  be  made  for  due 
payment  of  the  debts  of  the  company,  and  that  in  the  meantime 
the  action,  and  all  proceedings  therein,  might  be  stayed.  A  de- 
murrer to  the  bill  was  overruled  by  the  Yice- Chancellor,  who,  it  is 
said,  treated  the  case  as  one  in  which  a  partnership  of  A.  and  B. 
was  suing  a  partnership  of  A.,  C,  and  D.,  in  which  case  it  would  be 
contrary  to  equity  to  allow  the  debt  to  be  recovered  without  first 
ascertaining  for  what  proportion  of  it  A.  was  himself  liable,  {e) 
But  on  appeal   to  the  Lord    Chancellor,  the  decision    below  was 

id)  2  Ph.  726.  in  the  report.     But  it  is  clear  that  al- 

(e)  The  fact  that  such  an  action  could      though  one  partner  might  under  certain 

not  be  maintained  at  law,  is  not  noticed      circumstances  sue  another  at  law,  A. 

714 


CHAP.  III.]  SET-OFF    BY    AND    AGAINST   COMPANIES.  ^514- 

reversed,  and  the  demurrer  was  allowed;  the  Lord  Chancellor  ob- 
serving,— 

"  It  really  seems  to  me  that,  if  the  principle  on  which  this  demurrer  is  said  to 
to  have  been  overruled  by  the  Vice-Chancellor  were  admitted,  it  would  lead  to  the 
most  frightful  consequences;  for  it  comes  to  this,  that  if  a  railway  company,  or  any 
company  carrjing  on  gieat  works,  and  who  may  have  become  indebted  to  some 
contractor  in  half-a-million  of  money  for  work  done,  upon  that  contractor  applying 
for  payment  of  his  deljt,  can  find  out  that  he,  or  any  one  connected  with  him  in 
business,  holds  a  .sin^^le  share  in  the  company,  they  may  say.  No,  we  cannot  pay 
our  debt;  you  must  fii-st  break  up  the  company,  and  ascertain  whether  its  assets 
are  sufficient  for  the  payment  of  its  debts,  for  if  not,  you  or  the  persons  connected 
with  you  will  be  liable  to  contribute  to  the  veiy  sum  which  you  seek  to  recover.  It 
is  impossible  to  stop  short  of  that  if  the  principle  be  once  admitted.  After  some 
difficulty  a  rule  has  been  established  at  law,  enabling  creditors  of  these  great  com- 
panies to  enforce  their  claims  against  individual  shareholders,  leaving  them,  of 
course  to  their  right  to  contribution  against  their  co-partners.  The  rule,  no  doubt, 
leads  sometimes  to  hardship  upon  the  party  sued,  but  the  balance  of  convenience  is 
in  its  favour,  and  for  that  reason  it  has  been  adopted:  because  it  would  be  a  still 
greater  hardship  upon  parties  dealing  with  such  companies,  if  the  enforcerai-ntof 
their  claims  were  to  be  embaiTassed  by  the  necessity  of  treating  all  the  membere  of 
the  company  as  jointly  responsible.  This  suit,  however,  is  an  attempt  to  induce  a 
court  of  equity  to  interfere  with  that  nile  for  the  plaintiff,  by  his  bill,  asserts 
in  eflfect  nothing  short  of  this  proposition : — If  I  can  find  *out  that  you  who  *51-i 
are  suing  me  at  law  have  a  single  share  in  the  company  against  whom  the 
claim  is  made,  then  there  is  an  end  to  j^our  legal  right;  equity  will  interfere,  and 
though  your  money  may  have  contributed  to  the  establishment  of  the  company, 
you  shall  not  be  permitted  to  recover  a  single  farthing  against  any  member  of  the 
company  until  the  concern  is  altogether  wound  up." 

It  must  not,  however,  be  inferred  from  this  case,  that  if  a  mem- 
ber of  a  company  has  a  demand  against  it,  and  seeks  to  enforce 
that  demand  against  some  member  of  it,  he  may  not  be  met  by 
some  defense  based  on  the  rights  of  the  members  inter  se.  This 
subject  will  be  examined  in  the  third  book,  when  the  rights  of 
partners  inter  se  are  discussed,  {f) 


The  general  rule  that  an  assignee  of  a  debt  is  in  no  better  posi- 
tion than  his  assi<;nor,  is  undoubted;  and,  as  a  g'eneral   sot-..irnsninst 
rule,  where  a  debt  dne  from  a  company  is  assigned,  the  sccuriiics. 
assignment  cannot  defeat  the  right  of  the  company  to  setoff  against 

and  B.  could  not  possibly  have  sued  A.  (/)  See  Woodhams  r.  Anglo-Austral- 

&  C.  ian  Co.  2  DeG.  J.  &  Sm.  162. 

715 


*415  EXECUTION   AGAINST   TAETNEKS.  [bOOK  II. 

the  assignor,  and  also  against  the  assignee,  what  may  be  due  from 
the  assignor  to  the  company  before  the  company  has  notice  of  the 
assignment,  and  when  payment  by  the  company  is  demanded,  {g) 
At  the  same  time,  it  is  possible  for  a  company  to  deprive  itself  of 
this  right  of  set-off ;  and  if,  being  indebted,  it  gives  to  its  creditor  a 
document  which  shows  that  the  debt  is  to  be  paid  without  refer- 
ence to  the  state  of  other  accounts  which  may  exist  between  him 
and  tlie  company,  the  company  cannot,  when  sued  for  such  debt, 
set  off  demands  which  it  may  have  against  him  for  other  matters. 
The  decisions  on  tliis  subject  will  however  be  more  conveniently 
referred  to  hereafter.  (A) 


*515  *SECTION  IV.— OF  EXECUTIONS  AGAINST  PARTNERSHIPS  AND 
COMPANIES  AND  THEIR  MEMBERS  FOR  THE  DEBTS 
THEREOF. 

After  a  creditor  of  a  partnership  or  company  has  succeeded  in 
establishing  his  demand,  and  has  obtained  iudgment. 

Execution.  .  ^       ^  /.,.  t/.i 

it  may  become  necessary  lor  him  to  take  further  pro- 
ceedings to  enforce  that  judgment  before  he  can  obtain  actual  pay- 
ment. These  proceedings  are  very  different  when  judgment  lias 
been  obtained  against  a  company,  from  what  they  are  when  judg- 
ment has  been  obtained  against  the  members  of  an  ordinary  part- 
nership; although  now  a  judgment  may  be  entered  up  against  part- 
ners in  their  mercantile  name,  (i) 


1.  Execution  against  partners. 

If  a  judgment  has  been  obtained   against  several  persons  sued 
Execution  jointly,  the  writ  of  execution  founded  on  the  iudo-ment 

against  part-         J  ./ '  .  n      ,.      ,  J       » 

ners.  must  be  agamst  all  of  them,  and  not  against  some  or 

one  of  them  only;    for  the  judgment   does   not  warrant  such  a 
writ,  ih)     But,  although  the  writ  of  execution  on  a  joint  judgment 

[g)  Ashworth's  case,    10  W.  R.  771,  593. 

V.-C.  W.;  and  see  Athenaeum  Life  As-  {h)  See  infra,  book  iv.  c.  3,  cliv.  1,  §  9, 

surance  Society  v.  Pooley,  1  Giif.  102,  and  Aslatt  v.  Farquharson,   10  W.  R. 

and  3  DeG.  &  J.  294.      See,  also,  Wat-  458. 

kins  V.  Clark,  12  C.  B.  N.  S.  277;  Wat-  (/)  Ord.  xUi.  r.  8,  set  out  below. 

son  V.  Mid  Wales  Rail.  Co.  L.  R.  2  C.  {k)  See    Penoyer  v.   Brace,    1   Lord 

716 


CHAP,  iii.j 


EXECUTION   AGAINST   PARTNERS. 


'515 


nuist  be  joint  in  form,  it  may  be  levied  upon  all  or  any  one  or  more 
of  the  persons  named  in  it;  fur  each  is  liable  to  the  judgment  cred- 
itor for  the  whole,  and  not  for  a  proportionate  part  of  the  sum  fur 
which  judgment  is  obtained.  (Z)'     The  consequence  of  this  i.s  that 


Raymond,  244;  Clarke  v.  Clement,  6  T. 
R.  526;  2  Wms.  Saund.  72  /;  Bac.  Ab. 
Exec.  (i.  1. 

{I)  See;jer  DoGrey,  C.  J.,  in  Abbot 
V.  Smith,  2  Wm.  Blacks.  949;  and  Her- 
ries  V.  Jamieson,  5  T.  R.  55G,  per  Lord 
Kenyon. 

'  See  Foster  v.  Barnes,  81  Penn.  St. 
377;  Randolph  v.  Daly,  15  N.  J.  Eq. 
313. 

So  long  as  the  legal  title  of  the  pai-t- 
nership  property  reniain.s  in  the  co-part- 
ners, a  creditor  of  the  fimi  may  pursue 
his  remedy  against  it,  in  an  action  at 
law,  in  the  same  manner  as  against  an 
individual  debtor.  But  if  the  legal  ti- 
tle has  been  conveyed  to  a  thii-d  person 
hond  fide,  the  creditor  can  pursue  the 
property  only  by  a  bill  in  equity  to  mar- 
shal the  assets  and  enforce  his  equit- 
able lien.  Stokes  v.  Stevens,  40  Cal. 
391. 

Judgment  was  obtained  and  execu- 
tion issued  against  an  individual  doing 
business  in  his  own  name,  but  who  had 
at  the  time  a  secret  partner;  afterwards, 
a  judgment  was  obtained  ^nd  an  exe- 
cution issued  against  both  partners: 
Held,  that  the  property  of  the  partner- 
ship was  liable  to  pay  both  debts,  but 
that  the  creditor  whose  execution  was 
first  in  the  hands  of  the  sheriff  had 
priority.  Brown's  appeal,  17  Pa.  St. 
480. 

I  A  judgment  was  recovered  against  a 
partnership  on  confession  of  one  of  the 
partners.  Execution  was  issued  there- 
on, and  the  pnrtners  paid  the  amount 
to  the  sheriff  after  a  levy  on  partner- 
sliip  property.  Afterwai-ds,  the  judg- 
ment was  reversed  as  to  the  part}'  who 
was  not  a  party  to  it:  Held,  that  the 
plaintiff  in  execution  was  entitled  to  re- 

-^ver  of  the  sheriff  the  amount  received 


by  him  on   the  execution.     Haiiier  v. 
Fox,  7  Watts  &  S.  142. 

S.  and  T.,  trading  as  partners,  made 
several  assignments,  each  of  his  private 
property  and  interest  in  the  finn,  on 
successive  days,  to  the  same  assignees, 
who  accepted  both  trusts.  Aftei-i^'ard  a 
firm  creditor  issued  execution  and  levied 
upon  the  partnership  property:  Held, 
that,  in  the  absence  of  proof  to  the  con- 
trary, the  assignment  of  the  firm  prop- 
erty to  assignees  l)y  one  of  the  firm  was 
assented  to  by  the  other,  and  that  the 
partnership  property  vested  in  the  as- 
signees, and  could  not  be  levied  upon 
by  the  sheriff,  after  the  assignments  ha<l 
been  made  and  accepted.  McNutt  v. 
Strayhom,  39  Pa.  St.  269. 

The  mere  insolvency  of  a  partnership 
does  not,  of  itself,  work  such  a  legal  or 
equitable  appropriation  of  its  effects,  in 
the  absence  of  any  proceedings  for  a 
])ro  rata  distribution,  as  to  prevent  a 
a  judgment  creditor  from  making  his 
debt  out  of  the  effects  by  execution,  or 
to  prevent  liim  from  removing  fraudu- 
lent obstnactions  or  assignments  intend- 
ed by  the  debtor  to  hinder  the  execution. 
Greene  v.  Breck,  32  Barb.  73. 

A,  residing  in  the  country,  and  B  in 
the  city  of  New  York,  both  produce 
dealers,  made  an  aiTangement  by  which 
they  carried  on  their  business  in  connec- 
tion, the  profits  at  both  places  to  be 
divided  between  them,  intentionally 
concealing  the  an-angement  made.  B 
incun-ed  a  debt  to  C  in  the  course  of  his 
business,  confessed  a  judgment,  and  the 
execution  was  levied  on  the  property 
used  in  the  business  carried  on  l)y  B. 
A  claimed  the  property  as  pai-tnership 
property:  Held,  that  the  levy  w;is  just 
and  legal,  the  creditor  C  having  a  right 
to  look  to  the  property  of  A  to  pay  his 

717 


^516 


EXECUTION    AGAINST    PARTNERS. 


[rook  ir. 


the  sheriff  may  execute  a  writ  issued  against  several  partners 
jointlj,  either  on  their  joint  property,  or  on  the  separate  property 
of  any  one  or  more  of  them,  or  both  on  their  joint  and  on  their 
respective  separate  properties;  and  so  long  as  there  is,  within  the 
sheriff's  bailiwick,  any  property  of  the  partners,  or  any  of  them,  a 
return  of  nulla  hona  is  improper,  (m)  Of  course,  if  the  judgment 
creditor  has  had  execution  and  satisfaction  against  one  of  the  part- 
ners, he  cannot  afterwards  go  against  any  of  the  others  in)\ 
*516  but  the  ^important  point  to  observe  is,  that  the  sheriff  is 
not  bound  to  levy  on  the  goods  of  the  firm  before  having 
recourse  to  the  separate  properties  of  its  members,  and  that  they 
cannot  require  the  sheriff  to  execute  the  writ  in  one  way  rather 
than  another. 

Similar  rules  are  applicable  to  attachments  of  debts  under  the 
Common  law  procedure  act,  1854  (17  &  18  Vict.  c.  125,  §61),  it 
having  been  determined  that  a  judgment  creditor  of  three  persons 


debt.  Van  Valen  v.  Russell,  13  Barb. 
590. 

M.  and  K.,  in  their  articles  of  partner- 
ship, agreed  that  K  should  furnish  at 
first  all  the  necessary  capital,  and  have 
the  exclusive  ownership  of  it,  until  M. 
should  contribute  certain  sums  as  agreed 
on.  Before  M.  had  contributed  any 
funds,  T.  obtauied  a  judgment  against 
K.,  which  was  levied  on  the  whole  prop- 
erty constituting  the  capital  stock ; 
and  aftei-ward  the  York  County  Bank 
obtained  a  judgment  against  M.  &  Co., 
which  was  levied  on  the  same  property. 
The  property  was  sold  for  less  than  T.'s 
debt,  and  the  money  paid  into  court  for 
distribution:  Held,  that  T.  was  entitled 
to  the  whole  of  it.  Appeal  of  York 
County  Bank,  32  Pa.  St.  446. 

Where,  by  articles  of  dissolution  of  a 
partnership  between  A  and  B,  A  took 
the  property  of  the  partnership,  and 
agreed  to  pay  the  debts  of  the  finn,  and 
a  creditor  of  the  partnership  having 
obtained  a  judgment  against  the  firm 
for  a  debt,  levied  his  execution  upon 
the  real  and  personal  estate  of  both  A 
and  B,  and  afterward  assigned  the  judg- 

718 


ment  to  C,  the  father-in-law  of  A,  and 
A  afterward  sold  his  personal  estate  so 
levied  on,  to  D,  and  C,  by  writing  under 
seal,  released  his  interest  therein  to  D. 
with  full  knowledge  of  the  terms  of 
dissolution:  Held,  that  the  judgment 
could  not  be  enforced  against  B.  Bell 
V.  Hall,  5  N.  J.  Eq.  477. 

A  judgment  obtained  by  one  firm 
against  another,  each  of  which  is  con  - 
stituted  in  pai-t  of  members  belonging 
to  both  finns,  thus  being  both  plaintiff 
and  defendant,  cannot  be  executed  by 
a  levy  upon  the  separate  property  of  an 
individual  member  of  the  defendant 
finn.  Tassey  v.  Church,  6  Watts  &  S. 
465. 

An  attorney  holding  moneys  belong- 
ing to  a  late  finn  of  three  persons  is 
chargeable  on  trustee  process  in  a  suit 
against  a  new  firm  comprising  two 
members  of  the  old  firm  and  another 
person,  unless  some  inteiposing  claim 
be  made  by  the  creditoi-s  of  the  old 
firm.    Bumell  v.  Weld,  59  Me.  423. 

(/«)  See  Jones  v.  Clayton,  4  M.  &  S. 
349. 

(«)  See  Com.  Dig.  Execution,  H. 


CIIAI'.  III.]  EXECUTION   AGAINST   COMPANIES.  *517 

can,  uiuUt  tlie  act  in  question,  attach  debts  owing  to  any  one  cr 
more  of  his  judgment  debtors,  (o) 

The  extent  to  which  the  right  to  levy  execution  against  the  ef- 
fects of  a  firm  is  aftccted  by  bankruptcy  will  be  examined  hereafter. 

The  procedure  on  a  judgment  against  a  firm  is  regulated  by 
Order  XLII.,  Paile  8,  which  is  as  follows: — 

Where  a  judgment  is  against  partnei-s  in  the  name  of  the  firm,  execution  maj- 
issue: —  Execution 

(a)  Against  any  property  of  the  partnors  as  such.  n?i^','m  ]uag- 

(b)  Against  any  person  who  has  admitted  on  the  pleadings  that   muut  against 
he  is  or  has  been  adjudged  to  be  a  partner. 

(c)  Against  any  person  who  has  been  served  as  a  partner  with  the  writ  of  sum- 
mons and  has  failed  to  appear. 

If  the  party  who  has  obtained  judgment  claims  to  be  entitled  to  issue  execution 
against  any  other  person  as  being  a  member  of  the  firm,  he  may  apply  to  the  court  or 
a  judge  for  leave  to  do  so;  and  the  court  or  a  judge  may  give  such  leave  if  the  lia- 
bility be  not  disputed,  or,  if  such  liability  be  disputed,  may  order  that  the  liability 
of  such  person  be  tried  and  determined  in  any  manner  in  which  any  issue  or  ques- 
tion in  an  action  may  be  tried  and  detennined. 

It  is  not  clearly  said  in  this  rule  that  execution  must  first  be 
levied  against  the  joint  estate  of  the  firm  before  having  recourse  to 
the  separate  estates  of  the  members;  and,  having  regard  to  the  pre- 
vious well-established  practice,  the  rule  would  probably  be  con- 
strued as  not  rendering  such  a  course  necessary.  Such  a  construc- 
tion of  the  rule,  or  a  new  rule  to  this  effect,  would,  however,  be 
eminently  just;  and  would  be  strictly  analogous  to  the  course 
adopted  by  the  legislature  respecting  the  issue  of  execution  against 
a  shareholder  on  a  judgment  against  a  company  governed  by  the 
Companies  clauses  consolidation  act.  {p) 

*The  mode  of  taking  in  execution  the  share  of  one  partner     '••oil 
on  a  separate  judgment  against  him  will  be  examined  here- 
after (see  Bk.  III.  c.  5,  §  4). 


2.  Execution  against  companies  and  their  siiARKnoLDKus. 

By  the  law  of  this  country,  a  judgment  against  an  incorporated 
company  cannot  by  common  law  be  executed  except  Jud-ments 

I       J  •'  J       •     1  ngnmst  com- 

against  the  property  of  the  company  ;  and  a  judgment   panics, 
(o)  Miller  v.  Mynn,  1  E.  &  E,  1075.  {p)  See  iufra. 

719 


*518  EXECUTION   AGAINST   COMPANIES.  [bOOK  II, 

against  an  individual  cannot  bj  common  law  be  executed  against 
any  person  or  property,  except  the  person  or  property  of  the  indi- 
vidual named  in  the  judgment.  In  order,  however,  to  give  creditors 
a  more  extensive  remedy  than  they  would  have  at  common  law  upon 
a  judgment  obtained  against  companies,  either  in  their  corporate 
names  or  in  the  names  of  their  public  officers,  the  legislature  has 
i-endered  such  judgments  enforceable  against  the  individual  mem- 
bers of  the  companies.  For  tliis  purpose  three  schemes  have  been 
liad  recourse  to. 

The  first  in  point  of  time  was  applicable  to  companies  empowered 
Modes nfexe-     to  sue  and  be  sued,  and  was  as  follows: — A  creditor 

cutins  such  .  i        •         i     •      n  •  i  t  a^ 

judgments         havino;  obtained  lud^ment  as^amst  the  public  officer, 

against 'he  °  i  ^  •  • 

members.  "was  allowed  to  procecd  upon  that  judgment  by  scire 

First  mode.  yacias  against  any  of  the  shareholders  in  the  company 
at  the  time  the  judgment  was  obtained  ;  and,  if  necessary,  also 
against  such  of  the  late  shareholders  as  were  members  of  the  com- 
pany when  the  debt  was  contracted. 

The  next  device  was  a  mere  modification  of  the  last,  and  con- 
sisted in  the  application  of  it  to  judgments  against  cora- 

Second  mode.  •         ^         J.^     •  j.  ^i-i-i  i. 

panics  by  their  corporate  names,  which  judgments 
were  made  enforceable  against  shareholders  and  former  shareholders 
in  substantially  the  same  manner  as  that  above  explained:  a  qual- 
ification, however,  was  added,  to  the  effect  that  recourse  should  not 
be  had  against  individual  shareholders  until  efforts  had  been  made 
in  vain  to  obtain  payment  from  the  company,  and  as  to  some  com- 
panies, that  recourse  should  not  be  had  against  any  shareholder 
except  to  the  extent  of  his  shares. 

The  third  and  last  device  was  altogether  different,  and  was  the 
result  of  the  course  adopted  by  creditors,  who,  when  they  could 
not  obtain  satisfaction  from   companies,  singled 
Third  mode.      *518    out    somc   *unfortunate   shareholder,  and   com- 
pelled him  to  pay  the  whole  amount  for  which 
judgment  had  been  recovered.     This  course  was  in  the  highest  de- 
gree cruel;  and  Parliament  was  induced,  when  legislating  on  joint- 
stock  companies,  in  1856,  to  leave  out  all  those  clauses,  found  in  the 
preceding  acts,  enabling  creditors  to   execute  judgments   against 
individual    shareholders,    and   to  provide,   instead,   that  creditors 
should  have  the  power,  upon  non-payment   of  the  debts   due   to 
them  from  the  company,  to  cause  it   to  be   wound  up.     The  same 
view  prevailed   when  the  acts  relating  to  joint-stock  companies 
720 


ClIAr.    III.]  EXIX'UTIOX    AGAINST    COMPANIES,  *i)  1 0 

were  remodeled  in  1802.  Consequently,  a  creditor  of  a  com])any 
registered  under  the  Companies  act,  18G2,  can  only  execute  a 
judgment  obtained  against  the  company  by  proceeding  against  the 
corporate  property,  and,  if  necessary,  by  liaving  recourse  to  a  pe- 
tition  for  winding  up  the  company. 

Such  is  a  general  outline  of  the  manner  in  whicli  a  creditor  of  a 
company  has  been  enabled  to  obtain  satisfaction  of  a  judgment  re- 
covered against  it.  To  fill  up  tiiis  outline  so  far  as  is  possible, 
without  alluding  to  repealed  statutes  and  to  the  winding  up  of  com- 
panies, is  the  object  of  the  remainder  of  the  present  siction. 


First,  as  to  execution  against  the  comi)any. 

A  judgment  against  a  cor])oration  is  executed  against  the  cor- 
porate property  in  the  same  way  as  a  judijment  against  Exciution 
an  individual  is  executed  against  his  property  ((^j;  and  porutiou. 
a  judgment  against  a  public  officer  may,  it  is  conceived,  be  exe- 
cuted against  him  and  his  property  as  if  he  were  an  ordinary  indi- 
vidual, where  the  right  of  the  judgment  creditor  is  not  in  this  re- 
spect modified  by  statute,  (r) 

A  corporation  cannot  be  attached  for  contempt  or  for  disobedi- 
ence to  an  order  made  upon  it.  {s)     But  if  an 
order  is  *made  upon  a  corporation  and  its  direct-     *519  Attachments. 
ors  or  officers  set  the  order  at  defiance,  an  at- 
tachment against  them  personally  will,  if  necessary,  be  granted.  (^) 

By  the  Common   law  procedure  act,  1800  (23  &  24  Vict.  c.  120, 
§33),  it  is  enacted  that: — 

"Writs  of  injunction  against  a  corporation  maybe  enforced  either  by  attach- 
ment ag-ainst  the  directors  or  other  officers  thereof,  as  in  the  case  of  Excputinns 
mandamus,  or  by  writ  of  sequestration  against  their  property  iind    ?,^[',','".^'  ^""^" 
effects  to  be  issued  in  such  form,  and  tested  and  returnable  in  like   Attucluncuts. 

{(f)    The  rolling  stock  and  plant  of  tachment.     See  '\nfra,  as  to  particular 

railway  companies  are  i)rotected  by  30  companies. 

&  31  Vict.  c.  127,  §  4,  made  perpetual  (.s)    Hence   an  award  against  a  cor- 

by  38«fe  39  Vict.  c.  31.  poration  cannot  be  enforced  by  altach- 

(r)    See  Harrison  v.  Timmins,   4  M.  ment,  Mackenzie  r.  Sligo  and  Shannon 

&  W.  510  ;  Wormwell  v.  Hailstone,  6  Rail.  Co.  9  C.  B.  2")0. 

Bing.  668,  where  the  nominal  defend-  (/)  Lacharme  v.  Quartz  Rock  Mining 

ant  was  held  not  liable  to  execution  ;  Co.    1  H.  &  C.  l-'M,  and  see  Salman  r. 

and  Corpe  v.   Glyn,   3  B.  &  Ad.  801,  Hamburg  Co.  1  Ch.  Ca.  204. 
where  he  was  held  not  liable  to  an  at-  • 


*5:^0  EXECUTION    AGAIx\ST    COMPANIES.  [bOOK  II. 

manner  as  writs  of  execution,  and  to  be  proceeded  upcn  and  executed  in  like  man- 
ner as  writs  of  sequestration,  out  of  the  Court  of  Chancery."  (u) 

Acts  of  Piirliament  are  soinetiines  met  with  which  empower  a 
Underacts  compaiiy  to  suc  and  be  sued  bj  a  public  officer,  but 
clmvlllrslnnds  which,  instead  of  giving  any  remedy  against  him  or 
alone  liable.  the  Other  sliarcholders  individually,  render  the  funds 
of  the  company  alone  h'able  to  its  creditors.  In  such  a  case  no 
execution  against  the  public  officer  of  the  company,  or  against  any 
of  its  shareholders,  can  be  issued  (a?) ;  but  an  action  against  the 
public  officer  will  nevertheless  lie,  even  although  there  may  be  no 
funds,  and  the  plaintiff  ma}^  consequently  have  no  means  of  enforc- 
ing his  ]'udgment  after  he  has  obtained  it.  (y)  If  there  are  funds 
they  can  be  got  at;  but  before  the  Judicature  act  it  was  said  that 
the  only  mode  in  which  a  creditor  could  get  at  them  was  by  man- 
damus, or  by  a  bill  in  equity,  (s) 

Even  before  the  Common  law  procedure  act  of  1854,  the  68th 
Mandamus  in  scction  of  wliicli  Considerably  extends  the  power  of 
such  cases.  courts  of  law  to  grant  o.  mandamus  {a),  it  had  been 
held  that  a  creditor  of  a  company,  who  by  virtue  of  its  act  of  Par- 
liament had  no  remedy  against  its  shareholders,  but  only 
*520  against  the  funds  *of  the  company,  was  entitled  to  a  mav- 
damus  to  its  treasurer  and  directors,  after  establishing  his 
debt  in  an  action.  (5)  If  there  are  no  funds,  and  the  company  is 
not  under  an  obligation  to  provide  any,  no  mandamus  can  be 
granted  (c);  but  if  the  company  is  under  an  obligation  to  provide 
funds,  and  it  will  take  no  measures  to  raise  them,  it  seems  that  a 
mandamus  will  go.  {d)  It  is,  however,  to  be  observed  that  a  writ 
of  Tiiandamus  will  not  be  granted  if  the  only  reason  why  payment 
cannot  be  obtained  by  execution  in  the  ordinary  wa3%  is,  that  thei-e 
is  nothing  to  seize.  (<?) 

(m)  See  on  this  section,   Day's  Com.  (a)  See  Non-is  v.  The  Irish  Land  Co. 

Law  Proc.  Acts.  8  E.  &  B.  512,  cx)rrecting  Benson  v. 

[x)  See  Hanison  v.  Timmins,  4  M.  &  Panll,  6  E.  &  B.  273. 

W.   .510  ;   Wormwell    v.    Hailstone,   6  (6)  See  Corpe  v.  Glyn,  3  B.  &  Ad.  801 : 

Bing.  668 ;  Corpe  v.  Glyn,  3  B.  &  Ad.  R.  v.  St.  Katherine  Dock  Co.  4  ib.  360. 

801.  (c)  R.  V.  The  Victoria  Park  Co.  1   Q. 

{y)  See  Kendall  v.  King,  17  C.  B.  483.  B.  2S8. 

{z)  See  the  cases  in  the  last  two  notes.  (fZ)  lb.;  and  see  17  k  18  Vict.  c.  125, 

Actions  have  been  brought  in  such  cases  §  68. 

as  in  Cane  v.  Chapman,  5  A.  &  E.  647  ;  (e)  See  R.  v.  The  Victoria  Park  Co.  1 

but  see  Addison  v.  The  Mayor  of  Pres-  Q.  B.  288. 

ton,  12  C.  B.  108. 
702 


CHAP,  III.]  SCIRE    FACIAS    AGAINST    SHAKKHOLDERS,  *521 

The  effect  of  windinpf  uj)  a  conipany  upon  executions  against  it 
will  be  examined  hereafter  in  the  Fourth  Book. 


Secondly^  as  to  proceedings  against  sharclwlders  wpon  a  judgment 
obtained  against  a  company  or  its  public  officer. 

By  the  common  law,  a  judgment  against  A.  cannot  be  executed 
against  B.  without  a  scire  facias,  which,  thonffli  a  fudi-  ,  .  , 
cial  writ,  IS  in   the  nature  of  an  action,  aiiil  may  be  s'li'Tehoidcrs. 
pleaded  to  accordingly.     So,  before  a  judgment  in   the  Chancery 
division  against  a  public  officer  can  be  enforced  against  Judprmcntin 
individual  shareholders,  an  order  against  them  person-   uivisiou!''*^'^"^ 
ally  must  be  obtained.  (/)     The  object  of  the  sci.fa.  is  technically 
to  make  the  execution  conformable  to  the  judgment;  but  substan- 
tially its  object  is  to  give  the  person  against  whom  the  judgment 
is  sought  to  be  enforced  an  opportunity  of  defending  himself;  for, 
ex  hypothesi,  he  has  not  had  that  opportunity  before,  {g) 

In  those  cases  in  which  a  judgment  against  a  company  or  a  pub- 
lic officer  can  be  enforced  against  a  shareholder,  a  scii'e  v- 

...  °  ?  "^    Necessity  of 

jacias  IS  a  necessary  preliminary,  unless  there  is  some  ®'='*''^- 
statutory  enactment  to  the  contrary  (A),  and  a  provision  that 
execution  *shall  not  issue  without  leave  obtained  by  motion     *521 
in  open  court,  is  not  sufficient  to  dispense  with  a  sci.  fa.  (/) 

It  has  been  decided  that  a  sci.  fa.  is  necessary  in  the  case  of 
banking  companies  governed  by  7  Geo.  4,  c.  46  {k\  pcl  fa.  under  t. 
and  of  companies  governed  by  the  Companies  clauses  s  Ji'a  vfct'.a'ic. 
consolidation  act.  {I) 

The  same  rule  would  probably  be  held  to  apply  to  com])anies 
governed  by  the  Letters  Patent  act,  7  Wm.  4  <t:  1  Vict.   Y"'''- "  ^\'™-  ^ 

fc_.rt.  ot  i  \  let.  C.    iOt 

c.  73. 

(/)  Vigers  v.  Pike,  8  CI.  &  Fin.  652  ;  L.  J.  N.  S.  102,  Q.  B. 
Healey  v.  Chichester  and  Midhurst  Rail.  (/)    See  the  hust  three  cases.     A  judg- 

Co.  9  Eq.  148.  ment  obtained  in  a  colony  may  be  sued 

io)  See,  generally,  as  to  sci.fa.  Com.  iipon  in  this  country  in  an  action  in  the 

Dig.  Pleader,  3  L.  ;  Bac.  Ab.     Sci.  fo.  onlinary   fonn  :    Bank  of  Australia  c. 

and  the  note  to  Underbill  r.  Devereus,  Xias.  lO  Q.  B.  717, 
2  Wms.  Saund.  71.  (A-)    Kansford  v.  Bosanquet,  2  Q.  B. 

(h)  Bai-tlett  v.  Pentland,  1  B.  &  Ad.  972. 
704  ;  Clowes  r.  Brettell,  10  M.  &  W.  506;  (!)    8  &  9  Vict.  c.  16.  §  :16  ;  Hitchinfl 

Winfield  r.  Barton,  2  Dowl.  N.  S.  355,  v.  The  Kilkenny  Rail.  Co.  10  C.  B.  160; 

and  7  Jur.  258 ;  Wingfield  v.  Peel,  12  Devereux  v.  The  Kilkenny  Rail.   Co.  5 

723 


•^"522  EXECUTION   AGAIXST    COMPANIES,  [bOOK  II. 

Under  the  repealed  acts  7  &  8  Yict.  cc.  110  and  113,  leave  to  is- 
rnacr7&s  sue  execution  against  a  shareholder  might  be  obtained 
andiis.'  without  any  suggestion  or  sci.fa.     But  this  did  not 

render  a  sci.fa.  improper  ;  and  in  point  of  fact  it  was  very  com- 
monly had  recourse  to  for  the  purpose  of  executing  judgments  ob- 
tained against  companies  to  which  these  acts  applied,  {m)  A  sci. 
fa.,  however,  did  not  lie  against  the  executors  of  a  deceased  share- 
holder, {n.) 

The  Companies  act,  1862,  as  has  been  already  observed,  does  not 
T.  .    .^    .  .    erive  a  iudfjment  creditor  of  a  company  formed  under 

T  nder  the  Act     .*->.)       r?  r       j 

is^i^-  it  any  remedy  against  shareholders,  except  by  wind- 

ing up  the  company. 

If  a  company  is  incorporated,  or  if  it  must  be  sued  by  a  public 
officer,  a  creditor  cannot  proceed  by  action  against  a  shareholder  ; 
Shareholder  ^^^^  must  obtain  judgment  against  the  company  and 
ceed°e"d^a''an/st  then  procccd  upou  that  judgment,  {o)     It  seems 

a^afnsui'™*  ^^^^  ^^  ^^^  *doubtful,  whether  a  county  court  jndg- 
company.  mcut  against  a  company  can  be  executed  against 

its  shareholders;  hence  the  prudence  of  suing  companies  in  one  of  the 
superior  courts.  (  p) 

A  judgment  against  a  company  or  its  public  officer  may  be  reg- 
Re^istr  of  istcred  like  any  other  judgment;  and  in  those  cases  in 
judgments         which  it  is  equivalent  to   a  judgment  against  all   the 

against  com-  •  o       o  o 

panics.  members  of  the  company  individually,  and  is  enforce- 

able against  them  by  execution,  it  has  been  supposed  to  affect 
them  as  if  it  had  been  in  form  a  judgment  against  them  individ- 
ually and  registered  accordingly,  {q)  But  against  this  opinion  it 
may  most  reasonably  be  urged  that  as  a  judgment  against  a  com- 
pany or  its  public  officer  cannot  be  executed  against  an  individual 
shareholder  of  a  company  without  a  sci.fa.,  it  is  absurd  to  make 

Ex.  8-34.     See,  as  to  enforcing  decrees  524  ;  Morisse  v.  The  Ro3'al  British  Bank, 

in  equity,  Healey  v.  Chichester  and  Mid-  1  C.  B.  N.  S.  67  ;  Wilde  v.  Stannar,  1 

hurst  Rail.  Co.  9  Eq.  14S.  H.  &  N.  873.     See,  too,  Powis  v.  But- 

{m)    See  as  to  7  &  8  Vict.  c.  110,  Pal-  ler,  3  C.  B.  N.  S.  64-5,  and  4  ib.  469 ; 

mer  v.  The  Justice  Assurance  Society,  6  Fry  v.  Russell,  3  ib.  665. 

E.  &  B.  1015  ;  Peart  v.  The  Universal  (n)    Powis  v.  Butler,  nhi  supra. 

Salvage  Co.  6  C.  B.  478  ;  Thompson  v.  [o)    Fell  v.  Burchett,  7  E.  &  B.  537  ; 

The  Universal  Salvage  Co.  3  Ex.  310  ;  and  see  as  to  public  officers,  ante,  p.  495_ 

Re  Weiss,  15  C.  B.  .331.     And  as  to  7  (p)  See  Taylor  v.  The  Crowland  Gas 

&  8  Vict.  c.  113,  see  Bendy  v.  Harding,  Co.  11  Ex.  1. 

1  C.  B.  N.  S.  551 ;  Thompson  v.  Hard-  (g)  See  Ex  parte  Ness,  5  C.  B.  155. 
ing,    ib.  555  ;  Dossett  v.  Harding,   ib. 

724     ■ 


CHAP 


IILj 


SCIRE   FACIAS   AGAINST    SHAREHOLDERS. 


^523 


that  judgment  a  chari^u  on  liis  projicrty  before  execution  against 
him  can  lawfully  be  sued  out.  (r)  The  writer  takes  it  to  be  clear 
that  a  judgment  registered  against  a  company  governed  by  the  act 
of  lsG2  does  not  allcct  the  property  of  its  members. 

In  order  to  enable  a  creditor  who  has  obtained  judgment  against 
a  com])ai)y  to  discover  the  ]>ersous  against  whom  such  Discovery  of 
judgment  may  be  executed,  provision  has  been  made  shareholders. 
by  the  various  statutes  relating  to  companies,  compelling  them  to 
make  periodical  returns,  or  to  keep  registers,  of  the  names  and 
residences  of  their  shareholders,  and  directing  such  returns  or  reg- 
isters to  be  open  for  inspection,  {s) 

A  creditor  who  has  obtained  judgment  against 
a  company,  *and  is  in  a  position  lawfully  to  *o23 
execute  such  judgment  against  the  individual 
members  of  that  company,  cannot  be  restrained  from  proceeding 
to  execute  it  against  any  member  or  members  he  may  choose  to 
select,  pn)vided  he  acts  hondjide  for  the  purpose  of  obtaining  pay- 
ment of  what  is  due  to  him.  if)  But,  as  will  be  seen  hereafter, 
neither  a  judgment  creditor,  nor  a  purchaser  from  him,  will  be 
allowed  to  use  the  judgment  for  the  dislionest  purpose  of  aiding 
some  members  of  the  company  against  the  others,  (w) 

The  effect  of  winding   up  proceedings    on    executions   against 
members  of  companies  will  be  noticed  in  the  Fourth  I^ook. 

Having  made  these  preliminary  remarks  on  the  subject  of  execu- 


Risht  of  credit- 
or to  proceed 
against  indi- 
vidual share- 
holder. 


(r)  See  Harris  v.  The  Royal  British 
Bank,  2  H.  &  N.  535.  It  has  been  held 
in  Irehxud  that  a  judjjriiient  obtained 
against  a  company  ouirht  not  to  be  reg- 
istered against  a  former  sharehoUlcr. 
See  Hone  v.  OThihertie,  9  Ir.  Ch.  119, 
■where  relief  against  such  registration 
was  given.  See,  also,  Ex  j}arte  Thorn- 
ton, 2  Ch.  171,  as  to  registering  wind- 
ing-up orders  under  §  114  of  the  Com- 
panies act,  1862,  now  repealed. 

(s)  See  7  Geo.  4,  c.  4G,  §4,  et  scq.; 
7  Wm.  4  &  1  Vict.  c.  73,  §  6,  etseo.;  8 
&  9  Vict.  c.  16,  §§9,  10,  36;  and  as 
to  the  mode  of  obtaining  inspection,  see 
Header  r.  I.  of  Wight  Ferry  Co.  9  W. 
R.  750,  Ex.,  were  a  madiunus  was  held 
not  necessary;  R.  v.  The  Derbyshire 
Rail-Co.  3  E.  &.  B.  784,  where  a  manda- 


mus was  obtained.  As  to  e.xamining 
the  directors,  see  Dickson  r.  Neath  and 
Brecon  Rail.  Co.  L.  R.  4d  Ex.  87. 

{t)  See  Morisse  r.  The  Royid  British 
Bank,  1  C.  B.  N.  S.  67;  Green  r.  Nixon, 
2;3  Beav.  530.  See,  also,  Hardinge  r. 
Webster,  1  Dr.  &  Sm.  101,  where  it 
was  held  that  a  member  of  a  company 
who  had  obtained  judgment  against  it 
could  not  be  i-estrained  from  enforcing 
tliiit  judgment  against  another  membei 
of  the  same  company.  The  company 
was  governed  by  7  &  8  Vict.  c.  110,  and 
had  become  aniidgamated  with  another 
ccmpiiny  in  which  the  defendant  was  a 
shari'holder,  but  the  plaintiff  was  not. 

(»)  See  Woodhams  v.  Anglo- Austra 
Han  Co.  2  DeG.  J.  &  Sm.  162. 


l-lo 


^524:  EXECUTION   AGAINST    COMPANIES.  [uOOK  II. 

tions  against  shareholders  generally,  it  is  proposed  to  examine  more 
in  detail  the  law  relating  to  sci.  fa.,  and  to  proceedings  against 
shareholders  in  companies  governed  by  the  Banking  act  of  9  Geo. 
4,  the  act  of  7  Wm,  4  and  1  Yict.  c.  73,  the  Companies  clauses  con- 
solidation act,  and  other  companies. 


Proceedings  by  scire  facias,  (x) 

A  writ  of  scire  facias  is  a  judicial  writ,  and  is  the  commence- 
Natureof  mcnt  of  a  uew  action,  founded  on  a  judgment  already 

SCI.  la.  obtained.     The  writ  states  the  recovery  of  the  judg- 

ment, and  whatever  facts  are  necessary  to  show  that  the  person 
against  whom  the  writ  is  issued  is  liable  to  be  proceeded  against  on 
that  judgment;  and  the  shareholder  against  whom  the  writ  is  is- 
sued is  commanded  to  appear  to  show  why  the  plaintiff  ought  not 
to  have  execution  against  hira.  The  writ  is  set  out  in  a  decla- 
ration or  statement  of  claim,  which  prays  that  execution 
'"524  may  *issue  against  the  defendant  (y);  and  which  may  be 
pleaded  or  demurred  to,  in  the  ordinary  way,  (s)  Issue 
having  been  joined,  the  cause  proceeds  to  trial,  (a)  A  judgment 
obtained  against  a  defendant  in  a  sci.  fa.  is  executed  like  any  other 
judgment.  But  the  Court  will  compel  the  creditor  to  limit  the 
amount  for  which  execution  is  sued  out  to  what  may  then  be  really 
due  to  him.  This  is  done  by  putting  the  creditor  on  terms  when 
leave  to  issue  a  sci.  fa.  is  granted.  (5) 

{x)  The  Judicature  acts  and  i-ules  con-  371 ;    Bank    of   Scotland  r.    Fenwick, 

tain  no  provisions  specially  applicable  ib.  792;  Ness  v.  Fenwdck,  2  Ex.  598; 

to  these  proceedings.     But  the  general  Nunn   v.    Claxton,  3  Ex.  712,  in  each 

provisions  applicable  to  all  actions,  ap-  of  which  the  declaration  was  demurred 

ply,  it  is  conceived,  to  them.  to.      Several  matters  may  be  pleaded: 

(y)  See  the  pleadings  in  Ricketts  v.  Phillipson  v.  Tempest,  8  Jur.  60.     As 

Bowhay,  3  C.  B.  889,  where  the  writ  to  the  practice  and  forms,  see  2  Chit- 

and  declarations    are  set   out  in   full,  ty's  Archbold's  Practice,  and  Chitty's 

See,  too,  Bradley  v.  Eyre,  11  M.  &  W.  Forms  thereto. 

432;  Nunn  v.  Claxton,  3  Ex.  712.     In  (a)  The  jury  must  not  be  sharehold- 

some  of  the  forms  the  writ  is  dii-ected  to  ers,  Esdaile  r.  Lund,  12  M.  &  W.  784. 

the  sheriif,  but  in  others  it  is  directed  to  (fc)  See  Harvey  v.  Scott,  11  Q.  B.  92; 

the  individual  shareholder.  Green  v.  Nixon,  23  Beav.  630;  Addison 

[z)  See  Esdaile   v.  Trastwell,  1  Ex.  v.  Tate,  11  Ex.  250. 

726 


CHAl'.  III.J  SCIRE   FACIAS   AGAINST    SlIAKEIIOLDERS.  *525 

A  sci.  fa.  issued  irregularly,  e.  g.,  without  leave,  where  leave  is 
required,  will  be  set  aside;   but  a  plea  to  it,  alleging  irregular 
merely  an  irregularity  for  which  it  might  be  set  aside,  ^^^  ^'*- 
is  bad.  (c) 

A  judgment  creditor  of  a  company  may  issue  as  many  concur- 
rent writs  of  sci.  fa.  against  as  many  shareholders  as   conourrcnt 
he  thinks  ])roper;  and  so  long  as  his  demand  is  unsat-   wriuiofscLfa. 
isfic'd,  a  defense  by  any  shareholder  that  the  plaintiff  is  proceeding 
against  others  is  bad.  (d)     Even  the  circumstance  that  judgments 
have  been  already  obtained  against  them  on  the  writs  issued  against 
them,  affords  no  ground  of  defense;  for  such  judgments  do  not  ex- 
tinguish the  right  conferred  upon  the  creditor  by  the  prior  judg- 
ment obtained  against  the  com]>any.  {e)     Even  before  pleas 
in  abatement  were  abolished  it  -was  decided  that  to  a.  sci.  fa.     *525 
against  a  shareholder  the  non-joinder  of  other  ])ersons  liable 
to  be  proceeded  against,  could  not  be  pleaded  in  abatement;   and 
if  one  sci.  fa.  issued  against   several   sharcln elders,  a  declaration 
upon  it  against  some  of  them  only  was  not  bad  on  demurrer,  even 
if  it  were  irregular,  {f)     Neither  is  it  any  objection  to  a  sci.  fa. 
by  a  creditor  against  a  shareholder  that  other  creditors  are  suing 
him    or  are  in  a   position    to    issue   execution    against  him  {g)\ 
although  when  he  has -paid  the  full   amount  to  which  he  is  liable, 
no  other  creditor  can  extract  more  from  him.  (A) 

A  rule  for  a  sci.  fa..,  or  an  application  for  leave  to  issue  execution 
(in  those  cases  in  which  no  sci.  fa.  is  necessar\')  may.  Applications 

.  ,  ,     ,,  ,  ,  -for  rule  for  scL 

it  seems,  be  moved  tor,  or  made,  more  tlian  once  by  fa. 
the  same  creditor  against  the  same  shareholder  for  the  same  debt, 
if  the  same  rule  or  application  has  been  allowed  to  drop  for  any 
satisfactory  reason,  or  has  been  refused  upon  some  technical  ground 

(c)  Miirson  v.  Limd,  16   Q.  B.   34-t;  woll,  2  Ex.  ."^l^,  and  Ksdaile  v.  Lund. 

Bradley  r.  Warburg,  11  M.  &  W.  4:.-2;  12  M.  A:  W.  G-IT. 

Rickctts  V.  Bowliay,  3  C.  B.  889;   Bank  (<•)  Burniester  r.  Crofton,  3  Ex.  .397. 

of   Scotland  v.   Fenwick,    1    Ex.   792;  (/)  Fowler  r.  Rickerby,  2  Man.  &  Gr. 

Bosanquet  r.  Graham,  7  Jur.  831,  Q.  760,  docidnl  on  7  Geo.  4,  c.  46.     Seethe 

B.     See  as  to  suing  out  a  sci.  fa,  on  a  argument  in  Esdaile  v.  Lund,  12  M.  & 

judgment  entered  up  for  costs.  Fanner  W.  647. 

V.  Mottram.  6  Man.  &  Gr.  684.  (g)  Kigby  r.  Dublin  Trunk  Rail.  Co. 

(rf)  See  Rigby  v.  Dublin  Trunk  Rail.  L.  R.  2  C.  P.  .^86. 

Co.  L.  R.  2  C.  P.  586;  Nixon  r.  Brow-n-  (/i)  Bmke  r.  Dublin  Trunk  Kail.  Co. 

low,  1  H.  &  N.  405;  Nunn  v.  Lomer,  3  L.  R.  3  Q.  B.  47. 
Ex.  471.     Compare  Esdaile  v.  Trust- 

ili 


*i)26  EXECUTION    AGAIXST    COMPANIES.  [UOOK  II. 

wlilcli  lius  been  removed.  At  tlic  same  time  the  maxim,  nemo 
dihet  his  vexari  pro  eddem  causa  is  applicable,  unless  some  ^ood 
reason  to  the  contrary  can  be  shown,  (i) 

A  judgment  against  a  companj',  the  shareholders  of  which  are 
Sci  fa  after  Hable  to  execution  on  the  judgment,  may  be  exe- 
eiegit.  cuted   against  them,  although  the  creditor  has  issued 

an  elegit  against  the  company,  and  has  obtained  partial  satisfaction 
by  an  extent  under  the  writ,  (k)  The  extent  does  not,  in  these 
cases,  satisfy  the  debt.  If  the  creditor  has  received  nothing  from 
the  extent,  he  is  entitled  to  execution  for  his  whole  demand;  and 
if  he  has  obtained  any  fruits  from  the  extent,  lie  is  still  entitled  to 
execution  for  so  much  as  remains  due.  {I)  If  tlie  land  ex- 
*536  tended  is  of  small  value  compared  with  what  is  *due  to  the 
creditor,  he  is  entitled  to  execution  against  the  shareholders 
without  delay;  but  if  the  land  is  of  such  a  value  that  the  creditor 
will  in  a  short  time  be  able  to  obtain  pajmient  without  having 
recourse  to  the  shareholders,  the  court  will  not,  as  a  matter  of 
course,  let  immediate  execution  against  them  be  issued,  (m) 

Except  whert  judgment  has  been  obtained  by  fraud,  the  validity 
Vaiidityof  ^^'  ^  judgment  which  has  been  recovered  against  a 
nofbe'ques'^^^'  ^o"ipa".y  o^"  its  public  officcr,  cannot  be  imjieached  by 
tioued  on  SCI.  fa.  ^  shareholder  who  is  proceeded  against  by  sci. /a./  for, 
excepting  in  cases  of  fraud,  nothing  is  admissible  as  a  defense  to  a 
sci.  fa.  which  might  have  been  relied  on  as  a  defense  to  the  action 
on  the  judgment  in  which  the  sci.  fa.  issues,  (^i)  The  judgment 
is  conclusive,  and  nothing  can  be  set  up  as  a  defense  to  a  sci.  fa. 
upon  it,  except  some  matter  which  is  consistent  with  the  validity 
of  the  judgnient  itself. 

Thus  in  Peddell  v.  Gwyn  {o\  judgment  had  been  obtained 
PeddtUt).  against  the  official  manager  of  a  company  completely 

Gwyn.  registered  under  7  &  8  Yict.  c.  110,  upon  a  bill  of  ex- 

({■)  See,  upon  this,  Corder  v.  The  Uni-  should  state  what  has  been  done  under 

versal  Gas  Light  Co.  6  C.  B.  190  and  the  elegii,  and  the  amount  if  any  ob- 

554;  Field  v.  Mackenzie,  ib.  384;  Dodg-  tained  by  it. 

son  V.  Scott,   2  Ex.  457.     Edwards  v.  (m)  See  Addison  v.  Tate,  11  Ex.250. 

Cameron's,  &c.  Rail.  Co.  15  Jur.  470.  (»)  See  juer  Lord  Mansfield  in  Cook  v. 

Ex.,  is  a  strong  authority  for  not  aJlow-  Jones,  Oowp.  727. 

ing  two  applications.  (o)  1  H.  &  N.  590.     See,  too,  Bradley 

[k]  Addison  ij.  Tate,  11  Ex.  250;  R.  v.  v.  Urquhart,  11  M.  &  W.  546;  Philip- 

The  Derbyshire  Rail.  Co.  3  E.  &  B.  784.  son  v.  Egremont,  6  Q.  B.  587,  and  th' 

(0  See  Addison  v.  Tate,  11  Ex.  250,  cases  in  the  next  note, 
from  which  it  appears  that  the  sci.  fa. 

728 


CHAP.  III.]  SCIRL    FACIAS    AGAINST    SHAREHOLDERS.  ■*^527 

diaiif^e  accepted  for  the  company  by  two  of  its  directors  in  the 
form  prescribed  by  the  act.  Upon  tliis  judgment  a  sci  fa.  was 
issued  against  a  sliareholder,  who  pleaded  in  etlect  that  the  direct- 
ors had  no  authority  to  accept  bills  binding  on  the  shareholders  to 
a  greater  extent  than  the  amount  unpaid  np  of  their  shares,  and 
that  he,  the  defendant,  had  paid  up  his  shares  in  full.  This  plea 
was  on  demurrer  held  bad,  inasmuch  as,  assuming  that  the  bills 
had  been  accepted  without  authority,  the  judgment  which  had 
been  obtained  precluded  the  company  and  all  its  shareholders  from 
raising  that  question.  The  court  considered  it  clear  that  after 
judgment  against  a  joint-stock  company,  a  shareholder  cannot  set 
up  as  a  defense  any  matter  which  would  have  afforded  an  answer 
to  the  original  action. 

Upon   the  same  principle  it  seems  that  if  judgment  is 
*  obtained  against  a  person  sued  as  a  public  officer,  a  share-     *527 
holder  cannot  plead  as  a  defense  to  a  sci.  fa.,  that  the 
l^erson  against  whom  the  judgment  has  been  obtained  Bradley  r. ejtg. 
was  not  the  representative  of  the  company.  (^;)     In  such  a  case 
application  should  be  made  to  set  aside  the  judgment,  {q) 

A  judgment  obtained  by  defeult  is,  in  the  absence  of  fraud,  as 
conclusive  against  the  shareholders  as  any  other  judg-   j„f,gnicntby 

,     /    V  default. 

ment.  (r) 

A  judgment  obtained  by  fraud  and  collusion  is  always  impeach- 
able by  innocent  parties  affected  by  it;  and  however  Exceptions  in 
high  the  tribunal  in  which  the  judgment  has  been  pro-  ^^il^V^^i^of 
nounced  may  be,  its  invalidity  on  the  ground  of  fraud  the  creditor. 
may  be  examined  by  any  inferior  court  wdiich  may  happen  to  bo 
called  upon  to  give  effect  to  it.  {s)  If,  therefore,  a  shareholder  is 
proceeded  against  upon  a  judgment  obtained  by  fraud  on  the  part 
of  the  creditor,  the  judgment  may  be  impeached;  and  it  seems  that 
the  shareholder  may  at  his  option  either  apply  to  the  Court  in 
wdiich  the  judgment  was  obtained  to  have  it  set  aside,  or  rely  on 
the  fraud  as  a  defense  to  a  sei.fa.  or  to  an  application  for  leave  to 
issue  execution  as  the  case  may  be.  {t) 

{]})  See  Bradley  r.  EjTe,  11  M.  &  W.  (s)  See  Shedden  r.  Patrick,  1    McQu. 

432;  Fowler  v.  Rickerby,  2  Man.  &  Gr.  535:  Tlie  Duchess  of  Kingston's  ca^e,  in 

7(5(3  2  Sm.  L.  C.  and  the  admii-able  disserta- 

(7)  Ibid,  and  Bosanquet  v.  Graham,  tion  upon  it  there. 

7  Jur.  832,  and  6  Q.  B.  601,  note.  (/)  See  Dodprson  r.  Scott,   2  Ex.  457; 

(r)  Green  v.   Nixon,   23  Beav.   530.  Edwards  r.  The  Kilk.-nny  Co.  2  C.  B.  N. 

See,  also,  Ex  parte  Chorley,  11  Eq.  157.  S.  397;  Philipson  r.  Egremont,  6  Q.  B. 

729 


*J:28  EXECUTION   AGAINST    COMPANIES.  [bOOK  U. 

Philipson  v.  Egremont  (n)  affords  a  good  example  of  a  successful 
defense  to  a  sci.fa.  on  the  f^roimd  of  fraud  on  the  part 

Philipson  v.  ,  f"  .         ' 

Egremont.  oi  a  judgment  creditor,  in  that  case  an  action  was 
brought  against  the  registered  officer  of  a  company  formed  under 
the  Letters  Patent  act,  upon  a  bill  of  exchange  drawn  and  endorsed 
bv  the  agent  of  the  company,  and  judgment  was  recovered  against 
the  defendent  in  that  action.  A  shareholder  in  the  company 
*528  pleaded  to  a  sci.fa.  on  the  judgment,  that  the  *  original  ac- 
tion was  for  a  demand  in  respect  of  which  neither  he,  nor 
the  company,  nor  its  registered  officer,  was  by  Law  liable,  as  the 
plaintiff  knew,  and  that,  the  registered  officer  of  the  company  and 
the  plaintiff' knowing  the  premises,  such  officer  fraudulently  and 
deceitfully  and  by  connivance  with  the  phxintiff,  suffered  the  judg- 
ment to  be  recovered  in  order  that  the  plaintiff  might  proceed 
against  and  obtain  payment  from  him,  the  shareholder.  Upon 
demurrer  this  plea  was  held  good. 

It  is  to  be  observed  that  the  fraud  relied  npon  in  the  above  case 
Fraud  by  com-    as  a  defense  to  the  sci.  fa.,  was  fraud  on  the  part  of  the 

panv  on  share-      ,  .  ' 

holder  does       ludgment  Creditor.     Fraud  on  a  shareholder  by  the 

not  protect  him     , .  . 

from  sci.  fa.  directors  of  the  company,  and  to  which  fraud  the  cred- 
itor is  not  privy,  affords  no  defense  to  proceedings  by  him  against 
the  shareholder.  This  was  decided  in  several  cases  arising  out  of 
the  failure  of  the  Eoyal  British  Bank,  and  is  a  necessaiy  conse- 
quence of  those  principles  of  the  law  of  partnership  which  have 
been  discussed  in  the  First  Book  of  the  present  treatise. 

In  Henderson  v.  the  Eoyal  British  Bank  {x),  the  plaintiff  had 
Henderson!',  obtained  judgment  against  a  company  incorporated  by 
Bank.  letters  patent  under  the  7  &  8  Yict.  c.  113,  and  he  had 

also  obtained  a  rule  calling  upon  a  shareholder  to  show  cause  why 
execution  on  such  judgment  should  not  issue  against  him. 
The  shareholder  insisted  that  no  proceedings  should  be  taken 
against  him  because  he  had  been  induced  to  become  a  shareholder 

587;  Bosanquet  v.  Grabam,  6Q.  B.  601,  iell  v.  the  Royal  Brit.  Bank,  1  H.  &  N. 

note;     Green  v.  Nixon,  23  Beav.  530.  681;    Fowls  v.  Harding,    1  C.  B.  N.  S. 

The  first  two  of  these  cases,  and  Hai-vey  533.     Howard  v.  Shaw,  9  Ir.  Lav/  Rep. 

V.  Scott,  11  Q.  B.  92,  show  that  it  is  not  335,  shows  that  a  shareholder  sued  for  a 

proper  to  raise  the  question  of  fraud  debt  of  the  company  cannot  escape  pay- 

upon  a  motion  for  leave  to  issue  a  sci.  ment  on  the  ground  that  the  company 

/«.  was  concocted  in  fraud,  and  that  its 

(»)  6  Q.  B.  587.  deed  of  settlement  was  invalid. 

{x)l  E.   &.  B.  356.    See,  too,  Dan- 

730 


CHAP,  III.]  SCIRE   FACIAS   AGAINST   SHAREHOLDERS.  *529 

by  the  false  and  fraudulent  statements  of  the  directors  of  the  com- 
pany, and  had  repudiated  his  shares  as  soon  as  he  had  discovered 
the  fraud.  But  it  was  held  that  these  were  matters  with  which 
the  creditor  had  nothing  to  do.  The  judgment  of  Lord  Campbell 
in  this  case,  so  far  as  it  bears  upon  the  etiect  of  the  fraud  relied 
upon,  was  as  follows: — 

"  This  was  an  application  for  leave  to  take  out  execution  against  a  shareholder  ; 
and  the  proposed  answer  to  the  application  was,  that  the  shareholder 
had  been  induced  by  fraud  to  take  the  shares.  He  had  *remamed  a  share-  *529 
holder  for  some  time,  and  received  dividends,  and  acted  in  all  respects  as 
a  shareholder,  until  ,tlie  Royal  British  Bank  stopped  pajnnent,  and  until  its  bank- 
ruptcy, and  he  then  gave  notice  that  he  was  no  longer  a  share-  Henderson  v. 
holder,  and,  as  far  as  he  could,  disaffirmed  the  contract  under  which  ^">'J^'  British 
he  became  a  shareholder,  a.s  being  induced  by  the  fraud  of  the 
directors  ;  he  demanded  back  all  the  moneys  he  had  paid,  and,  being  a  depositor 
himself,  he  demanded  the  deposit,  and  all  the  advances.  Tlie  question  is  whether, 
if  it  were  established  that  this  fraud  had  been  practiced  upon  him,  it  could  be  an 
answer  to  the  application.  If  there  were  any  doubts  about  it,  we  should  not  make 
this  rule  absolute  ;  but  we  should  direct  a  scire  facias  to  issue,  so  that  the  question 
might  )}e  raised  on  the  record.  We  entertained  no  doubt  on  the  argument  :  but 
being  informed  that  similar  applications  had  been  made  to  the  Courts  of  Common 
Pleas  and  Exchequer,  and  that  rules  were  depending  in  those  Courts,  we  thought 
that  upon  a  matter  of  this  sort  it  would  be  well  if  we  had  a  conference  with  the 
other  judges  before  our  judgment  was  given.  That  conference  has  taken  place  : 
and  the  judges  are  unanimously  of  opinion  that  this  can  be  no  answer  to  the  appli- 
cation either  upon  principle  or  authority.  This  is  an  application  by  a  creditor, 
who,  upon  the  faith  of  the  party  who  then  was  a  shai-eholder,  and  who  held  him- 
self out  to  the  world  as  a  shareholder,  and  being  one,  gave  credit  to  the  bank.  ((/) 
He  has  obtained  judgment  against  the  bank.  There  were  no  assets  of  the  bank  as 
a  comjiany,  and  the  application  now  is  that  execution  may  issue  against  that  party 
individually.  It  would  be  monstrous  to  say  that  he  having  become  a  partner  and  a 
shareholder,  and  having  held  himself  out  to  the  world  as  such,  and  having  so 
remained  untd  the  concern  stopped  pajinent,  could,  by  repudiating  the  shai-es  on 
the  ground  that  he  had  been  defrauded,  make  himself  no  longer  a  shareholder,  and 
thus  get  rid  of  his  liability  to  the  creditors  of  the  bank  who  had  given  credit  to  it 
on  the  faith  that  he  was  a  shareholder.  It  would  be  monstrous  injustice  and  con- 
trary to  all  principle.  Whether  we  could  say  that,  with  regard  to  other  share- 
holders not  privy  to  the  fraud,  we  need  not  say  ;  there  may  be  some  dithiulty  aboiit 
that.  But  that  is  not  the  question  we  have  to  determine  ;  which  is  simply,  whethrr 
this  is  an  answer  to  a  creditor  who  has  given  trast  upon  the  faith  of  his  b-jing  a 
shareholder.  Suppose  this  were  a  common  partnership,  and  that  there  was  credit 
giv^n  to  the  linn  :  would  it  be  an  answer  to  an  action  by  a  creditor  ag.iinst  one  of 

(//)  It  may  well  be  doubted  whether,  could  be  justified  ;  for  there  was  noth- 

if  the  creditor  had  nothing  to  rely  on,  ing  to  show  that  the  shareholder  held 

except  that  the  shareholder  had  held  himself  out  as  a  partner  to  the  plaintiff, 

himself  out  as  a  partner,  the  decision  See,  ante,  p.  50,  et  seq. 

731 


*o30  EXECUTION    AGAINST    SIIAKEIIOLDER?.  [bOOK  11. 

the  partners  that  the  defendant  was  fraiidulentiy  induced  liy  the  other  partners  to 
become  a  partner  ?  Inter  se,  tliat  mig'lit  be  considered  :  but,  as  between  the  finn 
and  a  creditor,  it  is  a  matter  wholly  immaterial." 

A  shareholder  in  a  company  cannot  esca]-)e  from  the  liabilit}''  to 
„   ,.  its  creditors  which  is  imposed   upon  him  as  a  share- 

C  realtor  pro-  i     i  i  i 

ceedinfr  ngainst  holder,  except  Dv  virtiic  of  some  act  of  theirs  : 

shareliolcUT  after  ^  x  j 

indiicin.y^iiimto    *530     and  nothing  short  of  *  fraud  on  their  part,  or 

become  such.  "  15"* 

of  some  contract  or  conduct  of  theirs  preclud- 
ino;  them  from  treating  him  as  their  debtor,  will  afford  him  a 
defense  as  against  them  so  long  as  their  demand  exists  as  between 
thera  and  the  company.  This  is  well  illustrated  by  the  recent  case 
T.1,    T,-  ,     ,    of  Bill  V.  ftichards  (2).  where  a  shareholder  in  a  rail- 

Bill  u  Richards.  ^    ^ 

way  company  pleaded  to  a  sci.fa.  issued  against  him 
by  a  creditor  who  had  obtained  judgment  against  the  companj^  that 
he,  the  shareholder,  had  at  the  request  of  the  plaintiff  taken  shares 
ill  the  company  as  a  trustee  for  others,  and  upon  the  faith  of  the 
plaintiff's  statement  that  by  so  doing  no  responsibility  in  respect 
of  the  shares  would  be  incurred.  It  was  not  alleged  that  the  plain- 
tiff had  been  guilty  of  any  fraud  ;  his  statement  did  not  relate  to 
any  matter  of  fact ;  it  did  not  amount  to  a  contract  of  indemnity, 
nor  to  a  contract  that  if  he  were  a  creditor  of  the  company  he 
would  not  endeavor  to  obtain  payment  from  the  defendant.  It  was 
quite  consistent  that  all  that  was  meant  was,  that  if  the  defendant 
would  allow  shares  to  be  taken  for  others  in  his  name  they  would 
indemnity  him  against  the  consequences,  and  the  defense  was  there- 
fore held  insufficient,  although  pleaded  as  a  defense  on  equitable 
grounds. 

The  effect  which  a  contract  by  a  company  to  pay  out  of  its  funds, 
Nosci.  fa  by     and  thosc  only,  has  in  limiting  the  liability  of  the 

creditor  whose  "^  '^  ^  ^""^ 

right  is  limited  shareholders,  has  been  already  examined.  («)     Where 

to  company  s  '  ''  \    /        "  ^^'-'^  ^ 

funds.  such  a  contract  has  been  entered  into,  no  execution  on 

the  judgment  against  the  company  will  go  against  the  shareholders 

at  the  suit  of  a  person  seeking  to  enforce  that  contract  (6);  he  must 

obtain  some  order  against  them  personally,  (c) 

Having  now  adverted  to  those  rules  and  principles  wliich  are 

5ci  fa.,  &c.,        applicable    generally    to    i3roceedin2:s   against   share- 
under  particu-     1     \  ■,  .  o        o 
laracts.            holdcrs,  upon  judgments  obtained  against  the  company 

{z)  2  H.  &  N.  311."  Compare  Batty  v.  (b)  Halket  v.  The  Merchant  Traders' 

McCundie,  3  Car.  &  P.  203  ;  Connop  v.      Ass.  13  Q.  B.  960. 
Levy,  11  Q.  B.  769.  (c)  See  ante,  p.  382. 

(a)  Ante,  p.  377. 
732 


CUAl'.  III.]  SCIRE    FACIAS    AGAINST    SHAKEIIOI.OKRS.  ''-Oul 

of  wliich  tliej  are  members,  it  is  necessary  to  examine  with  more 
minuteness  the  liability  of  shareholders  in  different  sorts  of  com- 
panies. 


*Executio}i  ar/ainf!f  memhrrs!  of  companies  governed  hy  7  Geo.  4  c.  46.      *531 

The  Banking  companies  act  of  Geo.  4  requires  tlie  public  officers 
of  a  company  governed  by  that  act  to  be  members  of  jj^ecution 
the  company  {d),  and  enacts  that  execution  upon  any  Xc^^under? 
judgment  obtained  against  a  public  otHcer  may  be  is-  g«o-4.  c-*6. 
sued  against  any  member  of  the  company,  (e)  From  this  it  fol- 
lows that  a  public  othcer  of  a  company  governed  by  the  act  in 
question  is  personally  liable  upon  every  judgment  obtained  against 
him;  and  tliat  writs  can  issue  against  him  grounded  on  such  judg- 
ment, and  that,  so  far  as  he  is  concerned,  no  sci.  fa.  or  other  in- 
termediate- proceeding  is  necessary.  (/)  If,  indeed,  the  public 
officer  named  in  the  judgment  has  ceased  to  be  a  member  of  the 
company,  then,  by  the  act,  he  is  only  liable  like  other  former  sliare- 
holders;  and  upon  an  affidavit  by  him,  the  court  will  sta}'  execution 
against  him  until  after  he  has  been  proceeded  against  by  scire 
facias,  ig) 

The  act  in  question,  7  Geo.  4,  c.  4G,  allows  a  cred-  j  ;„,,;,;,  .„f 
itor,  who  has  ol)tained   ludgment  against  the  public  f,l"T'^" 'l!*^" . 
officer  to  execute  that  judgment —  ^•■*''- 

1.  Against  any  member  for  the  time  being  of  the  company;  and 
in  case  any  such  execution  shall  be  ineffectual,  then 

2.  Against  any  person  who  was  a  member  of  the  company  at  the 
time  the  contract  sued  upon  was  entered  into;  or 

3.  Against  any  person  who  became  a  member  at  any  time  after 
such  contract  was  entered  into,  but  before  it  was  executed;  or 

4.  Against  any  person  who  was  a  member  at  the  time  when  the 
judgment  was  obtained. 

But  persons  who  are  not  members  for  the  time  being,  and  so  do 
not  fall  within  the  lirst  class,  are  only  liable  for  three  years  after 
they  have  ceased  to  be  members.  (A) 

((7)  7  Goo.  4,  c.  46,  §4.  {g)  See  Harwood  v.  Law,  7  M.  &■  W. 

[e]  §  13.  203. 

(/)  Harwood  v.  Law,  7  M.  &  W.  (/t)  7  Geo.  4,  c.  46,  §  13. 

203. 

733 


*532  EXECUTION    AGAIN'ST    SIIARKIIOLDERS.  [boOK  II. 

It  appears,  therefore,  that  a  creditor  must  go  first  of  all  against 
the  members  for  the  time  being,  and  that  until 
the^ime^befng.  *532  he  has  *done  so  he  cannot  go  against  late  mem- 
bers {i);  and  bj  members  for  the  time  being  are 
meant,  not  members  at  the  time  judgment  was  obtained  against  the 
public  officer,  but  members  at  the  time  a  sci.  fa.  on  the  judgment 
is  issued.  Qc)  Members  for  the  time  being  in  this  sense  can  be 
proceeded  against  at  once,  and  the  statute  expressl}'^  allows  pro- 
ceedings to  be  taken  against  any  one  or  more  of  them.  Their  lia- 
bility, it  will  be  observed,  is  much  more  extensive  than  the  lia- 
bility of  ordinary  partners;  not  being  confined  to  debts  incurred 
after  they  became  partners. 

It  is  settled  that  a  sci.  fa.  is  the  proper  mode  of  proceeding 
against  shareholders  under  this  act.  {V)  The  names  of  the  share- 
holders can  be  ascertained  from  the  returns  made  to  the  Stamp 
Office,  (m) 

A  creditor  is  not  bound  to  proceed  against  all  the  members  for 
Former  mem-  ^^  time  being  before  having  recourse  to  former  mem- 
^®'"®-  bers;  but  he  must  make  every  reasonable  effort  to  ob- 

tain paj'ment  from  the  first  before  he  acquires  a  right  to  proceed 
against  the  last.  Acting  upon  this  principle,  the  Court  allowed  a 
sci.  fa.  to  issue  against  a  late  member,  although  proceedings 
against  a  member  for  the  time  being  were  pending,  evidence  being 
given  to  show  that  nothing  was  to  be  got  from  him,  and  that  evi- 
dence being  uncontradicted,  {n)  So  in  another  case,  a  late  member 
was  allowed  to  be  proceeded  against,  although  some  only  of  the 
members  for  the  time  being  had  been  sued  ineffectually,  uncontra- 
dicted evidence  being  given  that  inquiry  had  been  made  as  to  the. 
solvency  of  the  others,  and  that  there  was  reason  for  believing 
that  payment  could  not   be  obtained   from    any  of  them,  {p)      So 

(i)  Hence  a  late  member  was  a  com-  345;   Williams  v.    Aspinall,    7    Scott, 

petent  witness  for    the  public  officer,  822,    contra,    is  not  to  be  relied  upon. 

Needham  v.  Law,  12  M.  &  W.  560.  The  rule  for  a  sci.  fa.  against  present 

{k)  See  Dodgson  v.  Scott,  2  Ex.  457.  members  is  absolute    in    the  first  hi- 

See,  too,  Bradley  v.  Eyre,  11  M.  &  W.  stance,  and  need  not  be  moved  for  in 

432,  which  turned  on  a  private  act  in  open  court,  Harrison  v.  Tysan,  1  Bail 

which  similar  words  occurred.  Ct.  Ca.  111. 

{I)  Ransford  v.   Bosanquet,  2  Q.  B.  (m)  See  7  Geo.  4,  c.  46,  §  4,  et  fseq. 

972,  and  Bosanquet  v.  Ransford,  11  A.  («)  Dodgson  v.  Scott,  2  Ex.  457. 

&  E.  520,  and  Cross  p.  Law,  6  M.  &  W.  {o)  Harvey   v.    Scott,    11    Q.    B.  92; 

217;  Wittenbury  v.  Law,  6  Bing.  N.  C.  Field  v.  Mackenzie,  4  C.  B.  705. 

734 


CHAP.  III.]  SCIRE    FACIAS    UNDEIi    7    GKO.    -i,    C.    40.  *534 

it  was  unnecessary  for  the  creditor  to  -issue  writs  of  ca.  sa.  *533 
against  the  existing  Flifxreholders  before  proceeding  against 
former  members,  {j))  Moreover,  a  mortgagee  who  has  obtained 
judgment  for  liis  debt,  and  has  done  his  best  to  obtain  payment  by 
executins  that  iudorinent  against  the  members  for  the  time  being, 
is,  it  seems,  entitled  to  proceed  against  former  members,  even  with- 
out realizing  his  mortgage,  {q)  On  the  other  hand,  the  ('ourt  will 
refuse  a  creditor  leave  to  issue  a  8ci.  fa.  against  a  late  memlier 
where  there  is  reason  to  believe  that  satisfaction  can  be  got  with 
diligence  from  existing  members  (/•);  and  a  return  of  nulla  Ijona 
to  a  writ  oifi.  fa.  issued  against  the  public  officer,  together  with  a 
loose  affidavit  as  to  the  insolvency  of  the  members  for  the  time 
being,  will  not  of  itself  be  sufficient  to  satisfy  the  Court  that  pay- 
ment from  them  cannot  be  obtained.  («) 

With  respect  to  late  members,  the  act,  as  has  been  seen,  makes 
three  classes  of  them  liable,  and  renders  it  lawful  for  classes  of 

former  mem- 

the  creditor  to  proceed  against  any  or  all  oi  them,  not  bere. 
confining  him  to  one  class  before  having  recourse  to  another,  if) 
Tiie  liability  of  late  members  is,  in  some  respects,  more  extensive 
than  the  liability  of  retired  partners  at  common  law,  inasmuch  as 
these  last  are  not  liable  to  be  sued  in  respect  of  debts  contracted 
before  they  became  members.  But,  on  the  other  hand,  the  statute 
limits  the  duration  of  a  late  member's  liability  to  creditors  to  three 
years  after  retirement.  {\l)  Moreover,  there  is  one  class  of  late 
members  who  cannot  be  proceeded  against  by  a  creditor  at  all,  viz., 
those  who  did  not  become  members  until  after  his  debt  had  arisen, 
and  who  had  ceased  to  be  members  before  he  obtained  judgment 
against  the  public  officer.  "Whether  the  omission  of  all  members  of 
this  class  was  designed  or  accidental  is  not  known;  but  being 
*  omitted,  their  freedom  from  liability  towards  creditors  is  *534 
complete,  {x) 

(;))  Field  I'.  Mackenzie,  4  C.  B.  732.  be  shown  to  have  reached  him,  Esdaile 

\(l)  Ib.AC.  B.  725.     The  mortgage  v.  Smith,  18  L.  J.  Ex.  120. 

in  that  case  could  not  be  realized  at  once  («)  Thi.s  hmitation  apphos   only    to 

without  great  loss.  creditors,    and  does  not  pn?vont  a  late 

(/•)  Eardley  v.  Law,  12  A.  &  E.  802.  shareholder  from  being  a  contributory. 

See,  too,  Cross  r.  Law,  6  M.  &  W.  217.  although  three  years  may  have  elapsed 

(s)  Bank  of  England  v.   Johnson,  3  since    he  retired  from    the    company. 

Ex.  598.  Gouthwaite's  case,  3  Mc.  &  G.  187. 

[f)  A  rule  for  a  SCI. /a.  against  a  late  (j)  See  Dodgson  r.  Scott,  2   Ex.  i-'>l, 

member  must  be  ser\-ed  personally,  or  and  Harvey  v.  Scott,  14  Q.  B.  02. 

735 


*535  EXIiCUTION    AGAIXST    SlIAEEIiOLDERS.  [cOOK  II. 

A  creditor,  being  entitled  to  issue  execution  only  against  mem- 
Evidence  of  ^^^^  ^'^^  *^^®  ^'^^^  being,  or,  if  necessary,  against  certain 
membership,  classcs  of  late  members,  must,  before  he  can  obtain 
leave  to  issue  a  sci.  fa.  against  any  particular  person,  adduce  some 
evidence  to  show  either  that  such  person  is  a  member  for  the  time 
being,  or  that  he  was  a  member  at  the  time  when  the  contract  with 
the  creditor  was  entered  into,  or  before  the  same  was  executed,  or 
at  the  time  judgment  was  recovered,  {xj)  For  this  purpose  recourse 
is  usually  had  to  the  memorial  of  shareholders,  directed  to  be  re- 
turned to  the  Stamp  Office,  which  is  held  to  be  sufficient  if  uncon- 
tradicted, even  although  it  may  be  in  some  respects  informal  {£)  or 
inaccurate  as  regards  the  name  of  the  shareholder  proceeded 
against,  {a)  The  memorial  is  not,  however,  conclusive,  nor  is  it 
the  only  evidence  of  membership;  and  it  has  been  decided  that  a 
person  whose  name  is  omitted  from  the  last  return  may  neverthe- 
less be  proved,  aliunde^  to  have  been  a  shareholder  when  the  return 
was  made,  and  that,  if  there  is  a  dispute  as  to  the  fact  of  member- 
ship, a  sci.  fa.  ought  to  issue  in  order  that  the  creditor  may  have 
an  opportunity  of  tiying  that  question.  (J) 

As  between  a  creditor  and  an  alleged  shareholder,  the  question 
Effect  of  non-  ^^  membership  or  no  membership  depends  entirely 
requSform-  iipon  whether  these  requisites  which,  by  the  company's 
ahties.  deed,  have  to   be  complied    with    before  a  person  be- 

comes a  member,  have  been  couiplied  with  or  not;  and  it  may 
happen  that  one  and  the  same  person  is  not  a  member  for  the  pur- 
])Ose  of  being  proceeded^against  by  a  8gi.  fa..,  although  he  may  be 

a  member  for  the  purpose  of  being  made  a  contributory  on 
*o35     the  winding   *up  of  the  company.     In  Ness  v.  Angas  (c), 

a  husband  was  held  not  to   be  liable  to  be  proceeded  against 

by  a  sci.  fa.  in  respect  of  shares  held  by  his  wife,  he  not  having 

complied  with  the  terms  of  the  company's  deed,  so  as 

Ness  V.  Angas.  i       i  •  i.       j  ^ 

to  make  himself  a   member  in  respect  of  such  shades. 

{y)  In  The  Bank  of  England  v.  John-  699.     Compare  Prescott  v.  Buffery,  1  C. 

son,  3  Ex.  598,  the  Court  let  a  sc\.  fa.  B.  41;  ante,  p.  162. 

issue  agamst  a  person,  although  there  (a)  Clowes  v.   Brettell,   11   M.  &  W. 

was  strong  evidence  agamst  his  having  461,  decided  on  a  private  act.     See,  too, 

been  a  member  at  the  tune  alleged.  Thompson  v.  Harding,  1  C.  B.  N.  S.  555. 

(z)  See  Ex  parte  Prescott,   Mon.  &  {h)  Bank  of  England  v.  Johnson,  3 

Ch.  611;  Harvey  v.  Scott,  11   Q.  B.  92;  Ex.  598;  Prescott  v.  Buffery,  1  C.  B.  41. 

Field  V.   Mackenzie,  4  C.  B.    705  and  (c)  3  Ex.  805.     See,  too,  Dodgson  v. 

Ill;    Bosanquet  v.   Shortridge,   4  Ex.  Bell,  5  Ex.  967. 

736 


CHAP.  III.]         SCIRE  FACIAS  UNDER  7    \VM.  -i  &  1   VICT.  C.  73.  ''^536 

In  Ness  v.  Armstrong  (d),  a   similar  decision  was  come  to  witli 
resj^ect  to  an  executor,  although  he  had  been  paid  divi    jje^s  r.  Arm- 
dends  on  the  shares  to  which  he  was  as  executor  enti-  stronj,'. 
tied;  and  in  Bosanquet  v.  Shortridge  (e),  it  was  held  that  a  mem- 
ber who  had  sold  his  shares,  and  had  them  transferred  Bosnnnuetv. 
to  the  purchaser,  and  who  thenceforth,  and  for  some  ^i^ortndge. 
j-ears,  had  had  nothing  to  do  with  the  compan}',  continued  never- 
theless, as  between  himself  and  creditors,   to   be  liable  as  an  exist- 
ing shareholder,  he  not  having  duly  complied  with  the  requisites  of 
the  company's  deed,  so  as  to  exchange  places  with  the  purchaser. 
Similar  decisions  have  been  made  upon  statutes   relating  to  other 
companies. 


I-Jxecution  against  memhers  of  CoDipanics  governed  hy  the  Letters  Patent    act. 

The  Letters  Patent  act  (7  Wm.  4  &1  Yict.  c.  73)  does  not  require 
the  public  officers  of  a  company  governed  by  it  to  be  Execution 

,  o  ^^  ^  -i.   ,1  apiiunst  public 

meniocrs  ot  the  companv  ;  and  even  it  thev  are  mem-  onuerunder? 

1  -,.■,.■,.■,.,.  "  .         ,  1  "  .      Wm.  4  and  1 

bars  their  liabilities  are  restricted  to  the  extent  speci-  vict.c.  73. 
tied  in  the  letters  patent  of  their  respective  companies.  These  cir- 
cumstances alone,  it  is  conceived,  render  it  improper  for  a  creditor 
to  issue  execution  against  a  public  officer  of  a  company  governed 
b}'  the  Letters  Patent  act  without  a  sci.fa.;  for  it  is  clear  from  the 
act  that  he  cannot  be  made  personally  liable  unless  he  is  or  has 
been  a  member,  and  in  neither  case  is  he  liable  to  the  extent  to 
which  he  would  be  liable  at  common  law. 

The  act  in  question  appears  to  empower  a  creditor  who  has  ob- 
tained judgment  against  the  public  officer  of  a  com-   Linbiiity  of 
pany  governed  by  it,  to  execute  that  judgment  against  umuV;  \vm.  4 
all   or   any  of  the  shareholders,  or   late   shareholders 
whpm  he  might  have  sued  for  payment  at  common  law  ;  the  only 
qualifications  being  :    1.  that  a  shareholder  who  transfers  his  shares 
continues  a  shareholder  for  all  purposes  of  liability  until  the 
^■•transfer  has  been    registered;  and  2,  that   the  extent  of  a     *536 
shareholder's  liability  is  limited  or  unlimited,  according  to 
the  letters  patent  granted  to  the  company.  {/)     This  act  has  not  re- 

(,d)  4  Ex.  21.  &  24;  and  soo,  upon  it,  Pliilipson  v.  Eg- 

{e)  4  Ex.  099.  remout,  6  Q.  B.  587. 

(/)  7  Wm.  4  &  1  Vict.   c.  73,  §§  21 

»  737 


5^537  EXECUTION    AGAINST    SIIAKEHOLDERS.  [bOOK  II. 

ceived  any  judicial  interpretation  throwing  light  upon  the  liabili- 
ties imposed  by  it,  and  it  is  by  no  means  clear,  that  the  liability  ot 
an  incoming  shareholder  is  not  more  extensive  than  the  ordinary 
liability  of  an  incoming  partner. 

The  names  of  the  shareholders  can  be  ascertained  from  the  re- 
turns made  to  the  Court  of  Chancery,  {g) 


Execution  against  meinhers  of  companies  governed  hj  8  (&  9  Vict.  c.  10. 

With  respect  to  companies  governed  by  the  Companies  clauses 
rncier8&9  consolidation  act  (8  &  9  Vict.  c.  16),  there  is  one  im- 
uar mV«tf"f '  portant  rule  which  has  no  analogy  with  anything  met 
lompiuyP^^  with  in  the  law  applicable  to  ordinary  partner- 
ships, or  in  that  applicable  to  companies  governed  by  the 
Banking  act  of  7.  Geo  4,  c.  46,  or  by  the  Letters  Patent  act  of 
7  Wm.  4  and  1  Yict.  c.  73.  The  rule  referred  to  is,  tliat  t!io  credit- 
ors of  a  company  governed  by  the  Companies  clauses  act,  are  not 
entitled  to  proceed  against  the  shareholders  personally,  if  payment 
can  be  obtained  from  the  company.  Tn  other  words,  the  creditor;^ 
must  have  recourse  to  the  assets  of  the  company  before  they  can 
have  recourse  to  the  shareholders  individually.  A\^hen,  therefore, 
an  application  is  made  for  leave  to  issue  a  sci.  fa.  or  execution 
against  a  shareholder  in  a  company  governed  by  the  act  in  ques- 
tion, evidence  must  be  adduced  to  satisfy  the  Court  that  pay- 
ment cannot  be  obtained  from  the  company  itself  as  a  body  (h).  The 
and  show  that  Creditor  need  not  show  that  there  is  no  possibility  of  the 
toirpaymeut  Company  ever  paying  him;  ail  that  the  Court  requires 
from  it.  -g  ^y  i^g  satisfied  that  the  creditor  applying  for  leave  to 

proceed  against  the  shareholders  has  no  means  of  obtaining 
*537     ^'present  payment  except  from  them  individually.     In  order 

to  satisfy  the  court  upon  this  head,  the  crediror  must  prove 
that  he  has  made  reasonable  attempts  to  obtain  payment  from  the 
company,  and  to  discover  assets  presently  available  for  his  satis- 
faction, and  that  such  attempts  have  been  unsuccessful.     A  mere 

(r/)  lb.  §  6,  et.  seq.  the  company.      Hitcliins  r.   The    Kil- 

(h)  The   same  rule  applied  to  com-  kenny  Rail.  Co.  15  C.  B.   459,  but  if  it 

panics  governed  by  the  repsaled  acts  of  does,  the  averment  may  be  traversed. 

7  &  8  Vict.  cc.  110  and  113.     It  seems  Marson  v.    Lund,  16  Q.   B.  344.     See 

that  the  sci.  fa.  need  not  contain  any  Nixon  v.  Bro\\^llow,  1  H.  &.  N.  405. 

averment  that  nothing  can  be  got  from 

788 


CHAP.  III.]  SCIUE  FACIAS  UNDKR  8  &  9  VICT.  16.  *538 

i^eneral  assertion  by  an  attorney's  clerk  tliat  writs  of  fi.  fa.  have 
been  issued  against  the  company  and  returned  nulla  hona^  is  not 
sufficient ;  for  it  is  consistent  with  such  an  assertion  that  no  at- 
tempt lias  been  made  to  ascertain  whether  the  company  has  any 
assets  or  not.  it)  But  if  attempts  have  been  made  to  discover 
assets,  and  those  attempts  have  been  fruitless,  and  a  writ  of  ^.  fa. 
has  issued  against  the  company  and  been  returned  nulla  hona,  that 
will  be  sufficient  until  it  is  shown  affirmatively  that  the  company  has 
assets  (Jc)  ;  and  even  if  the  company  has  assets  which  have  not  been 
taken  in  execution,  still,  if  the  court  is  satisfied  that  they  are  in- 
sufficient to  satisfy  the  plaintiff,  the  sci.fa.  will  go.  (/) 

By  the  Companies  clauses  consolidation  act,  a  judgment  recov- 
ered against  a  company  to  which  such  act  applies,  may,   jjabiiity  of 
if  necessary,  be  executed   against   any  of   the   share-  u^i'jer^s&a" 
holders.     But  no  shareholder  is  liable  to  a  greater  ex-  "^'i^'-d^. 
tent  than  the  amount  unpaid  up  of  his  shares  in  the  company,  (ra) 

The  expression,  "  any  of  the  shareholders,"  has  been   decided  to 
mean  any  of  the    shareholders    at    the    time    execu-   <<Anvofthe 
tion    against  the  company    is    found    to  be  ineffect-  shareholders." 
nal,  i.  e.,  in  ordinary  cases,  at  the  time  of  the  sheriff's  re- 
turn of  nullahona.  («,)*Consequently,  not  only  all  persons     *538 
who  have  ceased  to  be  shareholders  before  judgment  against 
the  company  has  been  recovered,  but  also  all  who  have  ceased  to  be 
so  after  that  time,  but  before  it  has  been  ascertained  that  execution 
against  the  company  on  such  judgment  will  prove  ineffectual,  are 
wholly  exempt  from  liability  to  the  judgment  creditor,  {o) 

Sci.fa.  is  the  proper  mode  of  proceeding  against  a  sliareholder 
under  this  act,  and  every  shareholder  intended  to  be  g^.  j.^  ^^^^^ 
proceeded  against,  is  to  have  sufficient  notice  in  writ-  ^'^'^'• 

(?)  See  Hitching  v.  The  Kilkenny  Rail.  C.  P.  I-');  and  see  itifra,  notes  («)  and  (jo). 

Co.  10  C.  B.  160,  and  15  il).  459;  King  v.  (/)  Ilfracombe  Rail.  Co.  v.  Lord  Polti- 

The Parental Endov.'nient  Cell  Ex.  443.  more,  L.  R.  3  C.  P.  288;  Rigby  v.  Dub- 

(A-)  Rastrick  v.  The  Derbyshire  Rail.  lin  Trunk  Rail.  Co.  L.  R.  2  C.  P.  586. 

Co.  9  Ex.  149;   Nixon  v.  The  Kilkenny  {m)  8  k  9  Vict.  c.  16,  §3G.    See  Burke 

Rail.  Co.  1  H.  &  N.  47;  Hitchins  r.  The  r.  Dublin  Tnmk  Rail.  Co.  L.  R.  3  Q.  B. 

Kilkenny  Rail.  Co.  15  C.  B.  459;  Wyall  47;  Guest  v.  WorcesU?r  Rail.  Co.  L.  R. 

r.  The  Darenth  Rail.  Co.  2  C.  B.  N.  S.  4  C.  P.  9,  in  the  last  case  the  shares 

110;  Ridgway  r.  The  Security,  &c.  Ass.  were  not  in  fact  paid  up. 

Soc.  18  C.  B.  686.     The  return  by  the  («)  Nixon  r.  Green,  11  Ex.  550,  and 

sheritT  need  not  be  filed  when  the  s«./<T.  3  H.  k  N.  686;  Nixon  v.  Brownlow,  3 

is  moved  for;   Ilfracombe  Rail.  Co.  v.  H.  &  N.  686. 

Devon  and  Somerset  Rail.  Co.  L.  R.  2  {o)  Ibid. 

739 


*o39  EXECUTION   AGAINST    SHAREHOLDEKS,  [bOOK  II. 

ing  before  application  for  leave  to  issue  a  sci.fa.  against  him  is 
made.  (j>) 

Leave  to  issue  a  sci.fa.  will  be  refused  if  the  Court  is  of  opinion 
that  there  is  a  clear  defense  to  it.  {q)  On  the  other  hand  a  sci.fa. 
may  be  dispensed  with  if  the  shareholder  does  not  desire  to  con- 
test his  liabilitj.  (r) 

The  meaninff  of  the  word  shareholder  in  this  act  of  Parlia- 
.,  pj.  ment  has  been  already  examined  (s);  and  it  is  only 
membership,  necessarj  here  to  observe  that  the  company's  register 
of  shareholders,  which  a  creditor  who  has  obtained  judgment 
against  the  company  has  a  right  to  inspect  {t\  is,  in  the  absence  of 
evidence  to  the  contrary,  sufficient  proof  that  a  person  whose  name 
is  on  it  is  a  shareholder,  {u)  But  the  register  [is  not  conclusive 
evidence,  and  leave  to  issue  a  sci.fa.  against  a  person  who  is  on  it 
will  not  be  given  if  he  can  show  that  he  is  not  a  sharehold- 
^539  er.  {x)  Neitlieris  the  register  the  only*evidence  that  a 
person  is  a  shareholder;  and  a  sci.fa.  lies  against  a  person 
made  a  member  of  the  company  by  its  special  act,  although  no 
shares  have  been  issued  (y);  and  in  a  case  where  a  creditor  M'as 
prevented  from  seeing  the  register,  a  sci.fa.  was  allowed  to  issue 
against  a  person  sworn  to  be  a  shareholder  to  the  belief  of  the  de- 
ponent, and  which  belief  was  founded  on  information  from  officials 
connected  with  the  company,  (z) 

ip)  8  &  9  Vict.  C.16,  §36.    See  Hitc]i-  to  go,  althougli  the  case  was  clear, 

ins  V.  Kilkenny  Rail.  Co.  10  C.  B.  160;  (r)  Burke  v.  Dublin  Tioink,  &c.  Bail. 

Devereux  v.  Kilkenny  Rail.  Co.  5  Ex.  Co.  L.  R.  3  Q.  B.  47. 

884.     See  Ilfracombe  Rail.  Co.  v.  Devon  {s)  Ante,  p.  156. 

and  Somerset  Rail.  Co.  L.  R.  2  C.  P.  15,  (<)  8  &  9  Vict.  c.  16,  §  36.     R.  v.  Tte 

and  Edwards  v.  Kilkenny  Rail.  Co.  1  C.  Derbyshire,  &c.  Rail.  Co.  3  E.  &  B.  784; 

B,  N.  S.  409,  as  to  serving  the  notice  Header  v.  Isle  of  Wight  Feny  Co.  9  W. 

and  rule  nisi  on  the  shareholder.     See,  R.  750,  wliich  shows  that  a  mandamus 

as  to  enforcing  decrees  in  equity  without  is  not  necessary. 

a  sci.  fa. ,    Healey  v.  Chichester  and  (u)  See  8  &  9  Vict.  c.  16,  §  §8  and  29. 

Midhurst  Rail.  Co.  9  Eq.  148.  {x)  Edwards  v.  Kilkenny  Rail.  Co.  14 

(g)  See,  as  to  the  discretion  of  the  C.  B.  N.  S.  526;  Mather  v.  Nat.  Assoc, 

court,  Shrimpton  v.  Sidmouth  Rail.  Co.  Investment  Soc.  ib.  676. 

L.  R.  3  C.  P.  80;  Lee  v.  Bude,  &c.  Rail.  (y)    Portal  v.  Emmens,  1  C.    P.   D. 

Co.  L.  R.  6  C,  P.  576;  Burke  v.  Dublin  201,  ante,  p.  157. 

Trunk  Rail.  Co.  L.  R.  3  Q.  B.  47.    How-  (2;)    Rastrick  v.  Tlie   Derbyshire,  &c. 

ever,  in  Guest  v.  Worcester  Rail.  Co.  L.  Rail.   Co.  9  Ex.  149.     Seo  ante,  p.  156, 

R.  4  C.  P.  9,  the  court  allowed  a  sci.  fa.  et  seq^. 

740 


CIIAl'.  III.]  EXECUTION   AGAINST   8HAKEU0LDERS.  *539 


Execution  against  niemhcrs  of  other  companies. 

Companies  empowered  by  special  acts  to  sue  and  be  sued,  and 
the  shareholders  in  which  are  liable  lur  the  debts  of  inability  of 
the  companies,  will   generally  be   i'unnd  to    resemble   •n'j;th''er'2oS- 
com panics  governed  by  7  Geo.  4,  c.  46.  {a)  pames. 

Unregistered  cost-book  mining  companies  are  partnerships,  ami 
shareholders  in  them  may  be  proceeded  against  accord-  cost-i)ook  com- 
ingly.  {h)  P^^i^- 

Shareholders  in  companies  governed  by  the  Companies  act,  1862, 
are  not  liable  to  execution  on  judgments  against  the  companies gov- 

,     ,  .  ,  1        erned  by  act 

company,  but  must  be  proceeded  against   under   the  ofise-i 
winding-up  clauses,  which  will  be  examined  hereafter,  (c) 

The  law  respecting  execution  against  members  of  companies  gov- 
erned by  the  repealed  acts  of  7  &  8  Vict.  cc.  110  and  113,  is  now 
obsolete,  and  is  therefore  omitted,  {d) 

(fl)  See  Clowes  v.  Brettell,  10  M.  &  26  ;  Peel  v.  Thomas,  15  C.  B.  714  ;  Toll 
W.  506  ;  Wingfield  r.  Barton,  7  Jur.  v.  Lee,  4  Ex.  2:30  ;  Ellis  v.  Schmoeck, 
258  ;  Wingfield  v.  Peol,  13  L.  J.  N.  S.  5  Bing.  521,  are  instances  of  success- 
Q.  B.  102  ;  and  as  to  iriendly  societies,  ful  actions  against  individual  share- 
Myers  V.  Rawson,  5  H.  &  N.  99.  The  holders  in  cost-book  mining  companies. 
17  &  18  Vict.  c.  25,  on  which  the  last  (c)  25  &  26  Vict.  c.  89,  §§  180  and 
case  turned,  is  repealed  by  25  &  26  Vict.  195. 
87.  ((?)    It  will  be  found  in  the  first  edi- 

{h)    Lanyon  v.  Smith,  3  Best  &  Sra.  tion  of  the  present  treatise,  vol.  i.   pp. 

939;    Tredwen  v.   Bourne,   6   M.  W.  458-462. 
461  ;  Newton  v.  Daly,   1  Fos.  &  Fin. 

741 


^i>iO  EIGHTS   OF   PAKTNERS   INTER   SE.  [bOOK  III, 


*^^^  *BOOK  III. 

OF  THE  RIGHTS  AND  OBLIGATIONS  OF  MEMBERS  OF  PARTNERSHIPS 
AND  COMPANIES  BETWEEN  THEMSELVES. 


CHAPTER  I. 

OF  THE  RIGHT  TO  TAKE  PART  IN  THE  MANAGEMENT  OF  THE  AF- 
FAIRS OF  A  PARTNERSHIP  OR  COMPANY. 


SECTION  I.— OF  ORDINARY  PARTNERSHIPS. 

In  ordinary  partnerships,  the  good  faith  of  the  partners  is 
Each  member  Pledged  mutually  to  each  other  that  the  business  shall 
partnership  en-  ^^  conducted  with  their  actual  personal  interposition, 
part  in°it^ man-  SO  that  eacli  may  see  that  the  other  is  carrying  it  on 
agement.  ^^^  their  mutual  advantage,  {a) 

In  the  absence  of  an  express  agreement  to  the  contrary,  the  pow- 
ers of  the  members  of  an  ordinary  partnership  are  in  all  respects 
equal,  even  although  their  shares  may  be  unequal ;  and  there  is  no 
right  on  the  part  of  one  or  more  to  exclude  another  from  an  equal 
management  in  the  concern.  (5) '  Moreover,  if  two  persons  are  in 
partnership,  and  one  of  them  mortgages  all  his  share  and  interest 
therein  to  the  other,  the  latter  will  not  be  permitted  during  the 

(«)    Per  Lord  Eldon  in   Peacock  v.  ular  partner,  and  he  fails  to  perform 

Peacock,  16  Ves.  51.  them,  it  is  a  breach  of  contract;  yet  the 

(ft)    Rowe  V.  Wood,  2  Jac.  &  W.  558;  damages  for  such  breach  will  be  but 

see,  too,  Lloyd  v.  Loaring,    6  Ves.  777.  nominal,  if  another  party  s^hall  perform 

'  In  law  partnerships,  either  partner  the  duty  with  due  professional  skill,  and 

may  attend  to  business  intrusted  to  the  without  injury  to  the  cHent.     Smith  v. 

firm.     But  if  a  firm  contract  with  a  cH-  Hill,  13  Ark.  173. 
ent  for  the  personal  services  of  a  partic- 

742 


CHAP.  I.] 


DIEECTOES. 


*541 


continuance  of  the  partnerslii]),  to  avail  liimself  of  his  rights  as  a 
niort^ji^'ee  and  to  exclude  his  co-partner  from  intei-ference  in  the 
partnership,  (c)  Indeed,  speakinij  generally,  it  may  he  said  that 
nothing  is  considered  as  so  luudly  calling  fui-  the  interll-r- 
eiice  *of  the  Court  betwcL'u  partners,  as  tlio  improper  ex-  *541 
elusion  of  one  of  them  by  the  others  from  taking  j)art  in  the 
management  of  the  partnership  business,  (d) 

It  nceJ,  however,  hardly  be  observed  that  it  is  perfectly  compe- 
tent for  partners  to  agree  that  the  management  of  the  y,^^^^^  ^^^^ 
]):irtnership  affairs  shall  be  confided  to  one  or  moi-e  of  ^^'^""^  agreed, 
their  number  exclusively  of  the  others;  and  that  where  such  an 
agreement  is  entered  into,  it  is  not  competent  for  those  who  liave 
agreed  to  take  no  part  in  the  management,  to  transact  the  partner- 
ship business  without  the  consent  of  all  the  other  ])artners.'  But, 
as  was  seen  in  an  earlier  part  of  the  treatise,  every  member  of  an 
ordinary  firm  is  'prinid  facie  its  agent  for  carrying  on  its  business 
in  the  usual  way;  and  persons  dealing  with  a  partner  within  the 
limits  of  his  apparent  authority,  are  entitled  to  hold  the  firm  an- 
swerable for  his  conduct,  unless  such  persons  had  distinct  notice 
that  his  real  authority  was  less  extensive  than  they  had  a  right  to 
assume  it  to  be. 


(c)    Rowe  V.  Wood,  2  Jac.  &  W.  558. 

(f?)  See,  in  addition  to  the  cases  last 
cited,  Goodman  r.  Whitcomb,  1  Jac.  & 
W.  589;  Marshall  r.  Colman,  2  ib.  266. 

'  If  any  one  of  the  partners  of  a  co- 
jiartnei-ship  give  bis  ass^ent  to  the  acts 
of  their  agent,  such  assent  would  be 
good  evidence  affecting  the  rest,  unless, 
by  the  articles  or  constitution  of  the 
company,  the  whole  concern  and  man- 
agement should  be  intrusted  to  a  com- 
mittee or  board  of  managei-s;  in  which 
case  the  assent  must  be  proved  to  have 
been  given  by  them,  or  some  of  them, 
pursuant  to  the  authority  delegated  to 
them  by  the  company.  Odiorne  v. 
Maxcy,  13  Mass.  178;  S.  C,  15  id.   o9. 

Evidence,  both  dii-ect  and  ciicumstan- 


tial,  is  admissible  to  prove  that  the  sole 
power  of  conducting  the  business  of  a 
firm  has  been  given  to  one  partner. 
Such  power  may  be  inferred  from  the 
conduct  of  the  partners  for  a  series  of 
years,  as  that  one  has  exclusively  con- 
ducted the  business  of  the  finn,  and  the 
other  partner  has  never  questioned  his 
acts,  or  assumed  to  conduct  the  business 
himself.  It  is  proper  to  show  any  rea- 
son existing,  or  expressed  by  the  part- 
ners, why  it  was  not  desii-able  or  desired 
tliat  the  other  should  conduct  the  busi- 
ness, as  that  he  had  little  interest  in  the 
concern,  while  the  interest  of  the  man- 
aging pai-tner  was  large.  Anthony  p. 
Whoatons,  7  R.  I.  49. 

743 


*042  MANAGEMENT   OF   COMPANIES.  [UOOK  III. 

SECTION  II.— OF  COMPANIES. 

One  of  the  great  peculiarities  of  companies,  as  distinguished  from 
Paiie  otherwise  partnerships,  is  that  the  managen)ent  of  a  company's 

as  to  compa-         i        .  .  .  ,  i        ^ 

Hies.  business   IS    entrusted   to  a  lew    chosen    individuals, 

and  that  the  shareholders  are  deprived  of  that  right  of  personal 
interference  which  is  enjoj'ed  by  the  members  of  ordinary  firms,  (e)^ 
The  members  of  companies  form  two  bodies,  whose  interests  are 
or  should  be  the  same,  but  whose  powers  and  functions  are  differ- 
ent; the  one  body  consists  of  the  directors,  in  whom  the  general 
powers  of  management  are  vested;  and  the  other  body  consists  of 
the  shareholders,  to  whom  the  directors  are  accountable,  and  by 
whom  they  are  generally  appointed.  Each  of  these  bodies  has  its 
own  sphere  of  action,  and  its  own  rights  and  duties,  as  will  be  seen 
more  particularly  hereafter. 

Where  there  is  no  statutory  or  other  provis- 
Managing  body.  *  542  ion  regulating  *the  constitution  and  powers  of 
the  managing  body,  the  majority  of  the  share- 
holders of  the  company  must  determine  how  its  affairs  are  to  be 
conducted,  and  to  whom,  and  under  what  restrictions,  the  manage- 
ment of  those  affairs  shall  be  entrusted.  {/)'  This  is  the  rule 
which  prevails  in  cost-book  mining  companies  {g),  and  it  is  not 
easy  to  conceive  what,  except  the  will  of  the  majority,  can  deter- 
mine a  matter  of  this  description  under  the  circumstances  now 
supposed. 

The  number  of  persons  composing  the  managing  body  of  a  corn- 
Number  of  V^^y  is  generally  fixed  by  the  company's  special  act, 
directors.  charter,  deed  of  settlement,  or  regulations,   and  the 

number  making  a  quorum  is  also  usually  thereby  fixed.^  As  a 
general  rule,  there  is  no  doubt  that  a  power  entrusted  to  a  given 
number  of  individuals  cannot  be  properly  exercised  by  any  less 
number;  and  there  are  several  cases  in  which  the  principle  has 
been  applied  to  companies,  and  in  which  the  acts  of  directors  have 

(e)  See  Bumes  v.  Pennell,  2  H.  L.  C.  ^  See  generally  as  to  the  power  of  ma- 

520  and  521.  jorities,  Ang.  &  Ames  on  Coi-p.  §§  221, 

="  See  Ang.  &  Ames  on  Corp.  §  221.  499. 

(/)  Agreements  by  directors  depriv-  (ff)  See  Tapping  on  the  Cost-Book, 

ing  the  shareholders  of  this  power  are  p.  64. 

invahd,  James  f.  Eve,  L.  R.  6  H.  L.  *See  generally  as  to  what  constitutes 

335.    The  powers  of  majorities  will  be  a  quorum,  Ang.  &  Ames  on  Corp.  §501 

examined  hereafter.  et  seq. 

744 


CHAP.  1,]  DIRECTORS.  *543 

been  held  invalid  on  the  i^round  tliiit  tlicy  were  not  done  by  the 
requifjiite  number  of  directors.  (A)  But  it  does  uot  vaninRthe 
therefore  follow  that  the  number  of  directors,  as  origi-  'ii"n*^r. 
iialiy  fixed,  cannot  be  altered  by  the  majority  of  a  meeting  of  the 
shareholders;  and  where  the  number  is  not  fixed  by  the  legislature 
or  the  Crown,  it  seems  that  the  sharelutlders  may  alter  it.  (i)  Even 
where  the  number  is  fixed  by  an  act  of  Parliament  or  a  charter,  the 
act  or  charter  may  be  so  worded  as  to  be  in  this  respect  directory 
only,  (k) 

It  is  to  be  observed  that  the  directors  of  a  company  are  not  those 
only  who  choose  to  act,  but  all  those  persons  who  are  ^vhonre 
constituted  directors    by  a  company's    act,  charter,  or  directors, 
deed  of  settlement;    and  whether  a  jterson  once  a  director  has  or 
has  not  ceased  so  to  be,  depends  (except  in  the  case  of  his  death) 
upon  the  rules  of  the  comjiany.  (Z)    A  director  who  becomes 
*  bankrupt,  or  ceases  to  attend  to  his  duties,  does  not  there-     *543 
by  necessarily  vacate  his  office,  (m) 

Generally  speaking,  the  members  of   the  managing  body  are 
required   to  possess  certain  qualifications,  and  to  be  Qualifications 
appointed  in  some  prescribed  manner,  (n)     But  it  by  ofdircctors. 
no  means  follows  that  persons  who  are  in  fact  acting  as  duly  quali- 
fied directors  will  be  prevented  from  doing  so,  simply  because  they 
have  been  irregularly  appointed,  {o)     Still  less  does  it  follow  that 
the  irregularity  of  their  appointment  will  render  all  irregular 
their  acts  null  and  void.     Persons  dealing  with  them  as  app<J"itments. 
directors  lond  fide,  and   without  notice  of  the   irregularity    are 
entitled  to  treat  them  as  the  agents  of  the  company,  and  to  hold 
the  compan}' bound  by  their  acts,  as  if  they  were  its  duly  appointed 
directors,  (j^)     But,  as  between  themselves  and   the  shareholders, 
the  irregularity  is  of  greater  importance;  and  it  has  been  held  that 
persons  de facto,  but  not  de  jure  directors,  cannot  make  valid  calls 

(^)  See  anie,  p.  244;   and  as  to  the  other  offices,  see  Iron  Ship  Coatinp:  Co. 

power  of  directors  to  delegate  their  au-  r.  Blunt.  L.  K.  3  C.  P.  4'<4  ;  Eales  r. 

thority,  see  p.  247.  CunilK'rhuul  Blatk  Co.  6  H.  <t  N.  4^1. 

(/)  Smith  r.  Goldsworthy,  4  Q.  B.  4?>0.  As  t/i  the  effect  of  giving'  votes  for  dis- 

(A-)  Thames  Haven,  Dock,  Arc.  Co.  r.  qualified  persons,  see  R.  r.  Tewkeshurv. 

Rose,  4  Man.  k  Gr.  552.     See,  too.  Bar-  L.  R.  3  Q.  B.  629. 

gate  r.  Shortridge,  5  H.  L.  C.  297.  (r>)  See  Foss  r.  Harbottle,  2  Ha.  461. 

(?)  Phelps  V.  Lyle,  10  A.  &  E.  113.  and  Mozley  r.  Alston.  1  Ph.  790.     Tliese 

(hi)  IVhI;   see  Wilson  v.   Wilson,  G  cases  will  be  noticed  horoafter. 

Scott,  540.  {p\  See  as  to  this,  ante,  pp.  249  and 

(?i)  As  to  disqualification  by  holding  253. 

T45 


*54i  MANAGEMENT    OF    COMPANIES.  [lIOOK  III. 

or  forfeit  shares,  even  where  tliero  is  a  provision  rendering  valid 
wliat  mny  be  done  by  ])ersons  acting  as  directors,  notwithstanding 
tlie  subsequent  discovery  of  a  defect  in  their  appointment.  (5') 

Directors  are  supposed  to  know  the  regulations  of  their  own 
Denying  quau-  coin])any  (r) ;  and  if  a  person  becomes  a  director,  and 
fication.  acts  as  sucli,  he  will  not  be  allowed  to  take  advantage 

of  the  fact  that  he  was  not  duly  qualified  to  act  in  that  capacity,  {s) 
A  provision  that  no  person  shall  be  eligible  as  a  director 
*5J:4:  *  unless  he  holds  a  certain  number  of  shares,  does  not  apply 
to  persons  who  sign  a  company's  memorandum  of  associa- 
tion, and  who  by  that  fact  alone  become  directors  until  others  are 
appointed,  (t) 

Where  a  person  is  required  to  hold  a  certain  number  of  shares  as  a 
Effect  of  mort-    qualification  for  the  office  of  director,  those  shares  must 

gage  of  shares  on  ^  ' 

qualification,  not  be  nominally  paid-up  shares  (-m);  but  a  director 
having  the  requisite  number  of  shares  is  not  disqualified  for  the 
office  simply  because  he  may  have  mortgaged  his  shares,  {x) 

Directors  have  no  power  to  vote  themselves  fees  for  salaries  for 
Remuneration  their  scrviccs  bey  Olid  what  the  constitution  of  the  coin- 
of  directors.,       paiiy  may  provide.  (?/) 

The  shareholders  cannot  usually  exercise  any  control  over  the 
cpnfroiof         management  of  the  company,  except  at  meetino-s  duly 

rlirectors  by  °  i       J  ^  tr  &  .; 

shareholders,  couvoued ;'  for  the  directors  of  a  company  are  the  ser- 
vants, not  of  the  individual  shareholders,  but  of  the  company;  and 
where  the  management  of  the  directors  is  complained  of,  an  ag- 
grieved shareholder  should  seek  redress  through  the  company,  and 
induce  it  to  call  the  directors  to  account.  (2)  As  will,  however,  be 
seen  hereafter,  if  the  directors  are  doing  that  which   the   share- 

iq)  See  Howbeach  Coal  Co.  v.  Teag-ue,       Fowler's  case,  14  Eq.  316  ;  and  infra, 

5  H.  &  N,  151  ;  and  Miles  v.  Bough,  3      under  the  head  Contributories. 

Q.  B.  845  ;  Edinburgh,  &c.    Rail.  Co.  {t)  Stock's  case,  4  DeG.  J.  &  Sm.  426  ; 

V.  Hebblewhite,  6  M.  &  W.  707;  South-  and  see  Cotterell's  case,  11  W.  R.  13. 

Eastern  Rail.  Co.  v.  Hebblewhite,  12  A.  (u)  Roney's  case,  4  DeG.  J.  &  Sm. 

6  E.  497  ;  Swansea  Dock  Co.  v.  Levien,  426  ;  Carrie's  case,  3DeG.  J.  &  Sm.  367. 
20  L.  J.  Ex.  447.  Compare  Murray  v.  (x)  Camming  v.  Prescott,  2  Y.  &  C. 
Bush,  L.  R.  6  H.  L.  37,  turning  on  7  &  Ex.  488. 

5  Vict.  c.  110,  §30.  («/)  See  Evans  v.   Coventry,   8  DeG. 
(r)  See  per  Lord  Westbuiy  in  Lane's      Mc.  &  G.  835,  decree,  clause  3.     See 

case,    1   DeG.  J.  &  S.   506.     Compare  infra,  book  iii.  eh.  6,  §  2. 

Marquis  of  Abercom's  case,  4  DeG.  F.  'See  Ang.  &  Ames  on  Corp.  §221. 

6  J.  78.  (z)  See  Orr  v.  Glasgow  Rail.   Co.  3 
is)  See  Harward's  case,  13  Eq.   30 ;  McQu.  799. 

746 


CHAP.  I.]  MEETINGS   OF   8HAREU0LDEKS.  *515 

holders  cannot  sanction,  or  that  which  they  liave  by  a  proper  rcso- 
hition  forbidden,  the  dissentients  may  obtain  redress  by  legal 
proceedings.  («) 

It  may,  however,  hajjpcn  that  the  constitution  of  a  com  puny  is 
such  that  the  shareholders  are  deprived  of  all  control  over  the  man- 
aging body  in  matters  not  foreign  to  the  objects  of  the  comi)any. 
Where  this  is  the  case,  the  managers  have  it  in  their  powei"  to 
disregard  the  wishes  of  the  shareholders  as  to  all  such  matters,  {h) 

Where  the  siiareholders  have  power  to  remove  a  director  for 
"any  reasonable   cause,"    the   shareholders  are 
themselves  *the  judges  as  to  what  is  and  what     *545  Sr^cto^"^ 
is  not  a  reasonable  cause  for  removal;  and  their 
decision  will  not  be  interfered  with,  unless  a  clear  case  of  fraud  on 
their  part  can  be  established.  (<?)' 

One  of  the  most  important  rights  of  shareholders  is  to  inspect 
the  books  and  accounts  of  the  company,  and  to  have  inspection  of 

,  -11  ,1  1  books.  &c..  by 

them  examined  and  reported  upon  by  competent  per-  shareholders, 
sons.     This  subject,  however,  will  be  alluded  to  hereafter,  {d) 

Individual  shareholders,  being  comparatively  powerless,  pro- 
vision is  generally  made  for  brinurinij:  them  t02:etlier  at  ,,   ,. 

o  •/  .—      n  rt  Meetings  of 

meetings,  and  it  is  not  a  little  important  that  the  right  shareholders, 
to  convene  them  should  to  some  extent,  at  all  events,  be  exercisable 
by  the  shareholders  themselves.  It  is  however,  to  be  observed  that, 
where  those  who  have  the  right  to  call  a  meeting  of  the  shareholders 
refuse  to  exercise  that  right,  for  the  express  purpose  of  preventing 
the  shareholders  from  duly  assembling,  the  court  will,  if  necessary, 
interfere  to  protect  the  sluuehoklers  against  an  abuse  of  power  on 

(a)  See  jM/ra,  book  iii.  ch.  10,  §3.  signed.    Notice  of  a  special  meeting 

{h)  Spurgin  v.  White,  2  Giff.  473,  is  for  an  election  of  trustees  was  given, 

an  instance.  and  a  meeting  held,  at  which  B,  one  of 

(c)    Indarwick  v.  Snell,  2  Mc.  &  G.  the  seven,  voted  for  seven  ti-ustees,  and 

216.      See  as  to  becoming   bankrupt,  seven  were  chosen,  displacing  B.     The 

Phelps  V.  Lyle,  10  A.  E.  113;    abscond-  trustees  elected  excluded  B  from  the 

ing  from  creditors,  ^Wilson  v.  Wilson,  6  management  of  the  aS'airs  of  the  com- 

Scott,  540.  pany,  whereupon  he  brought  a  bill  for 

^  By  the  articles  of  a  voluntary  joint-  an  account  and  dissolution  of  the  part- 
stock  association,  seven  trusteees  were  nership:  Held,  that  by  acting  at  the 
to  be  elected,  and  any  vacancy,  occur-  election,  and  voting  for  seven  trustees, 
ring  by  death,  resignation,  or  otherwise,  B  had  not  resigned,  and  that  he  was 
was  to  be  filltxl  at  the  annual  meeting.  still  a  trustee.  Berry  f.  Cross,  3  Sandf. 
After  the  trustees  were  elected,  and  Ch.  1. 
acted  as  such,  A,  one  of  the  seven,  re-  ((/)  See  book  iii.  ch.  8,  §  '2. 

747 


*546  MANAGEMENT   OF    COMPANIES.  [bOOK  III. 

the  part  of  tliose  entrusted  with  the  management  of  the  affairs  of 
the  company,  {e) 

In  order  that  a  resolution  come  to  at  any  meeting,  whether  of 
Resolutions  of  ^i^ectors  or  of  shareholders,  may  have  any  legal  effect. 
Meetings.  {^  jg  neccssary  that  the  meeting  shall  be  duly  convened, 

that  a  proper  number  of  persons  shall  be  present  {f\  and  there 
must  always  be  two  at  least  {g\  that  the  resolution  should  relate  to 
a  matter  which  the  meeting  is  competent  to  pass  a  resolution  upon, 
and  that  the  resolution  should  be  duly  passed. 

As  a  general  rule,  a  meeting  is  not  duly  convened  unless  every 
Notices  of  person  entitled  to  attend  has  notice  of  the  time  and 

Meetings.  place  at  wliich,  and  purposes  for  which  it  is  to  be  held, 

so  that  he  may  exercise  his  own  judgment  whether  he  will  attend 
or  not  (A)'  and  there  are  numerous  cases  in  which  resolutions 
have  been  held  invalid  on  the  ground  that  insufficient  notice 
was  given  of  an  intention  to  submit  the  matters  to  which 
■^546  they  *relate  to  the  meeting  at  which  they  were  passed,  (i) 
But  a  notice  may  be  good  in  part  and  bad  in  part,  and  is 
not  wholly  invalid  because  it  extends  to  something  which  cannot 
be  done.  [Tc) 

A  person  who  attends  a  meeting  cannot  dispute  the  validity  of 
what  is  done  on  the  ground  that  he  had  not  due  notice  of  the  time 
and  place  at  which  the  meeting  was  about  to  be  held  ;  and  if  all 
entitled  to  notice  have  it  in  fact,  but  not  in  the  precise  form  in 
which  it  ought  to  have  been  given  them,  the  proceedings  of  the 
meeting  will  not  necessarily  be  invalid.  {I)  But  still  it  is  absolutely 
requisite  for  the  protection  of  those  who  are  to  be  affected  by  the 
Every  one  en-  resolutions  of  Others,  that  such  resolutions  shall  hav^e 
hea^rd  must  ^o  effect  uulcss  all  entitled  to  a  voice  in  making  them 
tun^^of°being  liad  an  Opportunity  of  expressing  their  views.  In  a  case 
where  directors  were  empowei-ed  to  meet  once  a  week 
at  their  office,  without  notice  or  summons,  but  on  and  at  such  day 

[e)  See  Foss  v.  Harbottle,  2  Ha.  461.  ^  See,  generally,  as  to  notice,  Ang.  & 

The  occasions  on  which  the  court  will  Ames  on  Corp.  §  487,  et  seq. 

interfere  to  control  the  management  of  (i)  A  leading  case  on  this  head  is 

the  affairs  of  a  company  will  be    ex-  Bridport  Old  Brewery  Co.  2  Ch.  191. 

amined  hereafter.  {k)    Cleve  v.   Financial   Corporation, 

(/)  See  Howbeach  Coal  Co.  v.  Teague,  16  Eq.  363. 

5  H.  &  N.  151.  (?)    See   British  Sugar  Refining  Co. 

{g)  Sharp  v.  Dawes,  2  Q.  B.  D.  26.  3.  K  &  J.  403. 

{h)  R.  V.  Langhom,  4  A.  &  E.  538. 

748 


CHAP.  I.]  MEETINGS   OF   SHAREHOLDERS.  *0-i< 

and  hour  as  they  should  from  time  to  time  agree  upon,  it  was  held 
that  a  resolution  come  to  by  a  qxiorum  assembled  without  notice 
was  invalid,  inasmuch  as  no  day  or  hour  for  the  meeting  of  the 
directors  had  ever  been  fixed,  (m) 

The  mode  in  which  notice  is  to  be  given  varies  with  almost 
every  companv.     Such  statutory  enactments  as   exist  Modeofeiving 

J  i        -^  -J  notK-cs  of 

upon  the  subject  will  be  noticed  hereafter.  The  only  meetings, 
general  rule  which  can  be  laid  down  is,  that  notice  must  be  given 
in  the  manner  prescribed  by  each  company's  act,  charter,  deed  of 
settlement,  or  regulations.  It  seems  that  it  is  not  necessary  to  give 
notice  of  the  holding  of  an  adjourned  meeting  to  the  persons  en- 
titled to  attend  it ;  it  is  apparently  sufRcient  if  they  had  notice  of 
the  holding  of  the  original  meeting,  {n)  But  nothing  can,  without 
notice,  be  transacted  at  an  adjourned  meeting  except  the  unfinished 
business  of  the  first  meeting.  (<;)' 

There  are  two  kinds  of  meetings,  viz.,  ordinary  and  extraordi- 
nary, or,  as  the_y  are  sometimes  called,  general  and  sjyeeiaJ.'' 
Ordinary  or  e-eneral  meetings  are  usually  held  ^  ^. 

•^  "  ^  P    1  *       T    Or(liii!ir>-an(l 

at  stated  times,  *and  for  the  transaction  of  bus-     *547  extra. )r.iiaary 
iness  generally.     Extraordinary  or  special  meet- 
ings are  held  as  occasion   may  require,  for  the  transaction  of  some 
particular  business,  which  ought  to  be  specified  in  the  Nature  of  bust- 
notice  convening  the  meeting.     A  resolution  passed  at  "peciLT 
an   extraordinary  meeting,  upon  a  matter  for  the  consideration  of 
which  it  was  not  avowedly  called,  or  which  was  not  specified  in  the 
notice  convening  the   meeting,  is  altogether  inoperative  {p)\  and 
although  such  resolution    may  have  been  confirmed  at  a  subsequent 
ordinary  meeting,  it  will  still  be  invalid  unless  it  might  have  been 
properly  passed  in  the  first  instance  at  an  ordinary  meeting,  with- 
out previous   notice  of  any  intention  to  enter  npon  the  matter  to 
which  the  resolution  relates  {q):     and  if  a  meeting  is  convened  to 

[m)  Moore  r.   Hammond,  6  B.   «fe  C.  seq. 

456.  ( /j)  Bridport  Old  Brewery  Co.  2  Ch. 

(n)    See  Wills  v.  Murray,  4  Ex.  843,  191;  Imp.   Bank  of  China  r.  Bank  of 

862.  Hindustan,  6  Eq.  91 ;  Anglo-Califomian 

(o)  R.  V.  Grimshaw,  10  Q.  B.  747.  Gold  Mining  Co.   r.   Lewis,   6  H.  &  N. 

'  As  to  what  business  may  be  done  at  174;  Stearic  Acid  Co.  9  Jur.  N.  S.  1066, 

a  meeting.     See  Ang.  &  Ames  on  Corp.  V.-  C.  K. 

§488,  ct  seq.  {q)  Lawes'  case,    1  DeG.  M.   it  G. 

«  See  Ang.  &  Ames  on  Corp.  487,    et  421 

749 


*54:8  MANAGEMENT    OF    COMPANIES.  [bOOK  III. 

confirm  resolutions  previonsly  passed,  the  notice  ought  to  state 
those  resolutions  or  their  effect,  (r) 

One  and  the  same  meeting  may  be  both  ordinary  and  extraordi- 
nary; ordinary  for  the  purpose  of  transacting  the  usual 

One  mcGting  •' 

may  be  both       busiuess   oftlic   comi)any,    and   extraordinary  for  the 

ordinary  and  '        "^  .  n      ^  -^  -    ^ 

extraordinary,  transaction  of  somo  particular  busiucss  01  which  special 
notice  may  have  been  given,  {s)  If  an  ordinary  meeting  is  held 
and  adjourned  the  adjourned  meeting  continues  to  be  an  ordinary 
meeting,  although  special  notice  is  given  that  it  is  about  to  be  held 
for  special  business,  {t) 

The  power  of  making  by-laws'  for  the  regulation  of  the  affairs 
of  a  company  is  not  unfrequently  reposed  in  its  share- 
^  '^^^^'  holders;  audit  is  not  uncommonly  required  that  all 

by-laws  shall  be  sealed  with  the  seal  of  the  company.  In  such  a 
case  nothing  which  is  not  so  sealed  can  be  regarded  as  a  by-law  (u); 
nor  is  an  unsealed  resolution  passed  at  a  meeting  of  the  share- 
holders of  an  incorporated  company,  equivalent  to  a  contract  under 

the  seal  of  such   company,  (x)     At   the    same   time   it  is 
*5-l:8     *  clear  that,  as  a  general  rule,   the  resolutions  of  meetings 

of  members  of  a  body  corporate  do  not  require  to  be  sealed 
in  order  to  be  binding  on  its  members,  as  between  themselves,  and 
as  meinbei's.  Acts  relating  to  the  internal  affiiirs  of  a  corporation, 
affecting  members  only,  and  affecting  them  merely  as  members, 
do  not  in  general  require  the  common  seal  to  render  them  valid.  (?/) 
By-laws  not  warranted  by  the  authority  which  empowers  them  to 
be  made  are  altogether  illegal,  (z) 

AVhere  there  is  no  special  provision  to  the  contrary,  the  resoln- 
Resointionofa  ^^^^^  ^0'"^  ^^  ^J  ^^^®  majority  of  those  present  at  a 
?Stiun'o\  a  meeting  is  the  resolution  of  that  meeting,'  and  it  is 
meeting.  ^^^  illegal  to  transfer  shares  before  a  meeting  so  as  to 

multiply  votes  at  it.  («)     A  meeting  at  which  there  is  not  present 

{r)  Dean  v.   Bennett,  6  Ch.  489  and  (//)  Grant  on  Corp.  65. 

9  Eq.  625.  {^)  See  Calder,    &c.  Nav.  Co.  v.  Pill- 

(.s)  See   Cutbill  v.   Kingrlom,  1   Ex.  mg,  14  M.  &  W.  76,  Adley  v.  Whitsta- 

494;  Graham  v.   Van  Diemen's   Land  ble  Co.  17  Ves.  315,  19  ib.   304,   and  1 

Co.  1  H.  &  N.  541.  Mer.  107. 

(0  Wills  V.  Murray,  4  Ex.  843.  '  See,  generally,   Ang.    &  Ames  on 

^  See,    generally,    Ang.   &   Ames  on  Corp.  §  499,  et  seq. 

Corp.  Chap.  X.  (o)  Pender  v.   Lushington,  6  Ch.  D. 

in)  Dunston  v.  Imperial  Gas  Co.  3  B.  70;  Stranton  Iron  and  Steel  Co.  16  Eq. 

&  Ad.  125.                "  559. 

(x)  Ibid,  ami  see  ante,   pp.  352,  353. 

750 


CHAP.  I.]  MEETINGS   OF    SHAREHOLDERS.  *549 

a  sufficient  number  of  persons  to  transact  business,  cannot  pass  any 
valid  resolution.  (J) 

It  is  conceived  that  an  agreement  to  vote  in  a  particular  way,  in 
consideration  of  some  personal  benefit,  is  illegal;  for  a  interested 
vote  ought  to  be  an  impartial  and  honest  exercise  of  ^'°"^^" 
judgment,  (c)  But  as  a  matter  of  law  as  distinguished  from  con- 
science, a  person' may  vote  on  a  question  in  which  he  happens  to 
have  a  personal  interest  opposed  to  that  of  the  company;  and  where 
the  question  was  whether  proceedings  should  be  taken  by  the  com- 
pany to  impeach  the  title  of  some  of  the  shareholders  in  it,  those 
shareholders  were  held  entitled  to  vote  in  respect  of  the  very  shares 
the  title  to  which  was  disputed.  (cT) 

*  Absent  members  are  not  entitled  to  vote  by  proxy  unless     *549 
they  are  specially  empowered  so  to  do.  (d)'      Where  voting 
b}'  proxy  is  allowed,  the  appointment  of  a  proxy   to 
vote  at  one  meeting  must  bear  a  penny  stamp {f)\  and 
the  appointment  must  specify  the  day  upon  which  tlie  meeting  at 
which  it  is  intended  to  be  used  is  to  be  held;  and  the  proxy  is 
available  only  at  the  meeting  so  specified,  or  an  adjournment  there- 
of, {g)     If  the  appointment  authorizes  the  proxy  to  at  more  than 
one  meeting,  the  proxy  paper  will  require  a  ten  shilling  instead  of 
a  penny  stamp,  {h)     Every  person  who  makes  or  executes,  or  votes 
or  attempts  to  vote  by  means  of  a  voting  paper  not  duly  stamped 
incurs  a  penalty  of  50^.,  and  his  vote  is  absolutely  void,  [i) 

{h)  Howbeach  Coal  Co.  v.  Teagne,  5  8  &  9  Vict.  c.  16,  §§85  and  8G,  and  the 

H.  k  N.  151;  Sharp  v.  Dawes,  2  Q.  B.  Companies  act,  1862,  Table  A,  No.  57, 

D.  26.  as  to  votes  by  directors  on  matters  in 

(r)  See  Elliott  v.  Richardson,  L.  R.  5  which  they  are  interested. 

C.  P.  744,   whore  the  agi-eement  was  {e)  See  Grant  on  Coi-porations,  '256, 

held  illegal  as  opposed  to  the  policy  of  note  [q);  Com.  Dig.  Franchise.  F.  11. 

the  Companies  act,  1862.    See,  further,  '  Ang.  &  Ames  on  Corp.  §  128. 

Moffatt  V.  Farquharson,  2  Bro.  C.   C.  (/)  33  &  34  Vict.  c.  97,   §3,  and 

338;  Card  r.  Hope,    2  B.   &  Cr.   661.  Schedule  ;  34  Vict.  c.  4. 

Compare  Bolton  r.  Madden,  L.  R.  9  Q.  {cj)  33  &  34  Vict.  c.  97,  §  102,  pi.  1. 

B.  55,  where  an  agreement  between  two  See  as  to  filling  up  a  paper  signed  in 

subscribers  to  a  charity  to  vote  for  each  blank,  Ex  parte  Lanca.ster,  5  Ch.  D.  911. 

other's  nominees  was  held  not  to  be  il-  (/t)  3.3  k  34  Vict.  c.  07,  §3  and  Sched- 

legal.  ule.     As  to  stamps  on  proxies  under  the 

[d)  East  Pant  Du  Mining  Co.  v.  Mer-  older  stamp  laws,  see  R.  r.  Kelk.  12  A. 

ryweather,   2  Hem.  &   M.   2.54.     See,  k  E.  559  ;  Monmouthshire  Canal  Co.  r. 

also,    Menier    r.    Hooper's    Telegiapli  Kendall,  4  B.  &  Al.  453  ;  Trinity  House 

Works,  9  Ch.  350.     Compare  Atwool  r.  of  Hull  v.  Beadle,  13  Q.  B.  175. 

Merry  weather,  5  Eq.  46  k  note,  and  see  (/)  33  &  34  Vict.  c.  97,  §  102,  pi.  3. 

751 


•H-550  MANAGEMENT   OF   COMPANIES.  [bOOK  III. 

The  right  of  a  married  woman  or  of  her  husband  to  vote  in  re- 

,     ,      spect  of  shares  held  by  her  has  not  been  judiciall}'  con- 
Husband  and  y  n         1  1         '.1        i. 

wife  voting.  sidered.  Speaking  generally,  however,  and  without 
reference  to  the  regulations  of  any  particular  company,  it  would 
seem  that  if  the  shares  belong  to  her  as  part  of  her  separate  estate, 
her  husband  has  no  right  to  vote  in  respect  of  them,  and  her  vote 
is  valid  notwithstanding  his  disapproval  thereof.  But  if  the  shares 
do  not  form  part  of  her  separate  estate,  she  alone  cannot  in  point 
of  law  be  a  member  in  respect  of  them,  and  cannot  therefore 
vote(^');  nor  is  her  husband  entitled  to  vote  in  respect  of  such 
shares  until  he  has  become  a  member  of  the  company  in  respect  of 
them.  Nor  does  it  follow  from  the  fact  that  he  is  subject  to  liabil- 
ities in  respect  of  his  wife's  shares,  that  he  is  entitled  to  the  priv- 
ilege of  voting  in  respect  of  them. 

The  right  of  a  shareholder  to  demand  a  poll  has  not  been  decided; 

but  the  right  would  probably  be  held  to  exist  unless 

the  contrary  could  be  shown,  (l) 
*550         ^Absentees  cannot   effectually   urge   their  ignorance  of 
what  took  place  at  meetings  which  they  might  have  attended 

had  they  thought  proper  so  to  do  :  and  they  are  bound 
Absentees.  ^^^  ^^^^  resolutions  come  to  at  a  duly  convened  meeting, 
provided  such  resolutions  relate  to  matters  upon  which  the  meeting 
was  competent  to  decide,  (w)  Moreover,  shareholders  who  receive 
reports  of  what  takes  place  at  meetings,  and  who  do  not  object  to 
what  is  being  done,  will  be  considered  as  acquiescing  therein  if 
what  is  done  might  have  been  validly  sanctioned  by  them  if  pres- 
ent; but  not  if  what  is  done  is  altogether  illegal,  and  beyond  the 
power  of  even  all  the  shareholders,  (n) 

The  limits  of  the  power  of  a  majority  will  be  examined  here- 
after. 

(k)  See  R.  V.  Harrald,  L.  R.  7  Q.  B.  L.  R.  3  H.  L.  249 ;  Turquand  v.  Mar- 

361.  shall,  4  Ch.  376  ;  Noi-wich  Yam  Co.  22 

(0  See  Grant  on  Corp.  203  ;  Campljell  Beav.  165. 
V.  Maund,  5  A.  &  E.  865.     If  no  poll  is  (ti)  See  Phoenix  Life  Assur.  Co.'s  case, 

taken  when  rightfully  demanded  the  2  J.  &  H.  441 ;  Irvine  v.  Union  Bank  of 

election  is  void ;  R.  v.  Cooper,  L.  R.  5  Australia,  2  App.   Ca.   366.     Compare 

Q.  B.  457.      As  to  demanding  a  poll  on  Evans  v.  Smallcombe,  L.   R.  3  H.  L. 

a  question  of  adjournment,   see  Mac-  249 ;    Spackman  v.    Evans,    ib.    171  ; 

dougaU  V.  Gardiner,  1  Ch.  D.  13.  Houldsworth  v.  Evans,  ib.  263 ;  Phos- 

(m)  Phosphate  of  Lime  Co.  v.  Green,  phate  of  Lime  Co.  v.  Green,  L.  R.  7  C. 

L.  R.  7  C.  P.  43  ;  Evans  v.  SmaUcombe,  P.  43. 
752 


(11 AI'.  I.]  MINUTES   OF    MEETINGS.  *d51 

Minutes  of  meetings,  and  the  contents  of  books  kept  by  tlie  offi- 
cers of  a  company,  arc  not,  as  ai^ainst  third  persons,  j^nnutesof 
evidence  for  tlic  company,  unless  expressl}'  made  so  by  nieeungs. 
Act  of  Pariiamcnt.  {o)  Partnership)  books  are,  as  a  rule,  evidence 
aiijaiust  ever}^  partner,  because  every  partner  is  entitled  not  only  to 
see  them,  but,  in  conjunction  with  his  co-partners,  to  determine 
what  shall  be  inserted  and  what  not;  but  this  is  not  the  case  with 
shareholders  of  companies,  and  consequently  unless  there  is  some 
statutory  enactment  or  agreement  to  the  contrary,  the  books  of  a 
Company  are  no  more  evidence  against  ordinary  members  of  the 
comjiany  than  they  are  as  against  strangers,  (o)  The  inconvenience 
resulting  from  this  principle  is  obviated  in  modern  acts  of  Parlia- 
ment by  making  certain  things,  e.  g.,  the  registers  of  shareholders, 
and  signed  minutes  of  meetings,  pri)/id  facie  evidence  as  well 
aujainst  shareholders  as  against  strauirers. 

*  Shareholders  are  not,  as  between  themselves  and  their  di-    "551 
rectors,  supposed  to  know  all   that    is   in    the  company's 
books,  {'p) 

With  respect  to  minutes  of  meetings,  it  is  usual  for  acts  of  Par- 
liament to  require  that  the  minutes  of  every  meeting  si„ningmin- 
sha!l  be  entered  in  a  book,  and  be  signed  by  the  chair-  ^"''*' 
man  of  the  meeting,  and  to  declare  that  the  minutes  so  entered  and 
t^igned  shall  be  admissible  in  evidence  in  courts  of  justice.  In 
practice,  the  minutes  of  a  meeting  are  commonly  made  up  and  en- 
tered by  the  secretary  after  the  meeting  is  over,  and  the  chairman 
signs  such  minutes  at  a  subsequent  period  (generally  the  next 
meeting).  It  has  been  frequently  urged  that  a  resolution  made  at 
a  meeting,  the  minutes  of  which  were  entered  and  signed  after  the 
meeting  was  over,  could  not,  by  such  minutes,  be  proved  to  have 
been  made.  But  this  objection  has  alwaj's  been  overruled,  even 
where  the  minutes  of  each  meeting  ought  in  strictness  to  have  been 
signed  at  such  meeting,  {q)     But  where  a  company  brought  an 

(o)  Hill  V.   Manchester  Watoi-works  {q)  IMiles  v.   Bough,    3  Q.   B.    845  ; 

Co.  5  B.  &  Ad.  866.   Compare  Alderson  Southampton  Dock  Co.   v.  Richards,  1 

r.  Clay,  1  Stark,  405,  and  The  Thetford  Man.  &  Gr.  448  ;  West  Ix)ndon  Rail.  Co. 

case,  12  Vin.  Ab.  90,  pi.  16 ;  ]\Iaguire's  v.  Bernard,  3  Q.   B.  873  ;  London  and 

case,  3  DeCI.  &  S.  31.     See,   also,  the  Brighton  Rail.  Co.  r.  Fairclough.  2  Man. 

noxt  note.  &  Gr.  675  ;    Inglis  v.   Great  Northern 

{p)  See  Longworth's  case,  1   DeG.  F.  Rail.  Co.  1  McQueen,  112.    See,   also, 

&  J.  pp.  27  and  32.     See,  too,  per  Lord  Roney's  case,    4  DeG.  J  &  Sra.  426, 

J.  Turner,  in  Stewart's  case,  1  Ch.  CS7.  which  shows  that  those  ^who  sign  min- 

*«  753 


*552  MANAGExMENT    OF    COMPANIES.  [UOOK  HI. 

action  for  calls,  and  the  evidence  of  t]ie  making  of  the  calls  con- 
sisted of  minutes  which  were  signed  after  the  commencement  of 
the  action,  it  was  held  that  such  minutes  were  not  admissible,  {r) 
The  maxim  077inia  prcesumuntur  rite  esse  acta  is  applicable  to 
Omnia  prscsum-  the  proceedings   at  meetings  ;  and  if  minutes  of  such 

untur  rite  esse  '     _.  ,  i^         i     •  mi     i  i 

acta.  proceedings    are    not  produced    it    will    be  presumed 

against  the  company,  and  in  favor  of  all  persons  dealing  hoiidjide 
with  its  directors,  not  onl^y  that  every  resolution  proved  to  liave 
been  made  was  duly  passed,  but  also  that  all  such  resolutions  and 
steps  were  made  and  taken  as  were  necessary  to  authorize  subse- 
quent acts  proved  to  have  been  done,  {s)     But  this  presumption 

will  not  be  made  in  favor  of  directors  and  against  the  share- 
■^552     holders  ;  and  a  transaction  with  directors  which  is   ^invalid 

if  not  assented  to  by  the  shareholders  must,  if  relied 
on  by  the  directors,  be  proved  by  them  to  have  been  brought  to 
the  attention  of  the  shareholders,  and  to  have  received  their  sanc- 
tion, {t) 

A  resolution  of  a  meeting  is  not  an   agreement,  and  does   not 

require  an  agreement  stamp,  {u) 

llavino;  made  these  general  observations  on  directors 

menTai^-cting"  and  shareholders,  it  is  proposed  to  examine  the  various 

tipn^ofcompa-    Statutory  provisions    now   in    force   relating    to    their 

^^^"  powers  and  duties  in  particular  companies. 

There  are  no  statutory  provisions  which  affect  the  constitution  of 
the  managing  bodies,  or  the  powers  of  the  shareholders  of  compa- 
nies governed  by  the  r)anking  act  of  7  Geo.  4,  c.  46  ;  or  by  the 
Letters  Patent  act  of  7  Wm.  4  &  1  Vict.  c.  73.  But  the  enactments 
affecting  the  management  of  the  afTairs  of  companies  governed  by 
the  Companies  clauses  consolidation  act,  8  &  9  Vict.  c.  16  ;  and 
the  Companies  act,  1SG2,  are  numerous  and  impor^;'.:it,  and  require 
special  notice,  {x) 

utes  are  treated  as  admittinof  their  tnith.  ance  Society,  1  Fos.  &  Fin.  607. 

(r)  Cornwall  great  Consolidated  Min-  {x)  Questions  on  the  repealed  acts,  7  & 

ingCo.  5  H.  &  N.  423.  8  Vict.  cc.  110  and  113,  and  the  Joint- 

(s)  See  Lane's  case,  1  DeG .  J.  k  Sm.  stock  companies  acts,  1856-58,  may  still 

504  ;  Grady's  case,  ib.  488  ;  Stanhope's  ai-ise,  but  it  has  not  been  thought  worth 

case,  1  Ch.  161  ;  Knight's  case,  2  Ch.  while  to  retain  those  parts  of  the  first 

321.  edition  of  this  treatise  which  related  to 

(0  See  British  Provident  Assur.  Soc.  such  companies.      When  necessary  re- 

r.  Norton,  3  N.  R.  147,  V.-C.  K.  course  can  be  had  to  that  edition  for  in- 

(.()  Mills  V.  British   Provident  Assur-  formation  on  these  matters. 


51 


CHAP.  I.]  COMl'AKIKS  GOVEKNED  BY  8  &  9  VICT.  C.  16.  *0oo 

Companies  governed  by  S  (&  9  Vict.  c.  16. 

F'wsi,  as  to  the  managing  body. 

The  Companies  clauses   consolidation   act   contains  several   im- 
portant provisions  relating  to  the  appointment,  rota-  ^    Directors  of 
tion,  powers  and  proceed  in i^s  of  directors  of  tlie  com-  po^,!;"".Injy 
panics   to  whicli  the  act  applies.  (?/)     The  special  act  s  & »  viot.  c.  lo. 
of  such  a  coni])any  is  supposed  to  fix  the  number  of  its  directors, 
and  this  number  cannot  be  varied  except  within  such  limits  as  may 
be  thereby  allowed.  (2)      A  certain  number  of  the  directors  are  re- 
quired to  retire  from  office  in  rotation  every  year,  so  that  all 
the  *directors  may  be  changed  every  three  years;  the  persons     '-^oSB 
to  retire  are  to  be  determined  by  the  directors  by  ballot  if 
they  do  not  otlierwise  agree;  but  the  persons  to  take  tlieir  place  are 
to  be  elected  by  the  sliareholders.  {a)     Occasional  vacancies  are  to 
be  supplied  by  the  directors  themselves.  i]j)     In  order  that  a  per- 
son maybe  eligible  as  a  director  he  must  be  a  shareholder,  and  hold 
as  many  shares  as  may  be  required  by  the  company's  special  act.  (c) 
Moreover,  it  is  expressly  declared  that  no  person  holding  an  office 
or  place  of  trust  or  profit  under  the  com]iany,  or  interested  in  any 
contract  with  the  company,  is  capable  of  being  a  director  {d)\   and 
that  if  any  director  accepts  or  holds  any  other  office  or  place  of 
trust  or  profit  under  the  company,  or  is  directly  or  indirectly  con- 
cerned in  any  contract  with  the  company,  or  participates  in  the 
l)rofits  of  any  work  to  be  done  for  it,  or  ceases  to  be  the  holder  of 
the  prescribed  number  of  shares,  then  his  office  shall  become  va- 
cant, and  he  shall  cease  from  voting  or  acting  as  a  director.  (<?) 
But  an  exception  is  made  as  regards  a  director  whose  only  interest 
in  a  contract  with  the  cotnpany  arises  from  his  having  shares  in 
another  company  with  which  such  contract  is  made.  (,/) 

These  provisions  do  not,  like  the  similar  clauses  of  the  repealed 
act  of  7  <k  8  Vict.  c.    110  (r/),  render  void   a  contract  contracts  be- 

"^ '^  tween  dirccto 

made  between  a  director  and  the  company,  unless  such  and  compnnj 


•tors 


{ij)  See  8  &'  9  Vict.  c.  16,  §§  81  to  100.  (c)  lb.  §  84. 

(^jlb.  §§  81,  82.     See  on  the  con-  ((/)  lb.  §  85. 

straction  of  such  acts,  Portal  v.  Emmens,  (e)  lb.  §  86. 

]  C.  P.  D.  201  and  cases  there  cited.  (/)  lb.  §  87. 

{a)  8  &  9  Vict.  c.  16,  §§88,  &3,  84.  (<7)  See  7  &  Vict.  c.  110,  §29.    Tlie 

(6)  lb.  §  89.  lollo'wnng'  decisions  upon  tliat  section 

755 


*554  MANAGKMENT   OF    COMPANIES,  [bOOK  III. 

contract  is  coniinned  bv  the  shareholders;  and  it  was  held  in  Fos- 
ter V.  The  Oxford  Eaihvay  Company  (h),  that  under  the  act 
Fosters. Ox-  8  ife  9  Yict.  c.  16,  such  a  contract  was  not  void, 

comp^ny!™^  *55J:  But  it  *innst  not  be  forgotten  that,  although  the 
act  does  not  expressly  invalidate  contracts  of 
this  description,  there  is  a  well-established  equitable  principle  which 
])recludes  any  person  whose  duty  it  is  to  take  care  of  others,  from 
binding  them  by  any  bargain  entered  into  on  their  behalf  with 
himself,  unless  all  the  circumstances  relating  to  such  bargain  are 
fully  and  clearl}^  explained  to  them,  {i) 

With  respect  to  the  nature  of  the  contracts  which  disqualify  a 
Nature  of  dis-    persou  interested  in  them  from  being  a  director,  it  has 

qualifying  con-    ,  i     i  i      i  i  ,    i  ,         ,  i  -ii      ^i 

tract.  ■  been  held,  that  tliey  must  be  contracts  made  with  the 

company  in  the  prosecution  of  its  undertaking;  and  that  there  is 
nothing  to  prevent  a  banker  of  a  company  from  being  one  of  its 
directors.  {7c) 

To  return  to  the  act.     The  directors  have  the  management  of 
the  affairs  of  the  company,  with  the  exception  of  such 

Power  of  '^       ^ 

directois.  ^s  are  required  to  be  transacted  by  a  general  meet- 

ing. (?)  They  are  subject  to  the  control  of  a  general  meeting 
speoiiilly  convened  for  the  purpose,  but  no  resolution  of  any  such 
meeting  renders  invalid  what  may  have  been  done  before  the  reso- 
lution passed,  {m)  The  directors  are  required  to  hold  meetings  at 
such  times  as  they  shall  appoint,  and  they  are  empowered  to  ad- 
may  be  usefully  refen-ed  to.  Ernest  v.  147;  Paul  and  Beresford's  case,  33Beav. 
Nicholls,  6  H.  L.  C.  401;  Curteis  v.  An-      204. 

chor.  Insur.  Co.  2  H.  &  N.  537;  Poole  {h)  13  C.  B.  200.  It  is  submitted  that 
V.  National,  &c.  Assur.  Society,  ib.  this  case  can  no  longer  be  relied  upon. 
687;  Stear's  case,  Johns.  480;  Stears  r.  See  infra,  Ch.  2,  §  22,  duties  of  di- 
South  Essex  Gas  Co.  9  C.  B.  N.  S.  180.      rectors. 

See  as  to  the  purchase  of  shares  by  di-  (i)  See  infra,  Ch.  2,  §  2,  duties  of  di- 

rectors.   Hodgkinson  v.  Nat.  Live  Stock      rectors. 

hisur.  Co.  26  Beav.  473,  and  4  DeG.  &  (k)  Sheffield  and    Manchester   Rail. 

J.  422;  Lane's  case,  1  DeG.  J.  &  S.  504;      Co.  v.  Woodcock,  7  M.  &  W.  574.    The 
and  as  to  loans,  Teversham  v.  Cam-       cases  refen-ed  to    above,   in  note  (g), 
eron's,  &c.  Rail.  Co.  3  DeG.  &  S.  296;      may  be  usefully  consulted  on  this  head. 
MuiTay's  executors'  case,  5  DeG.  M.  &      See,  also,  Lewis  v.  Carr,  1  Ex.  D.  484. 
G.  746;  Baker's  case,  1  Dr.  &  Sm.  55;  {I)  8  &  9  Yict.  c.  16,  §  90.     See,  as  to 

Bluck  V.  Mallalue,  27  Beav.  398;  British      this,  §  91,  and  infra,  p.  557. 
Prov.  Ass.  Society  v.  Norton,  3  N.  R.  [ni)  8  &  9  Vict.  c.  16,  §  90. 

756 


CnAP.  I.]  COMPANIES  GOVERNED  BY  8  &  9  VICT.  C.  IG.  *555 

journ  such  mcetiiif^s  as  they  may  think  pro]>er.  (n)  Any  two  di- 
rectors may  require  a  meeting  of  directors  to  be  called,  (n)  One- 
third  of  the  whole  number  of  directors  constitutes  a  quorum,  unless 
some  other  quorum  is  prescribed  by  the  comi»uny'6  special  act.  (;i) 
All  questions  at  any  meeting  are  determined  by  a  majority  of  votes 
of  the  directors  present,  and,  in  case  of  an  equality  of  votes,  the 
chairman  has  a  casting  vote,  (n)  A  chairman  is  required  to  be 
elected,  and  the  elected  chairman  continues  in  office  for  a  year,  (o) 
A  deputy-chairman  may  be  elected,  if  the  directors  think  fit,  and 
vacancies  in  the  office  of  chairman  and  deputy-chairman  are  to  be 
filled  up.  (p)  In  case  of  the  absence  at  any  meeting  of  the 
chairman  and  *deputy-chairman,  the  directors  present  are  to  *o55 
choose  one  of  their  number  to  be  a  chairman  for  that  meet- 
ing- (?) 

The  directors  are  authorized  to  delegate  their  powers   peicgationof 
to  one  or  more  committees,  (r)  powers. 

The  mode  in  which  contracts  are  to  be  made  on  be-   contracts  by 
half  of  the  company  has  been  already  explained,  (s)         «iirectors. 

The  directors  are  required  to  cause  to  be  entered  in  proper  books, 
notes  or  minutes  of  all  appointments  and  contracts  Dutvtokeep 
made  by  them,  and  of  the  orders  and  proceedings  of  ^oots.&c. 
all  meetings  of  the  company,  and  of  the  directors  and  their  com- 
mittees, {t)  All  entries  are  to  be  signed  by  the  chairman  of  the 
meeting  at  which  they  are  made,  and  entries  so  signed  are  receiv- 
able in  evidence  without  any  preliminui-y  proof  (u) 

The  proceedings  oide  facto  directors  are  not  invalid,  although  it 
may  afterwards  be  discovered  that  there  was  some  de-  Acts  of  de  facto 
feet  in  their  appointment,  or  that  they  were  disquali-  directors  valid, 
fied.  {x) 

The  directors  are  not  personally  liable  for  what  they  may  law- 
fully do  on  behalf  of  the  company,  and  they  are  entitled  in,i,.ninity  of 
to  be  indemnified  by  the  company  against  all  costs,   directors, 
charges,  and  expenses  properly  incurred  by  them  in  the  exercise 
of  the  powers  entrusted  to  them,  (y) 

(«)  lb.  §  92.    See  infra,  note  (r).  (s)  lb.  §  97;  see  ante,  p.  357. 

(o)  8  &  9  Vict.  c.  16,  §  93.  (0  lb.  §98. 

(j;))  Ibid.  (m)  lb.    Seeastothis,  Miles  r.  Bough, 

(7)  8  «fe  9  Vict.  c.  16,  §  94.  3  Q.  B.  845,  and  other  cases  noticed  ante, 

(/•)  lb.  §  §95,  96.     See  D'Arcy  r.  Ta-  p.  551. 

mar  Rail.  Co.  L.  R.  2  Ex.  158,  where  a  (.r)  lb.  §99. 

bond  was  sealed  without  authority.  (y)  lb.  §  100. 

757 


*056  MANAGEMENT   OF   COMPANIES.  [bOOK  III. 

The  directors  are  required  to  take  security  from  every  person 
Dutvtotake  entrusted  with  the  custody  or  control  of  the  moneys  of 
subordmate™  ^^^®  Company  (s);  and  they  are  empowered  to  demand 
officers.  from  every  officer  employed  by  the  company  an  account 

of  all  moneys  received  by  him  on  behalf  of  the  company  and  the 
delivery  up  of  all  receipts  and  vouchers,  and  payment  of  the  balance 
which  may  appear  to  be  owing  from  him  on  such  account,  (a)  A 
summary  remedy  is  provided  in  case  such  a  demand  is  not  com- 
plied with  (b),  and  also  against  any  officer  believed  to  be  about  to 
abscond  without  accounting,  (c) 


*556  *  Secondly,  as  to  the  shareholders. 

Ordinary  general  meetings  of  the  shareholders  are  to  be  held 
"  Shareholders  t^icc  a  year,  viz.,  in  February  and  August,  unless  the 
goveraed'by^  compaii^y's  act  Otherwise  directs,  (d)  Extraordinary 
8  &  9  Viet.  c.  16.  general  meetings  may  at  anytime  be  convened  by 
the  directors  (e);  but  provision  is  also  made  for  convening  such 
meetings  at  the  instance  of  the  shareholders.  (/")  In  order  to  con- 
stitute a  meeting,  there  must  be  present,  either  personally  or  by 
proxy,  the  quorum  prescribed  by  the  special  act;  and  where  no 
quorum  is  prescribed,  then  shareholders,  holding  in  the  aggregate 
not  less  than  one-twentietif  of  the  capital  of  the  company,  and 
being  in  number  not  less  than  one  for  every  500^.  of  such  required 
proportion  of  capital,  unless  such  number  would  be  more  than 
twenty,  in  which  case  twenty  shareholders,  holding  not  less  than 
one-twentieth  of  the  capital  of  the  company  shall  be  the  quorum,  (g) 
Every  meeting  is  to  be  presided  over  by  a  chairman,  viz.,  by  the 
chairman  of  directors,  or  in  his  absence,  by  the  deputy-chairman, 
or  in  the  absence  of  both,  by  a  director  chosen  by  the  meeting,  or 
in  the  absence  of  all  the  directors,  by  a  shareholder  similarly 
chosen.  (A) 

{z)  lb.  §  109.     See  Evans  v.  Coventry,  (d)  lb.  §  66. 

8  DeG.  M.  &  G.  835.    Decree  on  appeal,  {e)  lb.  §  68. 

clause  6,  as  to  the  effect  of  not  observ-  (/)Ib.  §70. 

ing  such  clauses.  (g)  lb.  §  72.     For  some  purposes  a 

(a)  8  &  9  Vict.  c.  16,  §  110.  less  quomm  is  sufficient,  see  the  section 

(b)  lb.  §§  111,  112.  72. 

(c)  lb.  §113.  (;»)Ib.  §73. 

758 


CUAl'.   I.J  COMPANIKS  (ioVKKNKD  UV   S  ik  1)  VICT.  C.   IG.  *557 

Fuurtecii  <lays'  jniblic  ii(»ticc,  at  least,  (jf  all  meetings  are  to 
be  given  by  advertisement  (/);  and  every  notice  of  an  x<,ticcsof 
extraordinary  meeting  is  to  specity  the  piir[)<)se  for  >"«*-•""«»• 
which  the  meeting  is  called  {k)\  and  if  any  matters,  e.xccpt  such  as 
are  authorized  by  the  legislature  to  be  done  at  an  ordinary  meet- 
ing, are  to  be  transacted  at  such  meeting,  the  notice  convening 
that  meeting  must  state  what  those  matters  are.  (Z)  The  share- 
liolders  present  at  any  meeting  are  to  proceed  with  the  business  to 
trans:ict  which  the  meeting  shall  have  been  convened,  and  with  no 
other  business;  and  no  business  is  to  be  transacted  at  an  adjourned 
meeting  except  that  left  iinthiished  at  the  first  meeting,  (vi) 

*  No  shareholder  is  entitled  to  vote  unless  all  the  calls  upon  *557 
his  shares  have  been  paid  (?<);  but  with  this  qualification,  and 
except  where  the  company's  special  act  otherwise  pi'o-  y„^^^„[ 
vides,  ever}'  shareholder  is  entitled  to  one  vote  for  every  shareholders, 
share  he  holds  up  to  ten,  and  to  one  additional  vote  for  every  addi- 
tional i\ve  shares  up  to  one  hundred,  and  to  an  additional  vote  for 
every  ten  shares  beyond  the  first  hundred.  (<>)  Voting  by  jiroxy  is 
allowed,  subject  to  certain  regulations,  easily  complied  with  (^;>); 
and  every  proi)Osition  is  determined  by  a  majority  of  votes,  the 
chairman  having  the  casting  vote  in  case  of  an  equality,  (q) 
Where  a  share  is  registered  in  the  names  of  more  persons  than  one, 
he  whose  name  stands  first  on  the  register  is  to  be  treated  as  the 
shareholder  for  all  purposes  of  voting,  (r)  Lunatic  shareholders 
are  entitled  to  vote  by  their  committees,  and  infant  shareholders  by 
their  guardians,  (s)  In  case  of  a  dispute  as  to  whether  any  reso- 
lution has  been  passed  by  the  required  majority,  a  poll  may  be  de- 
manded: but  if  no  ])ull  is  demanded  the  decision  of  the  chairman 
is  final,  {t) 

The  shareholders  elect  the  directors  (ii)  ;  bait  occasional  vacan- 
cies occurring  among  them  may  be  filled  up  by  the  con-   p, 
tinuing  directors,  (x)     The   shareholders  also  ap])oint  o'^^ei-s. 
the  auditors,  and  determine  the  remuneration  of  the  directors,  audi- 
tors, treasurer  and  secretary,  the  amount  of  money  to  be  borrowed 

(j)   lb.  8  Tl,  and  see  §  138.  (?)  lb.  §  76. 

(^•)  Ibid.  {,■)  lb.  §  78. 

(1)   lb.  i}§  67,  71,  138.  (*•)  lb.  §  79. 

(m)  lb.  §  74,  and  see  8§  67.  69.  {t)   lb.  §80. 

(n)  8  &  9  Vict.  c.  16,  §  75.  (»)  lb.  5;i?^3,  91. 

io)  Ibid.  (.rj  lb.  §  89. 
ip)  lb.  §§  76,  77.     See  ante,  p.  549. 

750 


■^558  MANAGEMENT    OF    COMPANIES.  [bOOK  III. 

on  mortgage,  and  the  extent  to  which  the  company's  capital 
may  be  augmented,  {y)  Dividends,  moreover,  can  only  be  de- 
othcr  powers     clared  at  a  general   meeting  of  the  shareholders,  (s) 

of  sharehold-        mi  i  i      i  i  i  •  •    n 

ers.  Ihe  shareholders  can  also,  at  a  meeting  specially  con- 

vened for  the  purpose,  make  regulations  for  the  conduct  of  the  di- 
rectors, (a)     The  power  of  making  by-laws  may  be  exercised  by  the 

directors,  snbject  to  the  control  of  the  shareholders,  (h) 
^■'558         *T]ie  company's  register  of  shareholders  is  to  be  authen- 
ticated by  the  seal  of  the  company  at  the  ordinary  gen- 
seaiing  regis-     gj.^|  meetings  of  shareholders,  {c) 

Forfeiture  of  Sliarcs  cannot  be  forfeited  for  non-payment  of  calls 

shares.  without   tlic  Sanction  of  a  general    meeting  of  share- 

holders, {d) 

Tlie  shareholders  have  a  right  to  inspect — 

1.  The  shareholders'  address  book,  (e) 

Right  to  m-  ^   ^ 

spect books, etc.       2.  The  register  of  mortgages  and  bonds.  (/ ) 

3.  The  register  of  consolidated  stock,  {g) 

4.  The  company's  books  of  account,  (h) 

5.  The  company's  special  act.  {i) 

They  have  also  a  right  to  have  copies  of,  or  of  any  part  of  the 
shareholders'  address  book,  and  the  company's  books  of  account, 
and  special  act.  {k) 

Copies  of  the  company's  special  act  may  always  be  seen  by  any 
person  interested.  {I) 

Companies  governed  by  the  Companies'  act,  1862. 

The  constitution  of  a  company  formed  under  the  act  of  1802  is 
determined  by  its  memorandum  of  association  and  its  articles,    to 

{y)  lb.   §91.     See,   tgo,    as  to  audi-  law.     R.  v.  Hammond,  3   N.  R.    140. 

tors,   §§  101   and  104,    and  as  to  bor-  (c)  8  &  9  Vict.  c.  16,  §  9. 

rowing  money,  §38,  &c.     A  company  {d)   lb.  §§31,    32.     See    infra,  bk, 

must  pay  its  secretary  for  his  services,  iii.    ch.    6,    §  7,    as    to   forfeiture    of 

although   his    remuneration   may    not  shares, 

have  been  fixed  at  a  general  meeting.  (e)  lb.  §  10. 

Bill  V.   Darenth,   &c.  RaU.  Co.  1  H.  &  (/)  lb.  §45. 

N.  305.  ig)  lb.  §63. 

(z)  8  &  9  Vict.  c.  16,  §  91.  {h)  lb,  §§  117,  119. 

(a)  lb.  §90.  W  lb.  §161. 

(6)    lb.    §§  90,    124.      The    by-laws  {k)  lb.  §§  10,  119,  161. 

must   be    under    seal.      A   justice    of  (?)  lb.  §161.     Printed  copies  can  be 

the  peace  who  is  a  shareholder  can-  bought  of  the  Queen's  printers, 
not    convict    for    a    breach    of   a    by- 

760 


CHAP.  I.]  THE   COMPANIES   ACT,    1S02.  *55!) 

copies  of  wliicli    the  members   are  entitled.  (;;i)     Both  tlie  mem- 
orandum and  the  articles  bind  the   members  as  if  they  constitution  of 
had  siiru'jd  and  sealed  them,  and  had  covenanted  to  ob-   f^^rSunder 
serve  their  conditions,  subject  to  the  provisions  of  the  ^'''■ 
act.  {/i)     The  memorandum  of  association  detines  the  nature  and 
objects  of  the  company,  and  cannot  be  altered  in  these  respects, 
although  it  may  in  some  others,  (o)     The  articles  contain 
rc^uhitions  '-for  the  manajrement  of  the    company's   affairs,     *559 
and  may  be  altered  from  time  to  time  by  a  special  resolution 
of  the  members.  (^>)     But  neither  the  articles  themselves  nor  the 
power  of  alterinfi^  them  authorizes  any  alteration  of  the  constitu- 
tion of  the  company,  as  defined   by  the  memorandum    of  associa- 
tion (q)  ',  e.  g.,  the  issue  of  j^reference  shares  (?•),  or  the  reduction 
of  capital  otherwise  than  as  allowed  by^the  Companies'  acts,  1867 
and  1877.  {s) 

The  constitution  of  an  existing  company,  registered  but  not 
formed  under  the  act  of  1862,  is  determined  by  the  act  of  constitution  of 
Parliament,  letters  patent,  deed  of  settlement,  or  other  n^Js^ret'iste^ed 

1    ..         ,,  fTM  •„    under  the  act. 

instrument  creating  or  regulating  the  company,  inis 
constitution,  so  far  as  it  is  fixed  by  act  of  Parliament  or  letters 
patent,  is  only  alterable  by  the  legislature  or  the  Crown,  as  the  case 
may  be  (t)  ;  nor  can  the  members  change  the  constitution  of  the 
company  in  any  of  those  matters  which,  had  it  been  formed  under 
the  act  of  1862,  would  have  been  unalterable  by  its  members,  {ii) 
But  those  regulations  which  are  not  contained  in  any  act  of  Parlia- 
ment or  letters  patent,  and  which,  if  the  company  had  been  formed 
under  the  act  of  1862,  might  have  been  altered  by  its  members, 
may  be  altered  by  a  special  resolution  of  the  members  of  an  ex- 
isting company,  after  its  registration  under  the  act.  (x) 

(m)  25"ct  26  Vict.  c.  89,  §  19.  win,  2  Q.  B.  D.  214. 

(ji)  lb.  §§11  and  16.  {q)   Ashbury    KaU.    Carriage  Co.  r. 

(o)  lb.  §12.    See,  also,  as  to  the  lia-  Uiche,  L.  K.  7  H.  L.  643,  and  ante  p. 

bility  of  the  directors,  30  and  31   Vict.  251. 

c.  131,  §  8;  as  to  reducing  capital,  ib.  (r)  Hutton  v.  Scarborough  Hotel  Co.  2 

§9,  &c.;  as  to  subdividing  shai-es,  ib.  Dr.  &  Sm.  521. 

§  21.      See,    also,   28    &    29   Vict.    c.  (s)  Hope  v.   International  Fmancial 

78,   §  3,   which    enables    certain  com-  Soc.  4  Ch.  D.  327. 

panies    to    restrict    their     objects     in  (0  25  &  26  Vict,  c.89,  §196,cl.3and4. 

order  to  avail  themselves  of  the  privi-  (»)  §  1^^''  ^1-  6. 

leges   of  issuing  transferable  mortgage  (.r)  §  196.  and  see  §  176,  as  to  compa- 

debentures  under  that  act.  nios  governed  by  Taljle  B,  of  the  act  of 

(«)  §  50.    Sheffield  Nickel  Co.  r.  Un-      1856. 

7G1 


*560  MANAGEMENT    OF    COMPANIES.  [iJOOK  III. 

A  comparison  of  §§  12  and  196  of  the  Companies  act,  1862,  will 
Power  to  show  that  a  company  once  registered  under  the  act  as 

unumit/dto  an  Unlimited  company  cannot  be  converted  by  its 
limited.  shareholders  into  a  limited  company  ;  and  the  writer 

apprehends  that  such  a  change  in  a  company's  constitution  can- 
not be  made,  even  with  the  sanction  of  the  Board  of  Trade,  under 
§  13.  The  company  would  have  to  be  wound  up  and  reformed. 
*560  *yery  little  is  to  be  found  in  the  act  relating  to  the  pow- 
ers of  directors,  or  to  the  internal  management  of  a  com- 
pany's affairs.  These  matters  are  for  the  most  part  left  to  be  pro- 
Management      vided   for  by   each    company  as  it  may  deem  proper, 

of  company's  ,  ,.        ,       ■,      ■,,       •,i'mii''A 

affairs.  and  are  accordmgly  dealt  with  in  lable  A. 

The  act  of  1862,  however,  requires  that  a  general  meeting  of 
„     .  .       „      members  shall  be  held  once  a  year  at  least  (?/),  and  the 

Provisions  of  ■'  v./  /' 

^^^-  amendment  act  requires  that  every  company  formed 

under  the  act  of  1862,  after  the  1st  of  September,  1867,  shall  hold 
a  o^eneral  meetinsr  within  four  months  after  its  memorandum  of 
association  is  registered,  (s)  Moreover,  the  act  of  1862  enables 
the  members,  %  a  special  resolution,  the  meaning  of  which  is  de- 
lined  («),  1,  to  alter  the  constitution  and  regulations  of  the  com- 
pany to  the  extent  already  pointed  out ;  2.  to  appoint  inspectors 
to  examine  into  the  aifairs  of  the  company  (5)  :  and  3.  to  have  the 
company  wound  up.  (<?)  The  act,  moreover,  renders  the  keeping 
of  proper  minutes  compulsory,  and  enacts  that,  until  the  contrary 
is  proved,  meetings  and  proceedings,  of  which  minutes  shall  be 
properly  made,  shall  be  considered  as  duly  convened  and  trans- 
acted, and  that  all  appointments  of  directors,  managers,  or  liqui- 
dators, shall  be  deemed  valid,  and  that  all  their  acts  shall  be  valid, 
notwithstanding  any  defect  that  may  afterwards  be  discovered  in 
their  appointments  or  qualifications,  (d) 

For  the  greater  protection  of  the  members  of  companies  the  act 
Examination  Contains  somc  very  important  provisions,  enabling  not 
affakfby''^^  ouly  the  members  {e\  but  also,  on  their  application, 
inspectors.  the  Board  of  Trade,  to  appoint  inspectors  to  examine 
into  and  report  upon  the  aifairs  of  all  companies  registered  under 

{y)  25  &  26  Vict.  c.  89,  §  49.  unregistered  companies  have  not  this 

(z)  80  &  31  Vict.  c.  131,  §  39.  power,  see  §  199. 

(«)  25  &  26  Vict.  c.  89.  §  51.  {d)  25  &  26  Vict.  c.  89,  §  67.    See 

{h)  §  60.  ante,  p.  551. 

(c)  §§  79  and  129.    The  members  of  (e)  §  60. 

762 


ClIAI'.  I.]  THE    COMPANIES    ACT,    18G2.  *501 

the  act.  {/)  A  copy  of  the  report  of  the  inspectors,  sealed  with 
the  seal  of  tlie  com  pan}-,  is  also  made  admissible  in  any  legal  pro- 
ceeding as  evidence  of  their  oj)iniun  on  any  matter  contained  in 
their  report,  {g) 

*Passin<:' now  to  the  reofulations  in  Tal)lc  A.,     *501   I'rnvisious of 

^  o  'J  uble  A. 

the  following  rules  will  be  found  respecting  the 

managing    bodies  and  the  members   of    companies  to  which  that 

Table  aj)plics. 


First,  as  regards  the  managing  tody. 

The  business  of  the  company  is  to  be  managed  by  the  directors, 
and,  in  case  of  any  vacancy  in  their  body,  by  those  j^j^.  ^ 
who  continue  in  office  (Table  A.,  Nos,  55  and  50).  The  ^'^'^'^  ^• 
powers  of  the  directors  are,  however,  subject  not  only  to  the  pro- 
visions of  the  act,  but  also  to  the  company's  regulations  {ih.),  which, 
as  before  obsei-ved,  may  be  altered  by  special  resolution.  AVhat  is 
done  by  de  facto  directors  is  valid,  notwithstanding  the  subsequent 
discovery  of  a  defect  in  their  appointment  or  of  their  disqualifica- 
tion (No.  71,  and  §  G7  of  the  act).  (A) 

The  directors  are  the  proper  persons  to  make. calls  (No.  4),  for- 
feit shares  (Nos.  17  and  22),  and  ap|)oint  the  first  auditors  (No.  84). 
But  the  directors  cannot,  without  the  sanction  of  the  members, 
convert  shares  into  stock  (No.  23),  increase  the  capital  by  issuing 
new  shares  (No.  20),  or  declare  dividends  (No.  72). 

Until  directors  are  appointed  tliej  subscribers  of  the  memoran- 
dum of  association  are  the  directors  (Table  A.,  No.  53),  .^ppoimment 
and  are  the  ])erions  to  determine  the  number  and  names  '^^  directors. 
of  the  first  directors  (No.  52).  This  number  may  afterwards  be 
varied  by  the  members  (No.  03).  At  the  fii'st  ordinary  meeting 
of  the  members,  after  the  registration  of  the  company,  the  whole, 
and  in  every  subsctjuent  year  one-third,  of  the  directors,  must  re- 
tire (No.  58).  In  case  of  any  disj  ute  as  to  who  shall  retire  in  the 
tii'st  two  years  after  the  first,  the  ]tersons  to  retire  must  be  deter- 
mined  by  ballot   (No.   5U);  but  afterwards  tho^j   wlu)   have   been 

(/)  §§  56-59.  directors  wa.s  liokl  not  to  bo  cured  by  a 

(^§61.  clauseof  this  nature.     Compiire  Murray 

{h)  See  ante,  p.  543,  and  Howbeach  r.  Bush,  L.  R.  0  H.  L.  37,  which  turned 

Coal  Co.    ('.  Teanfue,  5   H.  «fe   N.    151.  on  a  smiilar  ulau-se  in  7  «S:  8  Vict.  c.  lid. 

where  the  defect  in  the  appointment  of  §  30. 

703 


*062  MANAGEMENT    OF    COMPANIES.  [bOOK  III. 

longest  in  office  must  retire  (No.  59).  A  retiring  director 
■^562  may  be  re-elected  (No.  60).  Vacancies  *occnrringby  retire- 
ment under  these  provisions  must  be  tilled  up  by  the  mem- 
bers at  the  meeting  at  which  the  directors  retire  (No.  61);  other- 
wise the  meeting  stands  adjourned  for  a  week  (No.  62);  and 
if  the  vacancies  are  not  tilled  up  at  such  adjourned  meeting,  those 
directors  whose  places  are  not  filled  up,  continue  in  office  for  an- 
other year  (No.  62).  Casual  vacancies  ma^'  be  tilled  up  by  the  other 
directors  (No.  64). 

A  director  vacates  his  office — 1.  if  he  holds  any  other  office  or 
Dis  uaiifica-  placc  of  profit  undei' the  Company  (^);  2.  if  he  becomes 
^io^-  bankrupt  or  insolvent;  3.  if  he  (otherwise  than  as  a 

member  of  some  other  company)  is  concerned  in  or  participates  in 
the  profits  of  any  contract  with  the  company  (No.  57).  (k) 

Irrespectively  of  these  provisions,  any  director  may  be  removed 
DirTors"^       by  a  special  resolution  of  the  members  (No.  65). 

The  members  fix  the  remuneration  of  the  directors 

Their  pay  (No.  54). 

The  directors  may  regulate  their  own  meetings  as  they  think  fit 

Meetin-sof  (^^-  ^^)'  ^-*"^  ^^^^  ^^'®  bound  to  keep  minutes  of  their 
Directors.  proceedings  (see  §  67  of  the  act).     The  directors  may 

determine  what  number  is  to  be  a  quorum  (Table  A.,  No.  66),  and 
may  elect  a  chairman  and  determine  the  period  for  which  he  shall 
hold  office  (No.  67).  If  no  chairman  is  present  when  a  meeting 
assembles,  the  directors  present  must  choose  one  of  themselves  to 
be  chairman  ^:)ro  te?)i.  (No.  67). 

Questions  arising  at  any  meetings  of  directors  are  to  be  deter- 
mined by  a  majority  of  votes,  the  chairman  having  a  second  or 
casting  vote  in  case  of  equality  (No.  66). 

Any  director  may  at  any  time  summon  a  meeting  of  directors 
(No.  66). 
^  ,     ,.  The  directors  may  deles-ate  any  of  their  powers  to 

Delegatiou  ./  o  j  i 

of  powers.         committees  of  themselves  (Nos.  61-70).  {I) 

The  directors  may  at  any  time  convene  an  extraordinary  general 
meeting  of  the  members  (No.  32). 

(?)  The  directors  may  appoint  one  of  4S1.     Compare  Iron  Ship  Coating  Co.  r. 

themselves  to  be  a  manager  at  a  salary,  Bkmt,  L.  R.  3  C.  P.  484 . 

but  the  person  so  appointed  ceases  by  the  (k)  See  as  to  this,  aiife,  p.  55o. 

appointment  to  be  a  director.     Eales  v.  (I)  See  Totterdell  v.  Fareham  Brick 

Cmnberland  Black  Lead  Co.   6  H.  &  N.  Co.  L.  R.  1  C.  P.  674. 
764 


CHAP.  I.]  THE    COMPANIES    ACT,    1862.  *5G3 

The  directors  are  bound  to  keep  accounts  of  tlie  company's  stuck 
in    trade,  receipts  and  expenditure,  assets  and 
liabilities;  *and   the  members  are  entitled   to     *563  EirecLrs. 
inspect  these  accounts,  subject  to  such  restrict- 
ions as  the  members  may  themselves  impose  (No.  78).     The  di- 
rectors  are   further  bound,  once  a  year,  at  least,  to  lay  before  the 
members    a  statement   of    the    company's    income   and    expend- 
iture  for   the    past    3'ear   (Nos.    7*J   and    80),  and  also  a  balance 
sheet   containing   a   summary   of    the    assets    and    liabilities    of 
the  company   in    the    form  given  at  the  end  of  Table  A.  (No.  81). 
A  printed  copy  of  this  balance  sheet  is,  moreover,  to  be  sent  to  each 
member  seven  days  before  the  meeting  (No.  82). 

In  addition  to  these  provisions  the  directors  are  bound  by  the 
act  itself,  and  mostly  under  penalties,  to  do  various  things  which 
it  may  be  useful  here  to  recapitulate,  viz  : 

1.  To  keep  a  proper  register  of  members  (?/i),  and  to  allow  it  to 
be  insjK'cted.  (ii) 

2.  To  make  out  and  send  to  the  registrar  of  joint-stock  compa- 
nies the  annual  lists  required  to  be  sent  to  him.  (0) 

3.  To  notify  to  the  registrar  all  increases  or  re-distributions  of 
capital  and  conversions  of  capital  into  stock  {p\  and  all  increases 
of  members  where  there  is  no  share  capital,  (q) 

4.  To  keep,  if  there  be  no  share  capital,  a  register  of  directors, 
and  send  a  copy  of  it  to  the  registrar,  and  notify  to  him  all  changes 
amongst  the  directors,  (r) 

5.  To  take  care,  in  the  case  of  limited  companies,  that  the  word 
"  limited  "  appears,  and  is  used  as  prescribed  by  the  statute.  (5) 

6.  To  keep,  in  the  case  of  a  limited  company,  a  register  of  all 
mortgages  or  charges  affecting  its  property,  and  allow  such  regis- 
ter to  be  inspected,  (t) 

7.  To  keep,  in  the  office  of  a  limited  banking  company,  an  in- 
surance company  and  deposit  provident  or  benefit  society,  the  state- 
ment required  by  the  act,  and  to  permit  such  statement  to  be 
inspected.  (21) 

(m)  25  &  20  Vict.  c.  89,  §  25                    note  (/). 

(w)  §  32.  (t)  §43.    See,  also,  a.s  to  the  ro{risti-a< 

(0)  §§26,  27,  45,  46.  tion,  «S:c.,  of  debentures  issued  umler  the 

ip)  §§28-34.  Mortgagre  debenture  act,  186"),  28  &  29 

(?)  §34.  Vict.  c.  7>!.  §§  6-11,  21.  23,  27,  31-33, 

(r)  §§  45  and  46.  and  33  .t  34  Vict.  c.  20,  §§  3  ct  seq 

(«)  §§41  and  42.     See  aute,  p.  366,          (»)  §44. 

765 


*565  MANAGEMENT    OF    COMPANIES.  [rOOK  III. 

*56J:         *  8.  To  take  care  that  the  company  does  not  carry  on  busi- 
ness with  less  than  seven  members,  {x) 

9.  To  send  copies  of  all  special  resolutions  to  the  registrar,  and 
to  the  members  if  required,  (y) 

10.  To  submit  to  examination  by  the  inspectors  appointed  by 
the  Board  of  Trade  (s),  or  by  a  special  resolution  of  the  mem- 
bers, (a) 

The  powers  of  directors,  as  regards  calls,  dividends,  and  the  for- 
feiture of  shares,  and  their  duties  and  liabilities  on  the  winding  up 
of  a  company,  will  be  pointed  out  hereafter. 


Secondh/,  as  regards  the  memhers. 

The  question  who  are  members  has  been  already  examined,  (b) 
The   original   number   of  members   mav  be   increas- 

Members.  t    /   n 

ed. (c) 
The  act  requires  a  general   meeting  of  the  members  to  be  held 
Meeiiii'^sof       once  a  year  at  least  (rZ);  and  all  companies  formed  after 
members.  -j^g^  Se])t ember,  1867,  must  hold  a  meeting  within  four 

months  after  its  memorandum  of  association  is  registered,  (e) 
By  the  regulations  contained  in  Table  A.,  the  first  ordinary  gen- 
eral meeting;  is  to  be  held  at  such  time  within  six 

Table  A.  ,  ,.  .  .  ^     ,  i  , 

months  alter  registration  of  the  company,  and  at  such 
place  as  the  directors  may  determine  (Nos.  29  and  31).  Subsequent 
ordinary  general  meetings  are  to  be  held,  at  such  time  and  place  as 
the  members  may  determine;  and  if  they  do  not  fix  a  time  and 
place,  a  general  meeting  shall  be  held  on  the  first  Monday  in  Feb- 
ruary in  every  year,  at  such  place  as  the  directors  may  determine 
(^N'os.  30  and  31). 

An  extraordinary  general   meeting  may  be   convened   by  the 

,.j^        directors  whenever  they  think  proper  (Nos.  31  and  32); 

meetings.  {^^(j  {\^q  directors  are  bound  to  call  such  a  meeting 

whenever  required  so  to  do  in  writing  by  one-fifth  of  the  members 

(Nos.   32-31).      If  the  directors  fail  to  comply  with  such 

*565     requisition,  ^the  requisitioners,  or  any  other  members,  bein;;: 

{x)  §48.  {b)  Ante,  p.  170  et  seq. 

(v)  §§  53  and  5t.  (c)  §§  12  and  34. 

(^)§58.  (r?)  §49. 

{a)  §  GO.  (e)  30  &  31  Vict.  c.  131,  §39. 

7G6 


c;iAr.  1.]  THE  companies  act,  1SG2.  ^oCG 

one-fifth  of  the  whole,  may  themselves  convene  an   extraordinary 
general  meeting  (No.  3-i).  [f) 

Seven  days'  notice  at  least,  specifying  the  day,  place  and  hour  of 
meeting  is  to  be  given  to  the  members,  by  post  or  per-  xotice com-fii- 
sonal  service  (Nos.  95-97,  and  §  52  of  the  act),  or  in  ^"k  nicetiugs. 
such  other  way  as  the  members  in  general  meeting  may  direct  (No. 
35),  but  the  non-receipt  of  such  notice  by  any  member  does  not  in- 
validate the  proceedings  of  the  meeting  (No.  35).  Whenever  an 
extraordinary  meeting  is  called,  or  whenever  it  is  intended  at  an  or- 
dinary meeting  to  do  more  than  sanction  a  dividend,  or  consider 
the  accounts,  balance-sheets,  and  ordinary  reports  of  the  directors, 
the  notice  convening  the  meeting  must  state  the  general  nature  of 
the  business  to  be  transacted  (Nos.  35  and  36).  (g) 

No  business,  except  the  declaration  of  a  dividend,  can  be  trans- 
acted   at  any  general  meeting,  unless  a    quorum    of 

,  .,,  ,1,.  ,  ,..      Kcsoliuions. 

memi)crs  is  present  M'hcii  the  meeting  proceeds  to  busi- 
ness (No.  37).  The  quorum  is  ascertained  as  follows: — If  the  mem- 
bei's  of  the  company  do  not  exceed  10,  the  quorum  is  5  ;  if  they  ex- 
ceed 10,  one  must  be  added  for  every  5  additional  meml)crs  up  to 
50  ;  and  one  for  every  10  additional  members  after  50,  until  the 
quorum  amounts  to  20,  which  is  in  all  cases  a  sufficient  number. 
(Tal)le  A.  No.  37).  (A) 

If  within  an  hour  from   the  time  appointed  for  the  meeting,   a 
quorum  is  not  present,  the  meeting,  if  convened  upon 
the  requisition  of  the  members,   shall  be  dissolved;  in  Dis^ohuion  of 
any  other  case  it  shall  stand  adjourned  to  the  same  "^t-^-iing. 
day  in  the  next  week,  at  the  same  time  and  place;  and  if  at  such 
adjourned  meeting  a  quorum  is  not  present,  it  shall   be  adjourned 
sine  die  (Table  A.  No.  38). 

The  chairman,  (if  any)  of  the  board  of  directors,  shall  preside  as 
chairman   at   every  general  meeting  of  the  members 
(No.  39).     If  there  be  no  such  cliairman,  or  if  at  anv 
meeting  he  is  not  present  within  a  quarter  of  an  liour  after 
the  time  appointed  "^''for  holding  the  meeting,  the  members     *50G 
present  shall    choose  one  of  their  number  to    be  chairman 
(No.  40)  {I). 

if)  Where  there  are  no  regulations  cases  there  cited  innote(;)). 

upon  this   subject    anj'  five    niombei-s  (h)  See,  as  to  the  quoninis.  avte,  p. 

may  summon  meetings,  see  §  52  of  the  244. 

act.  (/)  Where  there  are  no  regulations  to 

((/)  See  ante  pp.  545,  547,  and  tlie  the  contrary  the  members  may  alwavs 

7G7 


*5G7  MANAGEMENT    OF    COMPANIES.  [bOOK  III. 

The  chairman  may,  with  the  consent  of  the  meeting,  adjourn  it 
from  time  to  time,  and  from  place  to  place,  but  no 

Adjourned  ^  "■  . 

meetings.  busiuess  Can  be  transacted  at  any  adjourned  meeting, 

except  the  business  left  nniinished  at  the  meeting  from  which  the 
adjournment  took  place  (No.  41).  {Ji) 

At  any  general  meeting  a  poll  may  be  demanded  by  five  or  more 
members  ;  but  if  no  poll  is  so  demanded,  a  declaration 
by  the  chairman  that  a  resolution  has  been  carried, 
and  an  entry  to  that  effect  in  the  book  of  the  proceedings  of  the 
company  is  sufficient  evidence  of  the  fact,  without  proof  of  the 
number  or  proportion  of  votes  recorded  for  or  against  the  resolu- 
tion (Nos.  42  and  43). 

Where  the  regulations  do  not  otherwise  prescribe,  each  member 
is  entitled  to  one  vote  (Z),  but  by  the  regulations  in  Table  A.,  every 
member  is  entitled  to  one  vote  for  every  share  up  to  ten,  and  to  one 
additional  vote  for  every  5  additional  shares  up  to  100,  and  to  an 
additional  vote  for  every  10  shares  beyond  the  first  100  (No.  44.) 
A  lunatic  may  vote  by  his  committee  (No.  41).  If  several  persons 
are  jointly  entitled  to  a  share  or  shares,  the  person  whose  name 
stands  first  on  the  register  in  respect  of  those  shares,  and  no  other 
person  is  entitled  to  vote  in  respect  of  them  (Table  A.  No.  46). 

No  member  can  vote  unless  he  has  paid  all  his  calls  (No.  47);  and 
except  for  the  first  three  months  after  the  registration 

Table  A.  „      ,  1  ,       .  4.      4f 

of  the  company,  no  member  can  vote  m  respect  ot 
any  share  acquired  by  transfer,  unless  he  has  held  it  for  three 
months  (No.  47). 

Votes  may  be  given  personally  or  by  proxy  (No.  48).  {m)      The 

proxy  must  be  a  member  of  the  company,  appointed 

in  writing,  signed  and  attested  by  one  witness  at  least. 

(No.  49).    An  instrument  appointing  a  proxy  is  only  good  for  a  year 

(No.  50),  and  it  must  be  left  at  the  company's  office  three  days 

*567     at  least  before  it  can  be  acted  upon  (No.  50).    A  form  *of  proxy 

is  given  in  Table  A.  (No.  51);  it  must  be  duly  stamped  {n). 

Minutes  of  all  resolutions  and  proceedings  of  general  meetings 

are  required  to  be  kept  by  the  act,  which  moreover 

Minutes.  ^akes  the  minutes  of  any  meeting  admissible  in  evi- 

elect  their  own  chaii-man,   see  §  52  of  (l)  25  &  26  Vict.  c.  89,  §  52. 

the  act.  (»0  See  atite,  p.  549. 

(^•)  As    to  adjourned  meetings,   see  {n)  Ante,  p.  549. 
ante,  p.  546. 

768 


Proxies. 


CIIAl'.  I.J  Tllf:   COMPANIES   ACT,    180:2.  *56s 

dciiee,  if  jiurj)ortiiig  to  be  sii^-'iied  liy  the  cliiiinnuu  of  that  or  of  tlie 
next  siicccediiii^  meeting,  (o) 

The   ineiulxrs  liave,  as  has  been   alread}'  mentioned,  power  to 
elect  (No.  52)  and  to  increase  or  reduce  tlie  number  of   powers oj 
the    directors    (No.    63),  and  to    fix  their    remiinera-   "•^■'"'^^•"• 
tion  (No.  54),    and    by   s])ecial    resolution    to    remove    them    (No. 
65). 

The  members  are  also  entitled  to  sec  tlie  accounts  of  tlie  com- 
pany (No.  Tb).  and  to  ap])(jint   all    auditors,  except   the  first   I  No. 

The  members,  moreover,  are  entitled  by  the  act, 

1.  To  have  copies  of  the  company's  memorandum  of  association 
and  articles,  {p) 

2.  To  inspect  and  have  copies  of  the  register  of  membr'rs.  (q) 

3.  To  inspect  the  register  of  mortgages  rOqiiii-ed  to  be  kept  by 
limited  con)])anies.  (r) 

4.  To  liave  copies  of  all  special  resolutions,  (s) 

5.  To  a|)]ily  to  the  Board  of  Trade  to  appoint  ins])ectors  to  ex- 
amine tlie  affairs  of  the  company  (t),  and  by  special  resolution  to 
appoint  such  inspectors  themselves,  (w) 

6.  To  insist  on  the  company  being  wound  np.  (x) 

7.  In  addition  to  these  powers,  the  members  are  empowered  bv 
a  special  resolution,  i.  e.,  a  resolution  passed  by  three-  special  resoiu- 
fourths,  and  afterwards  confirmed  by  a  majority  of  '"""*■ 
members,  present  in  person  or  by  proxy,  and  entitled  to  vote  (y), — 
to  alter  the  regulations  of  the  company,  (s)  But,  except  by  in- 
creasing [a)  or  reducing  (h)  the  original  capital,  or  by  subdi- 
viding the  shares  {o)  *or  in  certain  cases  by  limiting  the  oljjects  *568 
of  the  company  so  as  to  avail  itself  of  the  Mortgage  del»en- 

ture  act,  1805  (</),  c»r  by  changing  the  name  of  the  company  (c),  no  de- 

(o)  25  &  26  Vict.  c.  89,  §  67.  resolution  must  be  registennl,  §  :,X 

ip)  §  19.  {z)  §  50. 

(?)  §  32.  {a)  §  12. 

(/•)  §  44.  (b)  :W  &'  31  Vict.  c.  131.  .5  9.  et  scq 

(s)  §§  r.4  and  19.  "                                    and  40  &  41  Vict.  c.  26,  §  3  et  pcq. 

(0  §  '^6.  (r)  30  &  31  Vict.  c.  131.  §  21.  which 

ill)  §  60.  only  applies  to  limiteil  companies. 

(.r)  §§  79  and  129.  See,  also,  30  &  31          (r/)    2S  &  29  Vict.  c.  78,  §  3. 

Vict.  c.  131,  4?  40.  ((■)    25  &  26  Vict.  c.  89.  §  13. 

[l/)  25  &  26  Vict.  c.  89,  §  31.    The 

«  700 


*508  MANAGEMENT    OF    COMPANIEIS.  [bOOK  III. 

parture  can  be  made  from  the  memorandum  of  association  [f),  nor 
can  the  regulations  of  the  company  be  so  altered  as  to  change  the  res- 
pective status  of  the  members,  and  to  give  one  class  a  preference  over 
others  {g),  except  as  authorized  by  §  24  of  the  Companies  act,  1867. 

(/)  §  12,  ante,  p.  559.  judgrnent  of  Lord  Westbury  in  11  Jur, 

{g)  See  Hutton  v.  Scarbro'  Hotel  Co.      N.  S.  551. 
2  Dr.  &  Sm.  521.    See  ib.  514,  aaid  the 

770 


CIIAl'.  II.] 


DUTY    TO  OBSERVE    GOOD    lAITU. 


>0U 


♦CHAPTER  11. 


m 


OF  THE  GENERAL  DUTY  OF  PARTNERS  AND  DTKECTORS  TO  OBSERVE 
GOOD  FAITH,  AND  NOT  TO  EXCEED  THEIR  AUTHORITY. 

SECTION  I.— PRELIMINARY  REMARKS. 

In  societatis  contractihus  fides  exuheret.  (a)  The  utmost  good 
faith  is  due  from  every  member  of  a  partnership  to-  mgh  standard 
wards  every  other  member;  and  if  any  dispute  arise  pf,en"i'^ng"*'"" 
between  partners  touching  any  transaction  by  which  r"""*^"- 
one  seeks  to  benefit  himself  at  the  expense  of  the  firm,  he  will  be 
required  to  show,  not  only  that  he  lias  law  on  his  side,  but  that  his 
conduct  will  bear  to  be  tried  by  the  higliest  standard  of  honor.  (//)' 
Thus,  if  one  partner  knows  more  about  the  state  of  the  partnership 
accounts  than  another,  and  concealing  what  he  knows,  enters  into 
an  agreement  with  that  other,  relative  to  some  matter  as  to  which 


(a)  Cod.  iv.  tit.  37,  1,  3; 

{h)  See  Blisset  t\  Daniel,  10  Ha.  522, 
536. 

'  It  is  a  question  to  be  submitted  to 
the  jury  where  there  is  evidence  to  raise 
it,  whether  the  acts  of  the  majority 
were  in  bad  faith  towards  and  in  wan- 
ton violation  of  the  rights  of  the  minor- 
ity. Western  Stage  Co.  v.  Walker,  2 
Iowa.  504. 

Where  one  partner,  who  is  in  sound 
health  is  made  sole  agent  of  the  part- 
nership by  another,  who  is  not,  and  who 
relies  on  him  wholly  for  true  accounts, 
and  the  party  thus  made  agent  manages 
the  business  at  a  distance  from  the  other, 
communicating  to  him  no  information, 
the  relation  of  partners,  whatever  it 
may  be  in  general,  becomes  fiduciarj-, 
and  the  law  governing  such  relations 
applies.     Brooks  v.  Martin,  2  Wall.  70. 


In  an  action  against  a  partnership, 
if  process  be  served  on  one  partner. 
and  judgment  recovered,  and  executi(>n 
levied  on  the  partnership  property,  it  is 
the  duty  of  such  partner  to  give  notice 
of  it  to  his  co-partners,  and  a  neglect 
to  do  so  subjects  him  to  an  action.  De- 
vall  V.  Burbridge,  6  Watts  &  S.  529. 

Two  partners  carry  on  an  extensive 
business,  embracing  various  subjects, 
and  they  keej)  no  i-egular  set  of  books. 
One  of  tliem  attends  exclusively  to  the 
out-door  biisines-!,  makes  the  contractus 
and  executes  notes  for  the  firm  of  which 
no  regular  account  is  kept.  They  at 
length  quarrel,  and  the  in-door  partner 
insists  upon  a  dissolution  of  the  partner- 
ship, and  there  is  a  proposition  to  buy 
or  sell.  The  out-door  partner  in  making 
an  estimate  of  the  value  of  the  partner- 
ship proi)erty  for  his  own  guidance  in 

771 


^569 


DUTY    TO    OIJSEKVE    GOOD    FxVITH. 


[book  III. 


a  kiiowlcdi^e  of  the  state  of  the  accounts  is  matei'ial,  such  agree- 
iiieiit  will  not  be  allowed  to  stand.  (<?) 

This  obligation  to  perfect  fairness  and  good  faith,  is,  moreover, 
andamonn-  "°^  Confined  to  pcrsons  who  actually  are  partners.  It 
becorac^paJ^'  extends  to  persons  negotiating  for  a  partnership,  but 
""'^'  between  whom  no  partnership  as  yet  exists  (c?);"  and 

also  to  persons  who  have  dissolved  partnership  but  who  have  not 


any  proposition  he  may  make  or  receive, 
attempts  to  make  out  a  list  of  the  debts 
due  from  the  concern,  and  he  estimates 
them  at  about  one-half  what'they  turn 
out  to  be,  but  it  does  not  appear  that  he 
represents  them  to  his  co-partner  at  any 
amount  or  that  liis  partner  did  or  would 
have  confided  in  any  representation 
that  he  made  after  making  liis  estimate, 
he  makes  an  offer  to  sell  or  buy  at  a 
specific  price,  and  his  partner  agrees  to 
buy  at  the  price  offered;  and  the  con- 
tract is  executed:  Held,  that  under  the 
circumstances  the  selling  partner  was 
bound  to  the  utmost  good  faith  on  his 
part.  He  was  bound  not  only  to  dis- 
close truly  any  information  in  his  pos- 
session that  might  be  called  for,  but  if 
he  perceived  that  the  purchasing  part- 
ner was  laboring  under  incon-ect  views 
in  reference  to  the  amount  of  the  debt 
due  by  the  concern,  by  which  he  might 
be  misled  into  too  high  an  offer  for  the 
interest  to  be  sold,  it  was  his  duty  to 
furnish  all  the  data  he  might  have  by 
which  such  views  might  be  corrected 
and  the  mischief  prevented :  and  in  this 
case  he  does  not  appear  to  have  violated 
his  duty.  Sexton  v.  Sexton,  9  Grat.  204. 
A  and  B  being  partners.  A,  without 
the  consent  of  B,  bon-owed  mOney  at  an 
extra  rate  of  interest,  on  the  credit  of 
the  company,  to  pay  his  private  debts, 
and  credited  the  company  with  the 
money  so  applied  and  the  legal  interest 
only:  Held,  that  the  excess  of  interest 
thus  paid  hy  the  company  beyond  the 
amoimt  credited  to  the  company  was 

772 


a  proper  charge  against  A.  Tomlinson 
V.  Wai-d,  2  Conn.  396. 

Where  one  member  of  a  co-partner- 
ship made  a  promise  to  another  firm 
havmg  dealings  and  open  accounts 
with  his  firm,  in  which  he  individually 
had  an  interest  adverse  to  that  of  his 
firm,  that,  upon  closing  the  accounts, 
certain  concessions  would  be  made  by 
his  firm  favorable  to  the  other  parties : 
Held,  that  such  promise,  being  made 
without  the  knowledge  of  his  co-part- 
ners, and  made  clearly  in  his  own  in- 
terest, and  to  the  pecuniary  prejudice 
of  his  co-partners,  was  not  binding  up- 
on them;  it  appearing  that  the  accounts 
had  been  regularly  rendered,  and  the 
charges  made  in  the  accounts  were  the 
same  as  those  against  other  dealers 
with  the  firm.  Goodwin  v.  Einstein,  51 
How.  Pr.  9. 

(c)  See  Maddeford  v.  Austwick,  1 
Sim.  89. 

{d)  See  Hichens  v.  Congreve,  1  R. 
&  M.  150;  Fawcett  v.  Whitehouse,  ib. 
132,  noticed  with  other  cases,  infra.- 

"  It  is  not  contrary  to  equity  for  part- 
ners in  an  existing  firm,  upon  taking  in 
a  new  member,  to  put  in  the  stock  and 
machinery  of  the  old  business,  at  a  price 
fixed  arbitrarily  between  the  parties,  as 
one  of  the  conditions  of  the  new  arrange- 
ment. There  is  no  confidential  relation 
between  parties  untU  the  partnership 
is  formed.  In  the  negotiations  con- 
cerning it  the  parties  deal  as  strangers. 
Uhler  V.  Semple,  20  N.  J.  Eq.  288. 

See   _^Jos^,  579. 


CHAP.  II. 


DUTY    TO    DIRECTOKS. 


completely  wound  np   and    settled    tlie    partnership  affairs  (<?);' 
and  most  especially  is  good    faith  required   to  nndamont 


be  observed   when    one  *piirtner   is  endeavor- 
ing to  get  rid  of  another,  or  to  buy  him  out.  (/) 


"a  <  0 


nnd  among 
tliose  who  hi 
i-fusfd  Id  be 
imriucTS. 


{e)  See  Lees  r.  Laforest,  14  Beav.  250; 
Clegg  V.  Fishwick,  1  Mac.  &  G.  294; 
Perens  r.  Johnson,  3  Sm.  &  G.  419; 
Clements  v.  Hall,  2  DeG.  &  J.  17.'',. 

'After  a  dissolution  of  co-partnorship, 
each  partner  becomes  a  trustee  for  the 
others  as  to  the  partnership  funds  in  his 
hands,  in  order  to  effect  a  fair  settle- 
ment and  just  distribution  of  the  effects, 
and  he  will  not  be  allowed  to  make  a 
bargain  with  his  former  co-pai-tners  ad- 
vantageous to  himself ;  but  before  dis- 
solution no  such  relationship  exists. 
Stephens  v.  Orman,  10  Fla.  9. 

If  pai-tners,  during  the  existence  of 
the  partnership,  are  trustees  for  each 
other,  that  relation  certainly  ceases 
when  the  firm  is  dissolved  and  the  busi- 
ness is  closed.  Pierce  v.  MeClellan,  93 
111.  245. 

In  Farman  v.  Brooks,  9  Rich.  212,  it 
was  held  that  a  seltlcment,  by  an  insur- 
ance broker,  with  the  administrators  of 
his  former  principal  or  partner,  will  be 
sustained,  if  it  is  not  actually  or  con- 
structively fraudulent,  although  advan- 
tageous to  the  party;  in  this  he  dilfors 
from  one  who  is  strictly  a  trustee,  such 
a  one  being  scarcely  allowed  to  purchase 
at  all  of  his  cestui  que  trust. 

Where  one  of  two  co-partners  sold  out 
liis  interest  in  the  co-partnership  assets 
to  the  other,  taking  back  an  agreement 
that  the  purchaser  would  pay  the  part- 
nei-ship  debts,  and  the  latter,  insteiul  of 
paying  them,  caused  them  to  be  brought 
up  in  the  name  of  a  confederate,  and 
judgment  to  be  obtained  thereon,  on 
which  the  lands  of  the  other  co-part- 
ners were  sold  to  such  confederate :  Hehl. 
that  those  sales  should  be  set  a.side  lus 
fraudulent,  and  void  on  behalf  of  one  to 
whom  the  owner  had  conveyed  the 
lands,  and  that  it  was  not  necessar}'  for 


the  complainant  to  show  that  he  had 
purchased  and  paid  a  valuable  consid- 
eration for  the  lands.  Reed  v.  Wessel, 
7  Mich.  139. 

M.  and  A.  formed  a  partnership  to 
set  up  a  flour  mill  in  W.  and  bought 
machinery  for  it,  but  abandoned  the 
project,  and  agreed  that  A.  should  take 
the  property  at  cost,  provided  he  used 
it  in  business  in  W.  He  gave  up  enter- 
ing into  business,  sold  the  property  and 
rendered  an  account,  accounting  for  a 
sale  of  an  engine  and  boiler  at  $4,000; 
whereas  he  had  sold  them  to  P.  to  re- 
sell and  divide  the  profits,  which  P.  did 
for  $5,250,  and  diwled  the  profits: 
Held,  that  A.  wa«  M.'s  trustee,  and 
must  account  for  the  profits  of  the  re- 
sale. Mathewson  v.  Allen,  10  R.  I. 
156. 

After  the  dissolution  of  a  finn,  one  of 
its  members  cannot  act  as  the  agent  of 
a  creditor  of  the  fiim,  in  holding  obli- 
gations due  the  firm,  as  collateral  se- 
cm-ity  for  a  note  due  from  the  firm -to 
such  creditor,  and  taking  a  conveyance 
of  land  in  settlement  of  such  an  obliga- 
tion; and,  in  such  a  case,  the  creditor, 
in  an  action  on  the  firm  note,  is  not 
bound  to  account  for  the  value  of  such 
land,  or  of  such  alleged  collaterals,  where 
it  appears  they  were  never  in  his  posses- 
sion, that  he  n'.^ver  authorized  such  al- 
leged agent  to  hold  them  for  him,  and 
never  received  any  payments  thereon, 
and  that  the  land  was  not  conveyed  to 
him,  but  to  such  alleged  agent.  Pray 
t'.  Morse,  41  Wis.  343. 

(/)  Blisset  r.  Daniel,  10  Ha.  493; 
Maddeford  r.  Austwick,  1  Sim.  89; 
Peiens  r.  Johnson,  3  Sm.  &  G.  419; 
Chandler  v.  Dorsett,  Finch,  431.  As  to 
withholding  information,  see  McLure  v. 
Ripley,  2  Mac.  &  G.  274. 

773 


*571  DUTY    TO    OBSERVE    GOOD    FAITH.  [bOOK  III. 

ISTotwitlistanding  the  universal  api)licatioii  to  partners  of  the 

^    ,       ,^       rule  reouirin":  the  most  perfect  f^ood  faith,  if  one  part- 
Each  mu-t  do  1  °  '^  ^  i.jMi 
his  duty.           ijgj.  reptuhates  the  contract  of  partnership  and  will  not 

perform  his  duty  towards  his  co-partners,  he  cannot  justly  com- 
plain if  they  in  return  decline  to  treat  him  on  a  footing  of  equality 
with  themselves,  {g)  As  observed  by  Lord  Eldon  in  Const  v. 
Harris:  "A  partner  who  complains  that  the  other  partners  do  not 
do  their  duty  towards  him,  must  be  ready  at  all  times  and  offer 
himself  to  do  his  duty  towards  them."  (A)  But  if  a  partner  has 
been  set  at  defiance  by  his  co-partners;  if  they  have  denied  that  he 
is  a  partner,  and  that  he  has  any  right  to  interfere  in  the  partner- 
ship, they  can  derive  no  advantage  from  the  circumstance  that  he 
has  not  performed  his  duty  to  them.  {€)  This  subject  will  be  fur- 
ther adverted  to  in  that  part  of  the  work  which  relates  to  the  de- 
fenses to  actions  between  partners. 

The  same  obligation  to  good  faith  which  exists  on   the  part  of 
Good  faith         evcry  member  of  an  ordinary  firm,  exists  also  on  the 

amongst  share-  "^    „  ,  „  -l     .    •      ^i  •     i    ii. 

holders.  part  of  every  member  oi  a  company;  but,  m  this  latter 

case,  the  obligation  of  each  member  towards  the  others  is  qualified 
by  the  comparatively  small  right  of  personal  intervention  in  the 
affairs  of  the  company  which  each  member  enjoys.  (Jc)  It  is  part 
of  tlie  contract  into  which  the  members  of  a  company  enter,  that 
the  management  of  its  concern  shall  be  confided  to  a  few  chosen 
individuals.  But  whilst  this  contract  limits  the  right  of  each 
member  of  the  company  to  interfere  in  the  conduct  of  its  afi['airs, 
and  limits  liis  obligation  to  exert  liimself  for  the  benefit  of  the 
company,  it,  if  possible,  increases  the  obligation  of  the  directors  to 

observe  good  faith  towards  the  great  body  of  shareholders, 
*571     to  attend  diligently  to  their  interests,  and  *to  act  within  the 

limits  of  the  authority  conferred  by  them.  Directors  are 
not  only  agents,  but  to  a  certain  extent  trustees.  The  duty  of  di- 
rectors to  shareholders  is  so  to  conduct  the  business  of 

Directors  .       n  /•/•.!         i 

trustees.  the  Company,  as  to  obtain  for  the  benefit  of  the  share- 

holders the  greatest  advantages  that  can  be  obtained  consistently 
with  the  trust  reposed  in  them  by  the  shareholders  and  with  hon- 
esty to  other  people.     Directors  should  remember  that  they  are  not 

ig)  See  McLvu-e  v.  Ripley,  2  Mac.  &  (A-)  As   to  voting    on    questions    on 

Ct.  274;  Reilly  v.  Walsh,  11   Jr.  Eq.  22.  which  interests  are  conflicting,  see  ante, 

(h)  Turn.  &  R.  524.  p.  548. 
(0  See  Dale  v.  HamUton,  2  Ph.  276. 

774 


CHAP.  II.]  DUTY    OF   DIRECTORS.  *572 

the  masters  but  the  servants  of  tlie  shareholders;  and  although  it  is 
true  that  the  directors  have  more  ])ower,  both  fur  good  and  for  evil, 
than  is  possessed  by  the  shareholders  individually,  still  tliat  power 
is  limited,  and  accompanied  by  a  trust,  and  is  to  be  exercised  land 
fide  for  the  purposes  for  which  it  was  given,  and  in  the  manner 
contemplated  by  those  who  gave  it.  (^) 

The  foregoing  general  principles  may  be  regarded  as  the  basis 
of  the  law  of  partnership,  so  far  as  it  relates  to  the  Principle  of 

'  y  ,  ,  pood  faith  the 

rifirhts  and  obliirations  of  partners  as  between  them-  ba-sisoftheiu- 

o  ^  ^  1  Ml  tcrnal  luw  of 

selves,  and  they  will  be  found  to  be  more  or  less  illus-  partnership, 
trated  throughout  the  whole  of  the  present  book.  Those  cases, 
however,  which  more  especially  relate  to  the  obligation  of  partners 
and  directors  not  to  benefit  themselves  at^the  expense  of  their  co- 
partners and  co-shareholders,  to  the  extent  to  which  promoters  of 
companies  and  directors  are  trustees,  and  to  the  duties  of  majori- 
ties, require  to  be  specially  noticed. 


SECTION  IT.— OF  THE  OBLIGATION  OF  PARTNERS,  PROMOTERS,  AND 
DIRECTORS  NOT  TO  BENEFIT  THEMSELVES  AT  THE  EXPENSE 
OF  THEIR  CO-PARTNERS  AND  SHAREHOLDERS. 

1.   As  regards  partners. 

Good  faith  requires  that  a  partner  shall  never  obtain  a  private 
advantai^e  at  the  expense  of  the  firm.     He  is  bound  in   No  partner 

°  ,   .  1      1   •      1  allowed  to 

all  transactions  anectinj;  the  partnerslnp,  to  do  his  best  benem  himself 

"  '  .   ,     ,  .  at  the  expense 

for  the  common  body,  and  to  share  with  his  co-part-  ofthenrm. 
ners  any  benefit  which  he  may  have  been  able  to  obtain  from  other 
peo])lc,  and  in  which  the  firm  is  in  honor  and  conscience  en- 
titled to  ^participate;'  /Se//ij)ef  enh/i  non  id  quod privatim     *572 
interest  ruiius  ex  sociis   servarl  sold,  sed  quod  socittatl 
expedit.  {in) 

(?)  See  infra,  section  3  of  this  chap-  398;  Tvowry  r.   Cobb,  9  La.  Ann.  592; 

tcr.  Stouy:hton  r.    Lynch,  1   John.  Ch.  467; 

(m.)  Dig.  xvii.  tit.  2,  pro  socio,  I.  65,  S.   C.   2  Id.   209;   Herrick  r.  Ames,   8 

§5.  Bosw.  llo;    Eason   r.  Cheiry,  6  Jones 

'See  Todd  p.   Rafferty,  30  N.  J.  Eq.  Eq.   261;  Lane  v.   Carpentor.   30  Ind. 

254;  Gray  v.  Porthmd   Bank,  3  Mass.  284;    Scruggs  r.  Russell,  McCahon,  39; 

364;   Lockwood  v.   Beckwith,  6  Mich.  Bart's  Appeal,  70  Penn.  St.  301;  Cour- 

168;   Anderson  v.   Whitlock,   2  Bush.  sen's  Appeal,  79   Id.   220;  Solomon  r. 

775 


^•0  ( :i 


DUTY    TO    OBSERVE    GOOD    FAITIL 


[book  III. 


There  are  two  modes  in  which,  more  especially,  partners  attempt 
unfairly  to  acquire  gain  at  the  expense  of  their  co-partners,  viz.,  1, 
by  directly  making  a  profit  out  of  them;  and  2,  by  approjjriating 
to  themselves  benefits  which  they  ouglit  to  have  acquired,  if  at  all, 


Solomon,  2  Ga.  18,  and  the  cases  cited 
below. 

Where  there  has  been  an  actual  breach , 
of  the  articles  of  co-partnership  by  one 
partner,  the  act  may  sometimes  be  af- 
firmed by  the  innocent  partners  who 
may  demand  an  accounting  and  a  share 
in  whatever  benefits  the  partner  break- 
ing the  articles,  may  have  derived  from 
their  violation.  See  Moritz  v.  Phelps, 
4  E.  D.  Smith,  135. 

It  is  a  general  rule  of  partnership 
that  the  partners  shall  devote  their  tune, 
labor  and  skill  to  the  benefit  of  the  firm 
and  not  to  themselves,  and  that  such 
partners  cannot  purchase  for  their  own 
use  articles  in  which  the  firm  necessarily 
deals,  and  if  they  do  so,  they  do  it  at 
the  risk  of  having  the  same,  and  the 
profits  arising  therefrom,  claimed  by 
the  firm,  as  belonging  to  them.  Amer- 
ican Bank  Note  Co.  v.  Edson,  56  Barb. 
84;  S.  C.  1  Lans.  388. 

One  partner  will  not  be  allowed  to 
stipulate,  clandestinely,  for  a  private 
advantage  or  benefit  to  himself,  to  the 
exclusion  of  his  partners,  in  matters  in 
which  he  has  been  dealing  on  behalf  of 
the  firm.  And  though  the  articles  al- 
low a  dissolution  at  the  will  of  either 
partner,  yet  a  partner  will  not  be 
allowed,  in  equity,  to  dissolve  the  firm 
for  the  purpose  of  securing  to  himself  an 
advantage  which  he  has  gained  in  such 
dealing;  but  the  other  partners  may  en- 
force a  right  to  participate  in  the  bene- 
fit on  contributing  to  the  expense.  Mc- 
Mahon  v.  McCleman,  10  W.  Va.  419. 

The  plaintiff  and  defendant,  being 
part  o^\niers  of  a  vessel,  of  which  the 
defendant,  was  master,  and  being  jointly 
concerned  in  a  whaling  voyage  under- 
taken by  such  vessel,  the  defendant,  in 
the  course  of  the  voyage,  landed  some 
776 


prisoners  from  a  privateer,  and  also 
saved  some  articles  from  a  wreck,  for 
each  of  which  services  he  received  a 
compensation.  On  his  return  he  settled 
up  the  voyage,  but  vdthout  rendering 
any  account  of  these  two  items  of  com- 
pensation: Held,  that  the  plaintiff 
recover  her  proportion  of  the  same 
in  assinnpsit.  Fanning  v.  Chadwick,  3 
Pick.  420. 

If  two  persons  agree  to  divide  the 
profits  of  a  certain  transaction,  it  is 
fraud  for  one  to  receive  any  com- 
missions thereon  from  thii'd  parties, 
apart  from  joint  profits.  Dunlop  v. 
Richards,  2  E.  D.  Smith,  181. 

Evidence  that  the  defendant  made 
$2,100  during  six  months  that  he  kept 
a  boarding-house  alone,  and  that  the 
expenses  were  less  and  the  receipts  more 
than  when  it  was  kept  by  the  i^laintift' 
and  himself  together,  was  held  not  to 
be  admissible  to  prove  that  the  plamtiif 
was  guilty  of  a  fraud  in  returning  a 
less  sum  as  the  profits  for  six  months  in 
which  it  was  kept  by  them  together. 
Thayer  v.  Barney,  12  Mmn.  502, 

One  of  two  partners  is  not  entitled  to 
share  in  the  fees  received  by  the  other  as 
administrator,  merely  because  that  other 
is  shown  to  have  intended  to  share  such 
fees  with  him.  King  v.  Whiton,  15 
Wis.  684. 

Where  a  partnership  was  formed  by 
two  individuals  for  the  purpose  of  cut- 
ting and  conveying  to  market  pine  tim- 
ber, and  all  the  pine  tunber  upon  cer- 
tain lots  of  land  was  purchased,  in  the 
name  of  one  member  of  the  finn,  for  the 
benefit  of  the  finn,  and  paid  for  from 
the  property  of  the  firm,  and  the  con- 
tract contained  a  provision  ttiat  the  tim- 
ber should  be  cut  and  taken  from  the 
land  by  a  time  specified,  which  was  not 


CHAP. 


II.] 


DUTY    OF    UIRFCTORS. 


for  the  common  advaiita^^c  of  tlicmsclves  and  otlicrs.     It  will  be 
convenient  to  advert  to  each  of  these  modes  in  turn. 

In  the  first  place,  then,  it  may  be  laid  down  as  a  general  rule, 
that  one  partner  is  not  allowed  to  derive  profit  at  the  ,  ^   .  . 

'  1  1.  Deriving 

expense  of  the  firm  from  any  dealing's  between  him   i?''"''' ""''■"..u 

'  •'  <^  (leunntfs  with 

and  the  partnership,  unless  it  is  clearly  agreed  that  he  ti^eiirui. 
is  to  have  such  profit.     For  example,  if  a  partner  is 
buying  or  selling  for  a  firm,  he  cannot  sell  to  it  or  buy 
from  it  at  a  profit  to  himself.^ 


Sale  to  firm. 


done,  but  the  owner  of  th^  land  did  not 
insist  upon  any  forfeiture,  but  subse- 
quently convo3'od  the  land,  for  the  mere 
price  of  the  land  exclusive  of  the  timber, 
to  the  member  of  the  finn  with  whom 
the  orig-inal  contract  was  made:  Held, 
that  the  timber  remainmg  upon  the  land 
still  continued  the  property  of  the  firm, 
and  that  the  avails  of  timber  subse- 
quently cut  upon  the  land  by  the  one 
who  made  the  purchase,  exclusive  of  ex- 
penses, must  be  accounted  for  by  him  as 
finn  assets.  Washburn  v.  Washburn, 
23  Vt.  577. 

A  and  B  entered  into  a  wi-itten  part- 
nership agreement  concerning  a  herd 
of  cattle  furnished  by  A,  and  to  be  cared 
for  by  B.  A  also  advanced  money  for 
further  investment  in  the  enterprise,  a 
portion  only  of  which  B  used  for  that 
pui-pose.  A  told  B  to  invest  the  re- 
mainder in  "  something  that  would  pay, 
and  not  let  it  be  idle."  B  afterwards 
rented  land  in  his  own  name,  raising 
crops  of  wheat  and  barley,  upon  which 
a  judgment  creditor  of  B  levied.  A 
brought  an  action  to  enjoin  a  sale  under 
the  levy,  setting  forth  his  partnership 
with  B  in  the  cattle  venture,  and 
claimed  that  the  crops  levied  on  were 
part  of  the  assets  raised  for  and  on  ac- 
count of  the  partnership:  IlchI,  that 
the  partnership  did  not  extend  to  the 
crops  raised  by  B.  Brown  v.  O'Brien, 
4  Neb.  195. 

One  of  three  partners  who  declines  to 
pay  over  a  sum  claimed  by  each  of  his 
other  partners,  cannot  relieve  himself 


fi-oni  the  payment  of  interest  thereon 
pending  the  adjustment  of  the  claim, if 
it  appears  that  he  has  meanwhile  used 
the  money  for  his  own  ptu'poses.  Cod- 
dington  v.  Idell,  30  N.  J.  Eq.  540. 

Where  a  firm  whose  business  was  "a 
general  produce  business,"  owned  a 
mortgage  on  real  estate,  which  real  es- 
tate itself  the  firm  desired  to  purchase 
under  the  mortgage,  and  intrusted  the 
subject  generally  to  one  of  the  finn: 
Held,  that  the  legal  obligation  of  the 
pai-tner  intrusted  being  only  to  get  pay- 
ment of  the  mortgage,  he  miglit  make 
an  arrangement  for  his  own  benefit  for  a 
third  person,  without  the  knowledge  of 
his  partners,  by  which  such  third  per- 
son should  buy  the  mortgaged  estate, 
giving  him,  the  intrusted  partner,  an 
interest  in  it;  and  if  the  mortgage  debt 
was  fully  paid  by  such  partner  into  th«. 
firm  account,  that  there  was  no  breach 
of  partnership  or  other  fiduciary  relation 
in  the  transaction;  or  at  least,  thdt  no 
partner  could  recover  fi-om  him  a  share 
of  profits  made  by  a  sale  of  the  real  es- 
tate; all  pai-ties  alike  having  been  orig- 
inally engaged  in  a  scheme  to  get  the 
real  estate  by  depreciating  its  value 
through  a  process  of  entering  judgment 
for  a  large  nominal  amount  and  by  de- 
ceiving or  "  bluffing  oft'"  of  her  cred- 
itors.    Wheeler  r.  Sage.  1  Wall.  518. 

'See,  generally,  Ewell's  Evans  on 
Agency,  Chap.  III. 

Although  one  partner  may  sell  the 
property  of  the  finn  and  give  a  good  ti- 
tle to  a  third  party,  he  cannot  sell  to 

777 


*572 


DUTY   TO    OUSEKVE   GOOD    FAITH. 


[book  III. 


In  Bentleyv.  Craven  (/i),  one  of  the  several  partners  was  employed 
„    ,,       ^       to  purchase  goods  for  the  firm.     He,  unlaiown  to  his 

Bentley  v.  Cra-  '  =>  i  •  •  i 

^'®°-  co-partners,  supplied  them,  at  the  market  price,  with 

•'•oods  previously  bought  by  himself  when  the  ])rice  was  lower,  and 
he  so  made  a  considerable  profit.  But  it  was  held  that  the  trans- 
action could  not  be  sustained,  and  that  he  was  accountable  to  the 
firm  for  the  profit  thus  made.     The  Master  of  the  liolls  in  deliver- 


himself.  Such  a  sale  is  simply  void; 
no  riglit  or  interest  passes;  the  legal 
and  equitable  title  remains  as  it  was 
before  the  attempted  transfer.  Corn- 
stock  V.  Buchanan,  57  Barb.  127;  Nel- 
son V.  Hayner,  66  111.  487. 

Thus,  where  stock  belonging  to  a  co- 
partnership was  sun-endered  by  one  of 
the  partners,  without  the  knowledge  or 
consent  of  his  partner,  to  the  company, 
he  representmg  to  the  secretary  that  he 
had  authority  from  and  the  consent  of 
his  partner  to  do  so,  and  procured  new 
scrip  to  be  issued  to  him  in  his  own 
name,  in  lieu  thereof:  Held,  that  the 
transfer  was  fraudulent  and  void.  Corn- 
stock  V.  Buchanan,  supra. 

A  surviving  partner,  until  the  part- 
nership affairs  are  closed,  occupies  a 
trust  position  as  to  the  estate  of  his  de- 
ceased partner,  and  a  purchase  by  him 
from  the  administrator,  of  the  deceased 
partner's  interest  in  the  firm,  is  subject 
to  the  liability  of  being  set  aside  at  the 
suit  of  the  heirs-at-law,  and  such  pur- 
chase cannot  be  set  up  as  a  bar  to  a  bill 
brought  for  an  accounting  of  the  part- 
nership assets  and  business.  KimbaU  v. 
Lincoln,  5  Bradw.  (lU.)  816. 

If  a  member  of  a  partnership  enters 
into  a  transaction  in  his  own  behalf, 
which  is  within  the  scope  of  the  part- 
nership business,  his  co-partner  may 
claim  the  benefits  resulting  from  it;  this 
right  however  belongs  to  the  partner 
alone;  third  parties  cannot  avail  them- 
selves of  it,  when  no  such  claim  has 
been  asserted,  to  fix  a  liability  on  the 


partnership.     Lockwood  v.  Beckwith,  6 
Mich.  168. 

Where    a  bill    is  filed  by  a  partner 
against  his   co-partner   for  an   account, 
and  one  of  the  partners  is  appointed 
receiver,  and  uses  the  money  received  as 
such  by  him,  on  which  he  makes  a  prof- 
it, the  other  partner  is  not  entitled  to  a 
share  of  such  profits,    the  money  not 
being  held  as  partner,  but  as  receiver. 
Whitesides  v.  Lafferty,  3  Humph.  150. 
Where  a  partner  fraudulently,    with- 
out the  consent  of  his  co-partners,  ap- 
plies the  partnership  funds  to  his  private 
purposes  and  profit,  or  invests  the  same 
in  his  own  name,  and  for  his  own  use, 
his  co-partners  may,   if  they  can  dis- 
tinctly trace  the  investment,  follow  it, 
and  treat  it  as  trust  property,  held  for 
the  benefit  of  the  firm  by  the  partner, 
or  by  any  person  in  whose  hands  it  may 
be,  except  a  bond  fide  purchaser  without 
notice.     Kelley  v.   Greenleaf,   3  Story, 
93;  Croughton  v.  Forrest,  17  Miss.  131. 
Profits  made  by  a  partner  in  the  pur- 
chase and  sale  of  merchandise,  in  which 
his  co-partners  are  entitled  to  share, 
give  them  no  privilege.     Shropshire  v. 
Russell,  2  La.  Ann.  961. 

So,  where,  after  the  death  of  a  part- 
ner, the  survivors,  one  of  whom  was  the 
executor  of  the  will  of  the  deceased 
partner,  fonned  themselves  into  a  new 
firm,  and  purchased  from  themselves  the 
whole  of  the  mterest  of  the  deceased  at 
10  per  cent,  below  its  appraised  value, 
to  be  paid  for  in  four  equal  installments, 
in  six,  twelve,  eighteen  and  twenty-four 


778 


(?i)  18  Beav.  75. 


CHAP.  II.]  DUTY    OF   DIliECTORS.  *573 

ing  judgment,  observed:  ''The  case  is  this, — Four  partners  estab- 
lisli  a  partnership  for  refining  sugar,  one  of  them  is  a  wholesale 
grocer,  and  from  liis  business  is  peculiarly  cognizant  with  tiie  vari- 
ations in  the  sugar-market,  and  has  great  skill  in  buying  sugar  at 
a  right  and  proper  time  for  the  business.  Accordingly  the  busi- 
ness of  selecting  and  purchasing  the  sugar  for  the  sugar  refinery  is 
entrusted  to  him.  lie  being  the  person  to  buy,  it  is  his  duty  and 
business  to  employ  his  skill  in  buying  for  the  sugar  refinery  at  the 
time  he  thinks  most  beneficial.  Having  according  to  his  skill  and 
knowledge  bought  sugar  at  a  time  wlien  he  thought  it  likely  to 
rise,  and  it  having  risen,  and  the  firm  being  in  want  of  some,  he 
sells  his  own  sugars  to  the  firm  without  letting  the  i^artners 
know  that  it  was  his  sugar  that  was  sold."  Being  the  agent  for 
the  firm  for  buying  sugars,  lie  sold  his  own  sugars  to  the 
*firm  and  made  a  ])rofit,  and  the  firm  was  held  entitled  to  *573 
that  profit  acconlingly. 

In  Dunne  v.  English  {o\  the   plaintiff  and   the   defendant  l»ad 
asrreed  to  buy  a  mine  for  50,000^.,  with  a  view  to  re-sell  „     ,      , 

ts  J  '  Purcliasc  from 

it  at  a  profit.     It  was  ultimately  arranged  that  the  de-   '^""• 
fendant  should  sell  it  to  certain  persons  for  00,OOOZ.,  and  that  the 
profit  of  10,00uZ.   should  be  equally  divided  between  pynne  f  fh- 
the  plaintiff  and  the  defendant.     The  defendant,  how-  e"'^''- 
ever,  in  fact  sold  the  mine  for  much  more  than  60,000?.,  to  a  com- 
pany in  which  he  himself  had  a  large  interest.     The  plaintiff  was 
held  entitled  to  one-half  of  the  whole  profit  made  by  the  re-sale. 

There  was  in  this  case  some  evidence  that  the  plaintiff"  knew  that 
the  detcndant  had  some  interest  in  the  purchase  be-  pu„  jij^eios- 
yond  his  share  of  the  known  profit  of  10,000?.;  but  the  ures  neces.sary. 
plaintiff' did  not  know  what  that  interest  was,  and  the  real  truth 
was  concealed  from  him.  It  was  held  that  the  defendant  being  the 
plaintiff" 's  partner,  and  expressly  entrusted  with  the  conduct  of 
the  sale,  was  bound  fully  to  disclose  the  real  facts  to  the  plaintiff, 

months,  without  interest  or  security,  the  that  he  was  not  b'able  to  account  for 

sale  was  hold  void.    'Nelson  v.  Hayner,  profits  received  by  him  aspaitner  in  the 

66  111.  487.  l>urohiising  firm,    although    said    firm 

A   member    of   one    firm    sold    coal  took  the  coal  to  fill  contracts  for  delivery 

thereof  to  another  firm  of  which  he  was  at  a  larger  price  than  they  piiid   for  it. 

a  member,  with  notice   to   his  partner,  Frock  r.  Hlackiston,  (>j  Pa.  St.  474. 
and  at  the  full  market  value:    Udd,  (o)  18  Eq.  524. 

770 


*5T4  DUTY    TO    OBSKRVE    GOOD    FAITJI.  [liOOK  III. 

and  not  liaviuu'  done  so,  could  not  exclude  lihn  from  liis  share  of 
\]ie  profits  which  the  defendant  realized  hy  tlie  sale,     {p) 

This  case  also  shows,  what  indeed  is  obvious  enough  without  an- 
Auiiiorityto       thoritv,  tluit  ouc  partner  who  authorizes  another  to  sell 

st'H  at  a^'iven  "     .  ,  ,  .  -  , 

price  no  waiver  partnership  propert\^  at  a  given  price,  does  not  there- 
liigiier  price,  bv  deprive  liiniself  of  liis  riglit  to  sliare  a  liigher  price 
if  a  liigher  price  should  be  realized,  (q) 

The  same  principles   apply    to   attempts  made   by  partners  to 
2.  obtainiiiR       sccure   for   tliemselves    which   it    is  their  duty  to  ob- 

benefits  which  .        ,  „  1 1     ^         i        j_>  i  •    i      i 

in  lit inor  belong  tain,  II  at  all,  lor  the  nrm   or  company  to  which  thev 

to  the  firm  or        .     .  ■,      ^    ^ 

company.  belonged,  {r) 

Thus  in  Carter  v.  Home  (s),  the  plaintiff  and  the  defendant 
Carter  t;  Home  agreed  for  the  purchase  of  an  estate  in  moieties  between 
them.  The  estate  was  subject  to  several  incumbrances, 
*574  which  were  to  *be  discharged  out  of  the  purchase  money. 
The  defendant  had  abatements  made  to  him  by  some  of  the 
incumbrancers  of  several  sums  due  for  interest  and  otherwise, 
which  they  in  consideration  of  services  and  friendship  agreed 
should  be  to  his  own  use.  However,  on  a  bill  brought  against  him 
by  his  co-purchaser  for  an  account  of  the  rents  and  profits,  the 
Court  would  not  allow  the  defendant  the  exclusive  benefit  of  these 
abatements,  but  held  that  he  must  account  for  them  ;  the  pur- 
chase being  made  for  the  equal  benefit  of  both  parties,  and  on  a 
mutual  trust  between  them. 

It  has  been  decided  more  than  once,  that  if  one  partner  obtains 
in  his  own  name,  either  during  the  i^artnership  or  be- 

Eenewing  o  x  i 

leases.  fQ^g  fts  asscts  have  been  sold,  a  renewal  of  a  lease  of 

the  partnership  property,  he  will  not  be  allowed  to  treat  this  re- 
new^ed  lease  as  his  own  and  as  one  in  which  his  co-partners  have 
^,     ,   ,.  no  interest.'     This  was  laid  down  and  acted  on  by  Sir 

Clandestine  ^  -^ 

renewal.  Wm.  Grant  in  the  celebrated  case  of  Featherstonhaugh 

{p)  See,  also,  Imp.  Merc.  Credit  As-  the  right  of  a  principal  to  profits  made 

soc.  V.  Coleman,  L.  R.  6  H.  L.  189.  by  his  agent. 

(g)  See,   also,   Parker  v.  McKenna,  'See  Anderson  f>-   Lemon,   4  Sandf.- 

10  Ch.  96.  552;  S.  C.   8  N.  Y.  236;  Struthers  r. 

(r)  Parker  v.  Hills,  5  Jur.  N.  S.  809,  Pearce,  51  N.  Y.  357;  Mitchell «;.  Read, 

is  not  opposed  to  these  cases,  for  there  61   Barb.   310;  S.   C.    61    N.  Y.    123; 

the  money  was  paid  for  a  lease  which  Mitchell  v.  Read,  19  Hun,  418. 

was  held  to  belong  to  one  partner  only.  The  fact  that  the  landlord  woulil  not 

(s)  1  Eq.  Ab.  7.     See,  also,  Morison  have  granted  the  now  lease  to  the  other 

V.  Thompson,  L.  R.  9  Q.  B.  480,  as  to  partners  or  to  the  firm,  is  immaterial. 

780 


CIIAIV 


II.] 


BENEFIT    OBTAINKT)    HELONGS    TO    THE    FIRM. 


74 


V.  Feinvick  (t),  'svliere  two  ])artncrs  liavinf^  ol)t!iiiie<l  in    their   own 
names  a  renewal  of  tlie  lease  of  tlic  partnersliip  prenii-  Feathcrston- 
ses,  immediately  dissolved  the  partnersliip,  and  sought  wick, 
to  exclude  the  plaintiff,  tlieir  co-])artner,  from  all  interest  in  the 


Mitchell  V.  Reed,  Gl  N.  Y.  123. 

A  purchase  by  one  partner  of  prop- 
erty hired  by  the  partnership,  inures  to 
the  benefit  of  all.  on  payment  of  their 
shares  of  the  purcluuse-monoy.  Laffan 
r.  Naglee,  9  Cal.  662. 

Thus,  where  a  co-partnership  occu- 
pies real  ostiite  under  a  lease  for  years, 
and  one  partner,  secretly,  while  the 
other  partner,  with  !iis  concurrence,  is 
negotiating  to  buy  it  for  the  firm,  pur- 
chases it  for  himself,  he  will  be  decreed 
to  hold  it  in  trust  for  the  firm.  Ander- 
son V.  Lemon,  8  N.  Y.  236. 

If  a  partner  tak'3  a  lease  of  lands  in 
his  own  name  for  the  purposes  of  the 
partnership,  he  will  be  considered  in 
equity  a  trustee  of  such  lease  for  him- 
self and  his  co-parUiers.  But  in  Otis  v. 
Sill  (8  Barb.  102),  where  a  lease  was  ta- 
ken by  one  member  of  a  firm  in  his 
own  name,  there  being  no  evidence 
that  it  was  taken  for  the  firm  and  with 
express  reference  to  its  business,  be- 
yond the  fact  that  the  partnership  com- 
menced at  the  date  of  the  lease,  and 
was  carried  on  upon  the  demised  prem- 
ises, it  was  held  that  the  lease  did  not 
belong  to  the  finn,  and  it  was  also  held 
that  parol  evidence  was  inadmissible  to 
show  that  the  lease  was  e.Kccuted  for 
the  benefit  of  the  firm,  for  the  reason 
that  by  such  evidence  it  was  sought  to 
create  a  trust  in  real  estate  by  parol 
which  was  prohiljitod  by  statute. 
Chamberlain  r.  Cluimb.'rlain,  44  N.  Y. 
Sup'r  Ct.  (12  .Tones  A:  Sp.)  116. 

Where  one  partner  during  the  part- 
nership, negotiates  respecting  and  ob- 


tains the  exclusive  use  of  a  right  in 
which  the  firm  was  mterested,  he  will 
be  declared  to  hold  such  use  in  trust  for 
the  firm.  Weston  v.  Ketcham,  39  N.  Y. 
Superor  Ct.  54. 

A  member  of  a  partnership  purcha-sed 
from  one  of  its  employes  the  patent 
right  in  an  article  of  use  and  value  in 
the  firm  business,  and  without  disclos- 
ing or  being  asked  to  disclose  the  terms 
upon  which  he  had  purchased,  offered 
to  sell  it,  at  an  advance,  to  the  fian ; 
the  firm  declined  to  buy,  preferring  to 
pay  a  royalty  for  the  use  of  the  articlt^. 
which  it  did:  Held,  that  the  rights,  if 
any,  which  the  firm  originally  had  to 
claim  the  purchase  as  for  its  benefit, 
could  not  be  insisted  on  after  its  disso- 
lution. American  Bank  Note  Co.  r. 
Edson,  56  Barb.  84;  1  Lana.  3S8. 

Where  one  partner  expends  the  part- 
nership funds  in  the'  purchase  of  prop- 
erty in  his  own  name,  he  will  hold  the 
same  in  trust  for  the  partnci-ship.  Ev- 
ans V.  Gibson,  29  Mo.  223;  Smith  v. 
Ramsey,  1  Gilm.  373;  Coder  r.  Huling, 
27  Pa.  St.  84;  Catron  v.  Shepherd,  8 
Neb.  308:  Phillips  v.  Cranmiond,  2 
Wash.  C.  C.  441. 

The  rule  is  the  same,  even  though 
the  purchasing  partner  takes  the  title 
in  the  name  of  his  wife.  Partridge  v. 
Wells,  .30  N.  J.  Eq.  176. 

C.  and  S.  were  in  partnership  in  the 
business  of  fatUming  cattle,  C.  conduct- 
ing the  sales  and  receiving  the  money. 
About  the  sixth  of  Apiil,  187-"),  C.  hav- 
ing a  considerable  amount  of  partm^r- 
ship  funds  in  his  hands  and  being  about 


{t)  Featherstonhaugh  v.  Fenwick,  17 
Ves.  298.  If  one  partner  contracts  for 
a  renewal  in  his  own  name,  the  others 
have  no  equity  to  restrain  the  landlord 


from  granting  the  lease  to  the  one 
pai-tner  only.  Their  remedy  is  to  make 
the  lessee  a  trustee  for  the  firm.  Alder  r. 
Fouracre,  3  Swanst.  489. 

781 


*5r4 


DUTV    TO    0BSP:RVE    (lOOD    FAITH. 


[book  III. 


new  lease.  The  unfair,  clandestine  conduct  of  the  defendants,  did 
not,  however,  avail  them;  for  in  taking  the  accounts  of  the  part- 
nership, the  new  lease  was  treated  as  part  of  the  assets  of  the  firm. 
Clegg  V.  Fishwick  (u)  is  another  case  to  the  same  effect.  There 
cieggr.  Fish-  the  plaintiff  was  the  administratrix  of  one  of  several 
^'^'^^^'  partners  in  a  coal  mine,  and  she  filed  a  bill,  some  years 

after  the  death  of  the  deceased,  against  the  surviving  partners, 
for  an  account  and  a  dissolution,  and  for  a  declaration  that 
a  renewed    lease,  which  had    been    obtained    by  the    defendants, 


to  sell  all  the  stock  owned  by  the  part- 
nership, purchased  a  claim  against  S. 
for  about  twenty-five  cents  on  the  dollar, 
and  in  his  settlement  with  S.  sought  to 
apply  it  against  the  amount  of  partner- 
ship funds  in  his  hands  due  S.  at  its 
face  value.  In  an  action  on  the  claim, 
held,  that  C.  could  recover  no  more 
than  he  paid  for  the  claim.  Catron  v. 
Shepherd,  supra. 

A  partner  may,  however,  purchase  with 
his  own  funds,  and  outside  of  the  part- 
nership business,  a  judgment  or  other 
evidence  of  indebtedness  against  his  co- 
partner, and  enforce  its  collection  by  a 
levy  upon,  and  sale  of,  the  mterest  of 
the  other  in  the  firm  assets.  McKenzie 
v.  Dickinson,  43  Cal.  119. 

In  order  to  raise  an  implied  trust  in 
favor  of  the  partnership  by  a  joint  pur- 
chase of  real  property,  the  purchase 
must  have  been  made  at  the  time  with 
partnership  funds,  or  on  partnership  re- 
sponsibility. The  payment,  incident- 
ally, out  of  those  funds,  of  an  instal- 
ment due  upon  an  antecedent  contract 
on  individual  responsibility,  does  not 
raise  such  a  trust,  or  give  title  to  any- 
thing but  reimbursement.  Wheatly  r. 
Calhoun,  12  Leigh,  264. 

On  a  sale  of  partnership  land,  under 
an  execution  against  the  firm,  one  part- 
ner cannot,  by  purchasing  at  such  sale, 
extinguish  the  title  of  the  other  partner. 
Farmer  v.   Samuel,   4  Litt.    187.     See, 


however  Baird  v.  Baird,  1  Dev.  «fc  B. 
Eq.  524. 

A  and  B  being  partners.  A,  under  a 
power  of  attorney  from  B,  executed  a 
bond  for  a  partnership  debt,  with  war- 
rant of  attorney  to  confess  judgment. 
B  afterwards  sold  land  bound  by  the 
judgment,  and,  upon  a  subsequent  dis- 
solution of  the  partnership,  funds  were 
deposited  in  the  hands  of  A,  for  pay- 
ment of  the  partnership  debts,  and  es- 
pecially of  the  bond  aforesaid.  Judg- 
ment was  subsequently  entered  upon 
the  bond,  and  the  land  sold  by  B  hav- 
ing been  sold  upon  an  execution  upon 
the  judgment,  A  became  the  purchaser: 
Held,  that  his  purchase  must  be  pre- 
sumed to  have  been  made  with  the  part- 
nership funds,  and  that  it  would  inure 
to  the  benefit  of  B's  grantee.  Swift  i\ 
Dean,  6  Johns.  522. 

Where  one  partner  buys  in  a  para- 
mount or  outstanding  title  to  lands  of 
the  partnership,  the  rule  is  that  he  buys 
in  behalf  of  all;  and  the  others,  on  con- 
tributing to  the  cost,  are  entitled  to  the 
benefit  of  the  purchase.  This  rule  ap- 
plies in  favor  of  heirs  of  a  deceased 
partner.  Forrer  v.  Forrer,  29  Gratt.  134. 

A  and  B,  owning  land  in  partnership, 
agreed  to  purchase  an  outstanding  ti- 
tle; A  purchased  and  paid  for  it,  and 
took  the  conveyance  to  himself;  B.  hav- 
ing then  done,  or  advanced  for  the  firm, 
more  than  his  share,  refusing  to  pay 


(m)  1  Mac.  &  G.  294. 
Beav.  333. 

782 


See,  too,  Clements  v.  Hall,   2  DeG.  &    J.    173,   and  24 


CHAP.  II.]  BKNKFIT    OBTAINED    BKLONCiS    TO    THE    FIRM.  ""OH) 

might  be  declared  subject  in  equity  to  a  trust  for  tlie  benefit  of 
the  partnersliip.  A  twofold  defense  was  set  up,  viz.,  Hr.-t,  that  the 
old  partnershij)  ended  with  the  old  lease,  and  that  the  plaintilf 
*could  not  therefore  claim  any  interest  in  the  new  lease;  *575 
and  secondly,  that  she  had  some  time  before  the  filing  of 
the  bill  assigned  all  the  share  of  the  deceased  to  his  children;  and 
that  she,  therefore,  at  any  rate,  had  no  right  to  institute  proceed- 
ings respecting  such  share.  It  was,  however,  held  by  the  Lord 
Chancellor,  first,  that  the  old  lease  was  the  foundation  for  the  new 
one,  and  that  parties  interested  jointly  with  others  in  a  lease,  could 
not  take  the  benefit  of  a  renewal  to  the  exclusion  of  those  others; 
and  secondly,  that  what  had  been  assigned  by  the  plaintiff  was  the 
share  of  the  deceased  in  the  partnership,  but  that  such  share  had 
never  been  ascertained;  that  the  plaintiff,  as  administratrix,  was  the 
only  person  entitled  to  have  the  necessary  accounts  taken  in  order 
to  ascertain  it;  that  it  was  not  only  her  right,  but  her  duty  to  have 
the  estate  of  the  deceased  realized;  and  that  the  effect  of  the  assign- 
ment was  merely  to  constitute  her  a  trustee  of  the  share  for  the 
assignees  after  she  had  got  it  in,  and  not  in  any  way  to  deprive 
lier  of  her  power  to  call  for  a  realization  of  the  partnership 
property. 

In  both  of  these  cases  the  renewal  of  the  lease  was  clandestine. 
But  that   is   not   an   essential   feature.     In  the   more  ^^^^  renewal. 
recent  and  very  important  case  of  Clegg  v.  Edraond- 
son  (x),    the  partnership   was   at  will;  the  managing  ciecgv. 
partners  gave  notice  of  dissolution,  and  of  tlieir  inten- 
tion to  renew  the  old  lease  for  their  own  benefit.     They  afterwards 
did  so,  the  other  partners  protesting,  and  there  was  evidence  to 
show  that  the  landlord  objected  to  renew  to  any  persons  except  the 

anything:     Held,   that  the  title  taken  the  creditors  their  claims,  together  with 

by  A  was  taken   for  the   partnership;  their  rights  to  certain  pledged  assets  of 

and  that  B's  refusal  to  pay  a  part  of  the  finn:     Held,  that  the  purchase  did 

the   piu-chase-nioney    did    not  deprive  inure  tx)  the  benefit  of  the  finn,   luul 

him  of  the  right  of  having  the  benefit  that  the  transaction  did  not  come  with- 

of  the  purchase,  nor  was  it  evidence  of  in  the  operation  of  the  general  rule  of 

a  dissolution  of  the  partnership.     Eakin  equity,  that  a  trustee  ciuinot  buy  trust 

r.  Shumaker,  12  Tex.  51.  property  for  himself,  or  act  as  agent  in 

A  member  of  an  insolvent  firm,  while  buying  it  for  another  person.     "\\  estcott 

acting  as  agent  for  the  creditors,  in  the  v.  Tyson,  38  Pa.  St.  Obi*, 

settlement  of  the  partnership  affairs,  (x)  8  DeG.  Mo.  &  G.  787. 
assisted  another  party  to  purchase  from 

783 


*576  DKTY    TO    OESEUVE    GOOD    FAITH.  [boOK  III. 

managing  partners,  (y)  It  was  held,  however,  that  it  was  not 
competent  for  the  managing  partners  thus  to  acquire  I'or  tliemselves 
alone  the  benefit  of  the  renewed  lease,  {s) 

The  principle,  however,  which  precludes  a  partner  from  re- 
taining for  himself  benefits  which  he  ought  to  share  with  his  co- 
partners, is  applied  to  cases  in  whicl)  unfairness  and  misconduct 
Bnefitsde-  ^^"^  ^J  ^^  mcaus  SO  apparent  as  in  those  just 

rived  iromn«e  ^t-g^G     cited.      *A  high  standard  of  honor  requires  that 

01   5*3.1 1  HCl  snip  •—  J- 

property.  no  partner  shall  derive  any  exclusive  advantage 

by  the  employment  of  the  partnership  property,  or  by  engaging  in 

transactions  in  rivalry  with  tlte  firm. 

Thus,  in  Burton  v.  Wookey  («),  the  plaintiff  and  the  defendant 

were  partners  as  dealers  in  l(fpis  calam.inaris.     The  de- 
Burton  V.  i-  -t  _ 

Wookey.  feudaut,  who  was  a  shopkeeper,  lived  near  the  mines 

Profits  of  tally  i^  which  the  ore  was  got,  and  he  purchased  it  of  the 
shop.  miners.     Instead,  however,  of  paying  them  with  money, 

he  paid  them  with  shop  goods,  and  in  his  account  with  the  plain- 
tiff charo-ed  him  as  for  cash  paid  to  the  amount  of  the  Helling  price 
of  the  goods.  The  plaintiff  contended  that  the  price  of  the  ore 
ouo-lit,  as  between  himself  and  the  defendant,  to  be  considered  as 
beiu'^'-  the  co8t^^x\<lQ  of  the  goods  given  in  exchange  for  it,  and  that 
the  profit  made  by  the  exchange  ought  to  be  accounted  for  to  the 
partnership.  The  Court  adopted  this  view;  holding  that  it  was  the 
duty  of  the  defendant  to  buy  the  ore  at  the  lowest  possible  price, 
and  to  charge  the  partnership  with  no  more  than  he  actually  gave 
for  the  goods  bartered  for  the  ore.  An  account  of  the  profit  made 
by  the  defendant  in  his  barter  of  the  goods  was  decreed  accordingly. 
Again,  in  Gardner  v.  McCutcheon  (J),  a  ship,  of  which  the  plain- 
tiffs and  the  defendant  were  part-owners  and  the  de- 
Gardner  V.  1  1     r.  1 

McCutcheon.     fendaut  was    master,  was  employed   tor  the   common 
benefit  of  all  in   trading   and  carrying  under  charter. 

Part-owners  ^  i         V  • 

of  ships.  The  defendant,  during  the  time  the  ship  was  thus  em- 

ployed, traded  on  his  own  account  and  made  considerable  profit. 

{y)  See,  as  to  this,  Fitzgibbon  v.  Scan-  {a)  6  Macld.  367. 

Ian,  1  Dow.  269.  W)  4  Beav.  534.    See,  too,  Benson  v. 

(z)  At  the  same  time  relief  against  Hathom,  1  Y.  &  C.  C.   C.  326,   and  2 

them  was  refused   on    the  ground   of  Coll.  309;  Miller  v.   Mackay,  31   Beav. 

laches   and  delay  on  the  part  of  the  77;  Shallcross  v.   Oldham,   2  J.   &  H. 

plaintiifs.     On  this   point  the  case  will  609;  and  as  to   commissions,  Holden  r. 

be  noticed  hereafter.     See  book  iii.  c.  Webber,  29  Beav.  117.  Compare  ]\iiller 

10,  §  3.  V.  Mackay,   34  Beav.   295,   where  the 

784 


CIIAl'.   II.]         PAUTNEIi    CANXOT    KETAIX    SEPARATE    BENEFIT.  *."»77 

It  was  lield  tliat  he  was  IjoiukI  to  account  f(jr  the  profits  thus  ob- 
t.iiued.  He  was  bound  to  trade  to  the  best  of  his  al)ility  for  the 
joint  interest  of  himself  and  co-owners;  he  had  no  ri<^ht  to  employ 
tiie  partnei'ship  property  in  a  private  speculation  for  his  own 
l)ent'iit;  and  '^althoug-h  he  alleged  that  the  profits  were  made  *57T 
solely  by  the  employment  of  his  own  private  capital,  and 
that  by  custom  masters  of  ships  were  allowed  to  trade  for  their  own 
benefit,  the  Court  declined  to  recognize  any  such  custom,  and  con- 
sidered that  the  profits  had  been  made  by  the  employment  of  what 
was  not  the  defendant's  exclusively,  and  that  the  ])laintiffs  had 
therefore  a  right  to  share  them. 

A  j^artner,  moreover,  is  not  allowed  in  transacting  the  partner- 
si  lij)  affairs,  to  carry  on  for  his  own  sole  benefit  any  Benefits  resuit- 
sej)arate  trade  or  business  which,  were  it  not  for  his  irecu.',n\vuh' 
eoiinection  with  the  partnershii>,  he  would  not  have  ^^^*"''^- 
been  in  position  to  carry  on.  Bound  to  do  his  best  for  the  firm, 
he  is  not  at  liberty  to  labor  for  himself  to  their  detriment;  and  it 
his  connection  with  the  firm  enables  him  to  ac(|ui re  gain,  he  cannot 
a])|)ropriate  that  gain  to  himself  on  the  pretense  that  it  arose  from 
a  separate  transaction  with  which  the  firm  had  nothing  to  do. 
This  is  well  exemplified  by  'the  cases  as  to  renewed  leases  which 
have  been  already  rel'erred  to  (e),  and- by  liussell  v.  Austwick, 
which  also  shows  that  the  same  principles  ap])ly  wherever  there  is 
an  ai;reement  to  share  profits. 

In  liussell  V.  Austwick  {d)  several  persons  agreed  to  carry  on 
business  as  carriers  between   London  and  Falmouth;  carriers  not 
lid   they   expressly  stijndated  that  no  partnership  |ut""s^ 
should  siihsist  hetween  theiii^  and   that   each   should  Russen». 
have  a  certain  portion  of  the  road  over  which  he  was  to 
carry.     Business  was  commenced  and  carried  on  by  the  parties  to 
this  agreement  under  the  name  of  Messrs.  Russell  &  Co.,  and  they 
were  employed  to  carry  bullion  from  Falmouth  and  Plymouth  to 
London.     On  the  issue  of  a  new  silver  coina<;e  by   the  Bank  of 
Knglaud,  Austwick,  who  appears  to  have  been   the  London   agent 

profits  were  held  to  bclon<r  to  him  who  edition. 

made  them.     In  Moft'att  v.  Farqiihar-  (c)  Avie,  p.  574. 

son,  2  Bro.  C.  C.  338,  a  part-owner  of  a  (f/)  1  Sim.  52.    See,  also,  as  to  bene- 

ship  was  lic'ld  to  be  excUisively  'entitled  fits  derived  by  one  co-owner  of  a  mine 

to  money  paid  liim  for  his  vote  in  the  from  the  use  of  a  shaft  situate  in  his 

appointment  of  a  master.     But  see,  on  own  Lmd.  but  used  for  the  mine,  Clegg 

that  case,  the  note  to  it  in  Mr.  Belt's  r.  Clegg,  3  Gitf.  322. 


"578  DUTY    TO    OBSERVE    GO(H-)    FAITH.  [bOOK  III. 

of  the  carriers,  entered  into  a  contract  with  the  Master  of  the  Mint 
for  the  carriage  of  the  new  coin  to  towns  on  the  road  between  London 
and  Falmouth.  Shortly  afterwards  lie  entered  into  another  con- 
tract with  the  Master  of  the  Mint  for  the  conveyance  of  more  new 
coin  to  towns  in  Middlesex,  and  the  adjoining  counties. 
*578  None  of  these  last  towns  lay  on  the  road  ^leading  from  Lon- 
don to  Falmouth,  and  many  of  them  were  only  accessible  b\- 
cross  country  roads,  and  in  consequence  of  the  increased  risk  of 
carriage  along  these  roads,  the  Mint  authorities  agreed  to  ]^ay  7.y. 
Qd.  per  cent,  for  all  the  com  seM  from  the  Mint,  instead  of  5*'.  per 
cent.,  which  was  the  remuneration  agreed  on  in  the  first  contract. 
Austwick  contended  that  he  was  entitled  to  the  whole  benefit  of 
this  second  contract,  because  (except  as  to  the  extra  2-5.  Qd.)  it  liad 
nothing  to  do  with  the  carrying  business  between  London  and  Fal- 
mouth; and  because,  as  to  the  25.  Qd.^  that  sum,  althougli  calcu- 
lated on  all  the  coin  carried,  whether  under  the  first  or  the  second 
agreement,  was  in  fact  paid  by  the  Mint  in  consideration  only  of 
the  extra  risk  attending  the  carriage  to  the  towns  specified  in  the 
second  contract.  On  the  other  hand  it  was  contended  and  held, 
that  the  second  agreement  ought  to  be  considered  as  made  on 
account  of  all  the  persons  interested  in  the  first  agreement;  because, 
although  the  common  concern  had  no  connection  with  the  provin- 
cial roads  which  were  the  occasion  of  the  second  agreement,  yet 
this  agreement  was  entered  into  by  the  officers  of  the  Mint  as  con- 
nected with,  and  a  continuation  of,  the  first  agreement,  and  in 
confidence  of  the  responsibility  of  the  parties  to  it. 

This  case  of  Russell  v.  Austwick  shows  how  difficult  it  is  for  a 
partner  to  benefit  himself  exclusively,  by  dealings  which  in  honor 
he  ought  not  to  have  engaged  in  except  for  the  common  benefit  of 
the  firm. 

Lock  V.  Lynam,  which  came  before  the  Court  of  Chancery  in 
Distinct  L-eland,   affords    another    instructive'  example    of   the 

businesses.  application  of  the  sanie  wholesome  doctrine.  In  this 
Lock  u  Lynam.  ^.^^gg  (^^)  ^he  plaiutifi^  and  the  defendant  had  agreed  to 
share  the  profit  and  loss  arising  from  contracts  taken  by  the  defend- 
ant for  the  supply  of  meat  and  bread  to  Her  Majesty's  forces  in 
Ireland.     Whilst    this    agreement    was    in    force,   the    defendant 

(e)  Lock  V.  Lynam,  4  Jr.  Cli.  188.;  compare  this  and  the  last  case  with  Miller  v 
Mackay,  34  Beav.  295. 

786 


*-.?<» 


CHAP.  II.]  PATiTNER    CANNOT   COMPETE    WITH    THE    FIRM. 

entered  into  secret  agreements  ^vitll  other  persons  to  share  with 
them  tlie  profit  and  loss  accruing  in  respect  ofsimihir  contracts  en- 
tered into  and  taken  b}'  tliein.  The  phiintiff  claimed  a  share  in  the 
])rofits  made  l)y  the  defendant  nnder  these  secret  agreements; 
-  wliilst  the  defendant  contended  that  he  was  entitled  to  retain  *579 
them  for  his  own  exchisive  benefit.  The  Lord  (Miancellor 
observed,  that  in  all  cases  of  this  kind  the  real  question  was, 
whether,  from  the  nature  of  the  transaction  between  the  ].artners, 
there  was  any  express  or  implied  contract  against  other  dealings 
of  a  like  character;  and  that,  althongh  there  was  no  engagement 
not  to  enter  into  any  other  partnership  of  the  same  kind,  still,  it 
never  could  have  been  in  the  contemplation  of  either  of  the  parties 
that  one  partner  should,  in  his  own  name  or  in  that  of  any  other 
person,  adopt  contracts  to  the  prejudice  of  the  other's  interest.  A 
decree  was  accordingly  made  directing  an  inquiry  whether,  during 
the  period  for  which  any  partnership  between  the  plaintiff  and  the 
defendant  existed,  the  defendant,  either  alone  or  jointly  with  any 
other  person  or  persons,  separately  from  the  plaintiff,  entered  into, 
or  was  beneficially  interested  in,  any  other  contract  or  dealing  of 
the  like  nature  with  those  in  which  the  plaintiff  and  the  defendant 
were  engaged  as  partners. 

After  the  decisions  to  which  attention  has  now  been  drawn,  there 
can  be  little  doubt  that  a  partner  cannot,  either  openly  o^j;;  f'J',^^^'-''' 
or  secretly,  lawfully  carry  on  for  his  own  benefit  any  with  firm, 
business  in  rivalry  with  the  firm  to  wliioh  he  belongs.  (/)'     But  it 


(/)  See  Glassington  v.  Thwaites,  1 
Sim.  &  Stu.  124  ;  Enj?lancl  r.  Curling,  8 
Beav.  129,  -in  which,  however,  there 
was  something  more  than  mere  rivah-y. 

'  Equitj'  will  enjoin  one  of  several 
partners  in  a  business  enteii^rise,  who, 
by  the  partnership  contract,  has  under- 
taken to  snperintend  and  manage  the 
business,  from  cairying  on  the  same 
business,  at  the  same  place,  in  a  se  pa- 
rate  establishment,  for  his  sole  benefit, 
even  though  there  be  no  express  cove- 
nant restraining  him  from  so  doing. 
Marshall  r.  Johnson,  :«  Ga.  ',00. 

A  pai-tnership  was  formed  for  a  com- 
mission and  warehouse  business,  the 
agi-eement  being  that  one  partner 
should  furnish  buildings   and  fixtures, 


and  the  other  should  keep  the  books 
and  devote  himself,  his  time  and  tal- 
ents to  the  business.  Buildings  were 
fumished  and  the  business  prosecuted 
until  these  were,  fully  occupied  with  cot- 
ton stored;  and  the  partner  who  en- 
gaged for  the  buildings  declined  to  sup- 
ply any  more,  for  an  increase  of  business. 
The  other  partner  then  put  up  buildings 
at  his  own  expense,  and  received  cotton 
in  store  in  them,  upon  his  individual 
account;  he  did  not,  however,  at  all 
neglect  the  partnership  stores  and  busi- 
ness: Held,  tliat  this  was  no  breach 
of  good  faith,  nor  was  his  co-p.irtner 
entitled  to  share  in  the  profits  of  the  in- 
dividual store.  Parnell  v.  Robinson,  ."iS 
Ga.  26. 

787 


''•580  DUTY   TO    OBSERVE   GOOD   FAITH.  [bOOK  III. 

would  neither  be  convenient,  nor  logically  correct,  to  apply  this 
doctrine  to  cases  where  private  interest  and  duty  to  others  are  not 
brought  into  conflict;  as  for  exaini^le,  to  the  case  of  a  person  hold- 
ing shares  in  rival  companies.  N^o  standard  of  honor,  however 
high,  requires  the  extension  of  the  doctrine  to  such  a  case  as  this, 
and  no  decision  can  be  found  to  warrant  such  an  extension,  {g) 

The  same  obligation  to  act  with  good  faith  exists  between  per- 
sons who  have  agreed  to  become  partners;'' and  if  one  of  them, 
in  negotiating  for  the  acquisition  of  property  for  the  intended 
Partnership  not  firm,  reccives  a  bonus  or  Commission,   he  must 

yet  farmed.        ^gg^     *account  for  it  to  the   firm    when   formed,  {h) 

Faweett  v.  . 

whitehouse.  J£e  Cannot  retain  for  himself  onthe    ground  that 

it  was  paid  him  for  personal  services  rendered  to  the  vendor  be- 
fore any  partnership  existed.  Having  obtained  the  benefit,  whilst 
negotiating  for  himself  and  his  future  partners,  he  must  share  such 
benefit  with  them.  (/) 


2.  As  regards  companies. 

{a)  In  process  of  formation. 

»       Duties  of  j^romoters. 

The  principles  stated  and  illustrated  in  the  foregoing  pages  are 
Pro-ectorsof  peculiarly  applicable  to  transactions  which  precede  the 
in™a^TOfitout  foJ'iiiation  of  a  company.  Nothing  is  more  common 
•^f^t-  than  for  persons  to  acquire  property,  to  form  a  com- 

pany on  purpose  to  buy  it,  and  to  conceal  their  own  true  position 
from  the  company  they  so  form.  Such  a  transaction  can  never 
stand.  There  is  nothing  to  prevent  a  person  from  buying  property 
for  himself  at  one  price,  and  afterwards  selling  the  same  property 
to  a  company  or  any  one  else  at  a  higher  price;  nor  in  a  case  of 
this  simple  description  is  the  vendor  bound  to  disclose  the  fact  that 
he  is  selling  at  a  profit,  {h)     Moreover,  there  may  be  a  valid  sale  to 

((7)  As  to  interfering  with  persons  who  {h)  Fawcett  v.  Whitehouse,   1  R.  & 

are  directors  of  two  rival  companies,  M.  132. 

and  who  promote  the  interests  of  one  of  (1)  Ibid.,  and  see  the  cases  as  to  pro- 

them  to  the  prejudice  of  the  other,  see  moters  of  companies,  infra. 

Orr  V.  Glasgow,  &c.,  Rail.  Co.  3  Mac-  {b)  See  Cover's  case,  1  Ch.  D.  182,  and 

Qu.  799.  ^jer  James,  L.  J.,  in  5  Ch.  D.  118. 

'  See  ante,  .569,  and  note. 
788 


cnAr.  II.]     riiOMOTEKS  must  account  for  benefits  received.      *5S1 

a  company  l).y  a  person  engat^ed  in  getting  it  up  (c);  and  there  often 
is  great  dillicnlty  in  determining  the  true  nature  of  any  given 
transaction  (tZ);  hut  once  let  it  he  shown  that  the  alleged  vendor 
obtained  the  property  when  it  was  his  duty  to  obtain  it  for  the 
company,  or  that  he  has  formed  a  com]iany  to  buy  property  which 
lie  desires  to  sell,  and  it  immediately  follows  that  he  cannot,  with- 
out the  fullest  disclosure  on  his  part,  ImM  the  company  to  its  bar- 
gain, or  charge  the  company  more  than  he  actuilly  gave.' 

The  cases  illustrating  this  princi])le  are  numerous  and  important, 
and  their  details  are  usually  complicated;  and  the  following  have 
been  selected  for  abridgment  tor  the  guidance  of  the  reader. 
*In  Hichensv.  Congreve  (e),  a  company  was  formed  to  work     *581 
a  mine,  and  was  ])rincipally  got  up  by  three  of  the  defend- 
ants ;  it  was  proposed  that  a  lease  of  the  mine  should  be  purchased 
by  the  company,  and  a  lease  to  the  company  was  exe-  company  en- 
cuted  by  the  owner  of  the  property  for  25,000^.      This  reserved  by 
sum  was  accordingly  charged  to  the  company,  but  it  jjj^^^^^'^ 
afterwards  turned  out,  that  10,000Z  only  had  been,  in  Congreve.' 
fact,  paid  to  the  owner  for  the  lease,  and  that  the  reanaining  15,000Z. 
had  been  distributed  amongst  the  directors.   The  three  principal  pro- 
moters of  the  company  alleged  that  the  property  had  been  sold  to 
them,  on  their  private  account,  before  the  couipany  had  come  into 
existence,  that  25,000Z  was  a  fair  price  for  the  company  to  i)ay  for 
the  lease,  and  that  the  15,000Z.  was  only  a  fair  proiit  on  a  re-sale, 
the  original  purchase  being  entirely  at   the  personal  risk  of  the 
three.     They  said  that  the  lease  was  taken  directly  to  the  company, 

(c)  As  in  Paul  and  BeresforcVs  case,  But  whore  persons  have  formed  an 

33  Beav.  204.     See,  too,   the  observa-  association,  or  iu-e  dealing  in  contcmphi- 

tions  of  V.-C.  Wigrara,  in  Foss  v.  Har-  tion  of  one.  then  they  stand  in  a  conti- 

bottle,  2  Ha.  480.  dontial  rehition  to  each  other  and  to  all 

(rf)  As  in  Beck  r.  Kantorowicz,  3  K.  &  who  may  suUsequently  become  mem- 

J.  323,  noticed  infra,  p.  581.  bei-s;    and  they  cannot  purchase   any 

'The  owner  of  any  property  may  form  property  and  sell  it  to  the  comjiany  at 
an  association  or  partnership  with  oth-  an  advance,  without  a  full  disclosure  of 
ers  and  may  sell  the  property  to  the  all  the  facts.  If  they  do  so,  the  corn- 
company  at  any  price  agreed  on,  pro-  pany  may  compel  them  to  account  for 
yided  there  be  no  fraudulent  representa-  the  profit.  Densmore  Oil  Co.  r.  Dens- 
tions  made  by  them,  and  no  such  confi-  more,  supra.  See,  also,  Short  v.  Ste- 
di'utial  relation  arises,  a«  to  make  them  venson,  63  Penn.  St.  95;  Doris  i'. 
liable  to  account  for  any  profits  reabzed  French,  4  Hun,  292;  S.  C.  6  Thump, 
on  such  sale.      Densmore  Oil  Co.   v.  &  C.  5*^1. 

Densmore,  64  Penn.  St.  43;  S.  C.  9Am.  See  F: well's  Evans  on  Agency,  ♦283. 

Law  Reg.  (N.  S.)  96.  {c)  1.  R.  &  M.  150.      See,  also,  Faw- 

789 


^^582  DUTY   TO    OBSERVE    GOOD    FAITH,  [eOOK  III. 

and  that  the  amount  of  the  consideration  money  was  stated  *to  be 
25,000^.,  with  the  knowledge  of  the  lessor,  and  merely  for  the  pur- 
pose of  simplifying  the  title.  But  it  was  admitted  that  only  10,000/. 
reached  the  lessor's  hands,  and  that  the  15,000Z.  had  been  divided 
amongst  the  defendants.  A  motion  was  made  that  the  three  prin- 
cipal defendants  might  be  ordered  to  pay  into  court  such  sums,  part 
of  the  15,000/.,  as  appeared  by  their  answers  to  be  then  in  their 
hands,  and  an  order  to  that  effect  was  made. 

Another  and  very  instructive  case  is   Beck -y.    Kantorowicz   (/), 
.„     ,,  in   which  one  projector  sought  to    obtain    a  benefit 

AUeged  open  r     J  o 

ors'tocom'*''fS*"  at  the  expense  of  the  others,  and  they  all  sought  to 
Beck  ?;.  Kant-  make  a  profit  out  of  the  company.  In  this  case  five 
orowiez.  persons  proposed  to  purchase  a  mine,  and   to  get  up  a 

company  to  work  it.  One  of  them,  Kantorowicz,  negotiated  on 
behalf  of  himself  and  co-adventurers  with  the  owners  of  the  mine, 
and  agreed  with  the  owners  for  a  purchase  from  them,  at  a  sum  of 
85,000/.,  and  he  represented  to  his  co-adventurers  that  tliis  sum  was 
the  least  which  the  owners  would  take  for  the  mine.      In  point  of 

fact,  however,  there  was  an  agreement  between  Kantorowicz 
*582     and  the  owners,  that  if  the  mine  was  purchased  *at  that  price 

he  was  to  have  20,000/.  for  his  trouble;  but  this  was  un- 
known to  the  other  adventurers  and  to  the  company  which  was  af- 
terwards formed.  Upon  the  supposition  that  85,000/.  was  the 
price  of  the  mine,  a  contract  for  the  sale  of  it  at  that  price 
was  entered  into  between  the  owners  of  the  one  part,  and  Kantoro- 
wicz and  his  four  co-adventurers  of  the  other.  Part  of  the 
purchase  money  was  to  be  paid  in  shares  in  tlie  company  proposed 
to  be  formed.  Shortly  afterwards  a  prospectus  was  issued,  with  a 
view  to  the  formation  of  the  company  ;  and  in  the  prospectus  it 
was  stated  that  a  contract  had  been  entered  into  for  the  purchase 
by  the  company  of  the  entire  property  for  125,000/.,  including  all 
preliminary  expenses,  and  a  premium  to  the  parties  who  had  in- 
curred the  risk  and  the  responsibility  of  the  original  purchase.  The 
company  was  formed.  The  agreement  between  Kontorowicz  and 
the  owners  was  afterwards  discovered,  and  a  bill  was  filed  by  three  of 
the  committee  of  management  of  the  company,  on  behalf  of  them- 
selves and  other  shareholders,  for  the  purpose  of  compelling  Kantoro- 

cett  V.  Whitehouse,  ib.  132,  a  somewhat  (/)  3  K.  &  J.  230.   See,  too,  Ex  parte 

similar  case.  Perrier,  7  Ir.  Ch.  Rep.  256. 

790 


CllAT.   II. J       I'UoMtjTERS  MUST  ACCOINT  I-OK  BPINKFITS  UKCEIVED.         *583 

wicz  to  account  to  tlic  coinpuny  tor  tlic  20, (;()()/.  irciniuin  wliicli  he 
had  received  in  shares  tVoni  the  venders  of  the  mine,  (^n  tlie  part 
of  Ivantorowicz  it  was  insisted,  first,  that  lie  ha<l  an  interest  in  the 
mine,  and  was  a  sellini^  party,  and  that,  therelore  he  i)racticed  no 
fraud  on  tlie  four  ori<^inal  adventurers;  and  secondly,  that  even  if 
the  transaction  could  not  be  upheld  as  between  hini  and  thcni,  the 
comv)any  could  not  complain,  as  he  and  the  other  ju'omoters 
avowedly  sold  the  jiroperty  to  the  company  for  125,000/.,  and 
the  company  had  fi^ot  all  they  ever  expected  or  had  con- 
tracted to  have.  But  it  was  held  u]X)n  the  evidence  that 
Ivantorowicz  had  no  interest  in  the  mine,  and  that,  as  be- 
tween him  and  the  other  promoters,  the  ti-ansaction  could  not  for 
one  moment  stand.  With  respect  to  the  more  difficult  ques- 
tion v.-hich  arose  between  Ivantorowicz  on  the  one  side,  and  the 
comjiany  on  the  other,  it  appeared  in  the  first  ])lace,  that 
two  of  the  orii^inal  promoters  were  meml)ers  of  tlie  com- 
mittee of  mauaiieuient.  In  this  latter  capacity  they  became, 
as-  it  were,  agents  for  the  company,  and  were,  as  such,  bound 
to  buy  for  the  coni])any  at  as  reasonable  a  price  as  pos- 
sible, although  in  their  character  of  grantees  they  were  enti- 
tled to  sell  at  any  jnice  they  liked,  *It  also  appeared  that  *583 
the  125,000/,  at  which  the  company  was  to  buy  was  fixed 
by  the  committee  of  management,  upon  the  assum]ition  that 
85,000/.  Mas,  in  fact,  to  be  paid  to  the  vendors  of  the  mine 
and  that  the  difference  between  85,000/.  and  125,000/.  Mould 
cover  the  preliminary  expenses,  and  M'hat  M'as  considered  to  be 
a  fair  premium  to  the  promoters.  This  premium  was  alluded  to 
in  the  prospectus,  and  Mas  a  premium  of  30,000/.,  to  be  paid  out  of 
the  difference  betM-een  the  85,000/.  and  the  125,000/.  Another  pre- 
mium, payable  out  of  the  85,000/.  to  one  of  the  promoters  alone, 
M-as  never  contemplated  in  drawing  up  the  prospectus.  Upon 
these  grounds  it  M'as  held  not  to  be  comjietent  to  IvantoroM'icz  to 
get  a  bonus  of  20,000/.,  in  addition  to  his  share  of  the  30,000/.,  and 
that  liaving  kept  back  the  transaction  as  to  the  20,000/.,  he  ought 
to  be  considered  as  having  joined  the  other  four  promoters  in  stipu- 
lating for  payment  by  the  company  of  a  premium  of  3('.000/.,  and 
no  more.  He  in  fact  allowed  them  in  the  exercise  of  their  judg- 
ment as  to  M'hat  Mas  a  right  premium  to  demand  of  the  coin]>any, 
to  contract  M'ith  the  company  for  the  30,000/.,  and  that  M'as  the  con- 

791 


*5S4  DUTY    TO    OBSERVE    GOOD    FAITH.  [B()(jK  IK. 

tract  wliich  the  Court  held  oii^ht  to  be  performed  as  between  tlif 
companj^  and  the  promoters  {g.) 

Again  in  The  New  Sombrero  Phosnliate  Co.  v.  Erlanger  (//),  a 
New  Sombrero,  lease  of  souio  property  was  sold  to  an  aii:ent  for  a  syndi- 

<fcc.,  Co,  V.  Kr-  .  n  1  r       '"     ±-     ^ 

langer.  cate,  I.  6.,  a  group  01  speculators.     One  oi  these  specu- 

lators on  behalf  of  himself  and  the  others,  got  up  a  company  to  buy 
the  property  from  them.  An  agent  of  theirs  entered  into  a  provis- 
ional contract  with  a  nominee  of  their  own  for  the  sale  of  the  prop- 
erty to  him,  as  trustee  for  the  intended  company,  at  the  advanced 
price,  to  be  paid  for  in  cash  and  shares.  The  company's  memoran- 
dum and  articles  of  association  were  prepared  under  the  direction 
of  the  chief  promoter.  There  were  five  directors.  Of  these  two 
were  abroad,  and  the  others  were  all  jn  fact  nominees,  and  more  or 

less  under  the  control  of  the  chief  promoter  ;  one  of  themwas 
^584     the  person    who  originally   ^purchased    as  agent  for  him 

and  the  other  speculators.  The  agreement  between  this 
agent  and  the  trustee  for  the  company  was  alluded  to  in  the  arti- 
cles of  association,  and  also  in  a  prospectus  published  by  the  direct- 
ors. This  prospectus  was  in  fact  prepared  under  the  instructions 
of  the  chief  promoter.  The  solicitor  of  the  company  was  the  solic- 
itor of  the  promoters.  The  prospectus  stated  that  the  provisional 
contract  with  the  trustee  for  the  company  had  been  approved  by  the 
directors,  and  in  fact  the  directors  in  this  country  had  adopted  it  ; 
but  they  had  in  truth  no  discretion  in  the  matter  ;  they  had  no  in- 
dependent advice,  and  one  of  them  was  the  trustee  for  the  promot- 
ers. Their  approval  was  therefore  a  mere  sham.  Upon  the  true 
facts  becoming  known,  the  company  repudiated  the  contract,  and 
filed  a  bill  to  set  it  aside.  The  Y.-C.  Malins  dismissed  the  bill,  be- 
ing of  opinion  that  the  promoters  of  the  company  were  not  in  such 
a  fiduciary  position  towards  it  as  to  render  it  obligatory  upon  them 
to  disclose  that  they  were  themselves  selling  their  own  property  to 
the  company.  But  the  Court  of  Appeal  reversed  this  decision, 
upon  the  ground  that  the  promoters  stood  in  a  fiduciary  relation  to 
the  company,  which  was  their  creature;  and  were  bound  to  disclose 
the  fact  that  they  were  selling  their  own  property  to  the  company. 

(gr)  The    result,    it    is   apprehended,  between  him  and  themselves.   As  it  was, 

would  not  have  been  different  if  the  four  they  abandoned  any  interest  they  might 

promoters  had  insisted  on  keeping  the  have  in  the  20,000?.  to  the  company, 

company  to  the  bargain  for  125,000?.,  (A)    5    Ch.    D.  73.     See,    also,   Bag- 

and  had  claimed  to  have  the  20.000?.  nail  f.  Carlton,  6  Ch.  D.  371.     In  this 

stix^ulated  for  by  Kantoro\Wcz  divided  case  a  fiduciaiy  relation    was  held  to 

702 


Ca.Vl'.  II.]  COMMENCEMENT  OF  THE  EIDUCIAKY   RELATION.  *585 

111  the  Pliu.sphate  Sewaf^e  Co.  v.  Ilartmuiit  {i)  the  promoters  had 
110  title  to  the  property  they  sold.     The  trustees  of  the  Phosphate 

I        L         J  J  ^  Sfwaue  Co.  v, 

eoinpaiiy  to  whom  they  sold  it  were  their  own  iinan-  Hanmout. 
cial  ai^ents,  and  were  paid  a  large  commission  by  them  out  of  the 
purchase  money  obtained  from  the  company.  The  solicitors  to  the 
company  were  the  solicitors  to  the  promoters,  and  neglci-.ted  their 
duty.  The  contract  was  set  aside;  the  so-called  trns'ees  had  to  re- 
pay the  commission  they  received;  and  all  the  defendants,  includ- 
ing the  solicitors,  were  ordered  to  pay  the  costs  of  the  suit. 

The  general   principle  illustrated  by  the  foregoing  decisions  is 
too  M'ell  established  to  be  now  disputed;  but  in  apply-  oommence- 

1  '  1  1    ■/       mentofthefid- 

iiig  that  principle  there  is  often  a  difficulty  in  deter-  uciary  relation, 
mining  when  a  promoter  of  a  projected  company  begins  to  be  in 
such  a  position  as  to  be  unable  to  make  a  secret  profit  by  a  sale  to 
it,  or  to  persons  acting  on  its  behalf.  "On  the  one  hand  it  is 
quite  *phiin  that  a  fiduciary  relation  between  a  promoter  and  *585 
a  company  may  exist  long  before  the  actual  formation  of  a 
company  by  registration  or  otherwise,  {k)  On  the  other  hand,  it  is 
obvious  that  something  must  be  done  beyond  a  purchase  and  re- 
sale, to  constitute  such  a  relation:  something  must,  it  is  submitted, 
be  doue  by  the  promoter  to  impose  upon  him  the  duty  of  protect- 
ing the  interests  of  those  who  ultimately  form  the  com]>aiiy.  He 
assumes  this  duty  if  he  assumes  to  act  for  them,  or  if  he  induces 
them  to  trust  him,  or  to  trust  persons  wdio  are  under  his  control, 
and  who  are  [)ractically  himself  in  disguise;  he  also  assumes  such 
<luty  if  he  calls  the  company  into  existence  in  order  that  it  may 
buy  what  he  has  to  sell ;  but  he  does  not  assume  such  duty  by 
negotiating  with  persons  who  have  themselves  assumed  that  duty 
and  who  are  in  no  way  under  his  influence.  A  fraud  by  him  on 
them  will  of  course  vitiate  any  agreement  based  on  the  frau<l, 
whether  there  is  any  fiduciary  relation  between  him  and  them  or 
not;  but  the  principles  now  being  investigated  presuppose  the 
existence  of  that  relation,  and  a  breach  of  the  obligations  inci- 
dental to  it,  and  no  fraud  other  than  that  involved   in  their  breach. 

have  existed  between  the  promoters  of  a  forming  the  company.    Erlanger's  ca-se 

tninpiiny  and  the  company  before  it  was  is  tmder  appeal  to  the  House  of  Lords, 

formed  ;  the  promoters  were  compelled  {/)  Phosphate   Sewage   Co.    r.    Hart- 

to  acceunt  to  the  company  for  the  profits  mont,  5  Ch.  D.  395. 

made  by  them  imder  a  concealed   agree-  (/.•)  See  the  cases.   aiifr,i>.  r)S;i.  nnd 

ment  they  being  allowed  to  deduct  such  Bank  of  London  /■.  Tyrrell,  10  li.  L.  C. 

allowances    for    expenses   incun-ed    in  26. 

TOO 


*586  DUTY    TO    OBSERVE    GOOD    FAITH.  [bOOK  III. 

The  Albion  Steel  and  Wire  Co.  v.  Martin  {I)  illustrates  the  above 
Albion  steel       remarks.     There  two    persons    carried   on    a    business 

and  Wire  Co.  v.  i        i  i 

Maitiii.  which  was  aiterward  sold  to  a  company  lornied  in  order 

to  buy  it.  The  defendant  liad  long  supplied  the  vendors  with  goods 
for  their  business,  and  at  their  request  lie  agreed  to  become  a 
director  of  the  compan3^  After  he  had  so  agreed,  and  before  the 
company  was  formed,  he  contracted  to  supply  goods  to  the  vendors, 
and  these  contracts  were  not  completed  when  the  company  took  over 
the  business.  The  business  was  taken  over  with  all  contracts  pend- 
ing at  the  time  of  its  transfer,  and  the  defendant  completed  the 
contracts  into  which  he  had  entered,  and  was  paid  by  the  company 
of  which  he  had  become  a  director.  An  attempt  was  made  by  the 
company  to  compel  him  to  account  for  the  profit  made  by  him,  at 
the  expense  of  the  company,  from  these  contracts.  But  it  was  held 
that  he  was  not  bound  to  do  so.     There  was  no  fraud  whatever  in 

the  transaction;  the  defendant  had  dealt  with  the  vendors; 
*586     they    *had   dealt   with   the   company;    the   company   had 

trusted  them,  and  he  was  not  concerned  directly  or  indireitl}^ 
in  the  purchase  by  the  company  of  their  business,  and  was  not 
directly  or  indirectly  in  the  double  position  of  buyer  and  seller; 
and  in  his  own  contracts  with  the  vendors  they  were  the  guardians 
of  the  interests  of  the  company.  In  this  same  case,  however,  the 
defendant  had,  after  he  had  become  a  director,  entered  into  similar 
contracts  with  the  company  itself,  but  he  did  not  attempt  to  retain 
the  profits  on  them,  and  it  is  plain  that  he  could  not  have  done  so. 
The  principles  illustrated  by  the  foregoing  decisions  apply,  if 
Solicitors  to       possiblc,  morc  strongly  to  the  solicitors  of  projected 

projected  com-    ■*■  .  "^  rm  i      •"  £• 

panics.  companies    than    to   other   persons.     Ihe   relation    or 

solicitor  and  client  in  cases  of  this  sort  is  considered  as  commenc- 
ino-  from  the  time  when  the  solicitor  first  acts  in  any  matter  relat- 
ing to  the  company;  and  if  he  afterwards  acquires  property  for 
himself  and  sells  it  at  a  profit  to  the  company,  without  the  fullest 
disclosure,  the  company  can  retain  the  property  and  compel  him 
to  refund  the  profit,  (m)  Moreover,  if  the  solicitor  to  the  com- 
pany is,  as  he  frequently  is,  the  solicitor  to  the  promoters,  and  he 

(?)  1  Ch.  D.  580.  part  of  what  its  solicitor  had  purchased, 

(/»)  Bank  of  London  v.  Tyrrell,  10  H.  and  the  House  of  Lords  held  that  the 

L.  C.  26,  affirming  mainly,  but  in  some  company  had   nothmg-  to   do  with   the 

respects  var^-ing  the  decree  below,  in  27  profit  made  by  re-selling  the  rest  of  the 

Beav.  273.    The  company  bought  only  property. 

794 


ClIAl'.  II.]         COMl'ANr    MAY    KEiCIXD    OR    AbolT    CONTIiACT.  *5S7 

m'<^Ieets  his  duty  to  the  company  when  he  knows  th.it  the  ]^n>- 
inoters  are  actin^^  iinpro])erly  towards  it,  he  runs  the  serious  risk 
of  being  held  liable  to  the  costs  of  proceedings  against  tliem.  (/?) 

Such  being  the  jjrinciplji  whicli  the  Court  enforces,  it  nejd 
liurdly  be  added,  that  contracts  of  this  class  will  not  be   No  specific  per- 

11  1  !•  Ill  fiiiiiaiu-col 

decreed    to    be    periornied     by   the   company:    even   c.mra.Ls  taim- 
althongh  the  company's  articles  of  association  provide   of  gou.j  tuiiu. 
tliiit  tiiey  siiall.  (/>)     Any  concealed  agreement,  moreover,  between 
a  vendor  to  a  comj)any  and   its  directors,  to  the  effect    that 
they  shall  profit  by  *the  purchase  by  the  company  will  entitle     '''587 
tiie  company  to  repudiate  its  agreement  with  the  vendor,  (p) 

The  right  of  the  company  in  these  cases  is  to  rescind  the  con- 
tract, or  at  its  option  to  hold  the  property  it  has  pur-  option  of  com- 
chased,  and  to  pay  no  more  for  it  than  its  agent  or  cases. 
trustee  himself  paid.  (^)  This,  of  course,  the  company  must  do; 
and  if  it  has  not  done  so,  and  cannot  do  so,  it  cannot  obtain  this 
relief  against  him.  (r)  Further,  if  the  agent  sells  to  the  company 
property  which  is  his  own,  but  for  which  he  has  jjaid  nothing,  the 
company  can  only  relain  the  |)roi)erty  upon  the  terms  of  paying  its 
proper  value.  (,s) 

The  liability  of  promoters  and  otiicrs  who  issue  prospectuses 
and  fail  to  comply  with  the  provisions  of  ^  38  of  the  Companies 
Act,  1SG7,  has  been  alreatly  noticed,  (t) 

(h).  Companies  formed. 
Duties  of  directors  and  their  position  as  trustees. 

The  duties  of  diixctors  begin  from  the  moment  they  become 
directors;    but   persons   who    are   directors    may  have  come  under 

(«)  Phosphate  Sewag'e  Co.  v.  Hart-  the  contract  in  toto,  or  rcscuKl  it  in  toto, 

inont,  5  Ch.  D.  394.  must  be  taken  with  reference  to  the  facts 

(o)  Maxwell  v.   Port  Tcnnant,   &c.,  of  the  case  before  liim.     The  company 

Co.  24  Beav.  495.    See,  too,  Ellis  v.  Col-  there    sought  to  repudiate  the  whole 

man,  25  Beav.  662 ;  Flanagan  v.   Gt.  transaction  after  it  had  rendered  iti^elf 

Western  Kail.  Co.  7  Eq.  116,  a  case  of  unalile  to  restore  what  it  had  got  by 

an  agr.^ement  with  a  director.  means  thereof.     See,  as  to  this,  New 

ip)  Ex  parte  Williams,  2  Eq.  216.  Sombrero  Phosphate  Co.  v.  Erlanger.  •') 

(q)  See  Bank  of  London  w.  Tyn-ell,  10  Ch.   D.  78;    Phosphate  Sewage  Co.  r. 

H.  L.  C.  20.  Hartmont,  ib.  394. 

(>•)  See  Great  Luxembourg  Rail.  Co.  (s)  Seeder  Lord  Romilly,  in  25  Bi'av. 

r.  Magnay,  25  Beav.  586.    The  observ-  595,  .596. 

ations  of  the  M.  R.  in  this  case,  to  the  (<)  Ante,  book  i.  ch.  5,  §  1,  p.  1 1  "i. 
effect  that  the  company  could  only  adopt 

795 


*5S8  DUTY    TO    OBSERVE    GOOD   FAITH.  [bOOK  III. 

obligations  to  the  company  long  before  they  became  directors  of  it. 
Commence-       Whctlicr  they  havc  done  so  or  not  depends  upon  the 

nient  of  duties         ..,."'.  t   •       i       ,-  •  /    %  -r 

of  directors.  principles  investigated  in  the  loregomg  pages,  {u)  In 
the  ensuing  pages  it  is  proposed  to  examine  the  duties  of  direct- 
ors after  they  have  become  such. 

Directors  of  a  company  are,  to  a  certain  extent,  trustees  for  the 
shareholders.  The  property  of  the  company 
fa'/trustees.°^  *58S  may  not  be  ^legally  vested  in  the  directors,  but 
it  is  practically  under  their  control;  and  they 
are  bound  to  employ  it  for  the  purposes  for  whicli  it  is  entrusted 
to  them.  So  the  powers  which  the  directors  have,  e.  g.,  of  calling 
meetings,  electing  members  of  their  own  board,  making  calls,  for- 
feiting shares,  &c,,  &c.,  are  reposed  in  them  in  order  that  such 
powers  may  be  hond  fide  exercised  for  the  benefit  of  the  company 
as  a  whole;  and  any  exercise  of  such  powers  for  other  purposes  is  a 
breach  of  trust,  and  will  be  treated  accordingly,  {v) 

It  follows  as  a  necessary  consequence  that  directors  of  a  companv 
Directors  must  ^^"®  bound  to  account  to  the  company  for  all  profits 
profit ma^°e by  "^^^^  by  themselvcs,  by  the  employment  of  the  assets 
the^compaSy's^  of  the  comjmny,  and  for  all  profits  made  by  them  at 
assets.  ^YiQ  expense  of  the  company,  unless  they  can  show  that 

the  company,  with  a  full  knowledge  of  all  the  fticts,  have  agreed  to 
allow  them  to  retain  such  profits  for  their  own  benefit. 

All  the  authorities  referred  to  in  the  j)i'eceding  pages,  showing 
the  duties  of  partners  and  promoters,  are  relevant  to  the  present 
inquiry,  and  may  be  referred  to  in  support  of  the  foregoing  general 
statement.'  In  addition  to  them  the  following  may  be  also  use- 
fully alluded  to. 

In  the  celebrated  case  of  The  York  and  North  Midland  Eailway 
Profits  made  by  Company  V.  Hudson  {x),  a  quantity  of  shares  in  a  rail- 
aSets^oTcom°^  ^^^  Company  were  placed  at  the  disposal  of  its  direct- 
P^^y-  ors,  amongst  whom  the  defendant  was  the  most  influen- 

{u)  They  had,  for  example,  in  Hich-  rule  against  not  interfering  in  matters 

ens  V.  Congreve,  1  R.  &  M.  150;  Faw-  of  internal  management,  see  ix/ra,  book 

cett  i?.  Whitehouse,  ib.  132;  but  not  in  iii.  c.  10,  §3. 

Albion  Steel  Wire  Co.  v.  Martin,  1  Ch.  '  See  ante,  hT2,  notes;  1  Story's  Eq. 

D.  580.  Jur.  §  823. 

{v)  See  generally  as  to  the  duties  of  U)  16  Beav.  485.     The  judgment  in 

directors,  York  and  North  Midland  Eail.  this  case  is  particularly  valuable  with 

Co.  V.  Hudson,  16  Beav.  485.    As  to  the  reference  to  the  position  of  dii-ectors. 

796 


.  ;:ai'.  ii.J         diukctoks  taking  up  un-issued  shares.  *589 

ti.il.    Tlie  defendant  disposed  of  these  shares  by  issuing  some  5000 
■A'  them  to  nominees  of  his  own,  causinoj  them  to  be  Directors  seii- 

'  "  inp  shares  for 

stt'd  for  his  benefit  and  pnttinir  the  proceeds  of  the  sale  thtirown 

I  ^  I  •  benefit. 

into  his  own  pocket,  accountinn:,  however,  to  the  com-  York  ami 
pany  for  the  money  due  on  tliem  in  res]iect  of  deposits   uau'Vo/r.'""'^ 
and  calls.     The  defendant  contended  that  the  shares  in   ""'''"^''• 
(jiiestion  were  in  fact  a  present  to  himself,  in  consideration  of  his 
great  services  to  the  company;    but  the  Court  thought  otherwise, 
and  having  come  to  the  conclusion  that  the  shares  were  to 
be  at  the  disposal  of  the  *  directors  as  trustees  for  the  com-     *589 
pany,  compelled  the  defendant  to  account  for  the  moneys 
derived  by  him  from  their  sale.     The  Court  also  held,  that  the  de- 
fendant was  not  entitled  to  be  allowed  any  part  of  such  moneys  by 
way  of  remuneration  for  his  services,  or  on  account  of  money  dis- 
bursed by  him  for  the  conipany  in  a  manner  which  he  either  could 
not  or  would  not  explain.  (?/) 

In  Parker  v.  McKenna  (s),  a  banking  company  resolved  to  issue 
20,000  new  shares,  and  those  not  taken  up  by  the  old  profits madeon 
shareholders  were  to  be  disposed  of  by  the  directors  at  i^''i""e ^  "^''•-'s- 

i  "^  Parker  v. 

a  certain -price.  The  old  shareholders  only  took  up  MeKenna. 
about  one-half  of  the  shares  ;  and  the  directors  made  an  arrange- 
ment with  one  Stock  that  he  should  take  all  the  rest  at  the  price 
fixed,  and  pay  for  them  as  he  found  purchasers  for  them.  He  was 
unable  to  pay  for  them  all,  and  he  applied  to  the  directors  to  take 
a  large  part  of  them  off  his  hands.  Some  of  them  agreed  to  do  so  ; 
and  each  of  the  defendants  took  a  certain  number,  sold  what  he 
took  at  a  price  considerably  higher  than  that  at  which  the  directors 
had  been  authorized  to  sell  them,  but  only  accounted  to  the  com- 
pany for  that  price.  When,  however,  the  shareholders  discovered 
what  had  been  done,  they  claimed  to  be  entitled  to  share  all  the 
profits  thus  made  by  the  defendants,  and  their  claim  was  upheld  b}* 
the  Court.  It  was  conceded  in  this  case,  that  if  the  directors  had 
actually  sold  the  shares  to  Stock,  and  he  had  hond  fide  paid  for 
them  and  completed  his  title  to  them,  the  directors  (or  any  one 
else)  might  have  bought  them  from  him  and  resold  them  at  a'profit; 
but  the  arrangement  with  him  was  such  that  the  shares  had  never 

(//)  In  Dunston  v.  Imperial  Gas  Co.  3      presents  to  directors,  Rosmore  r.  Mow- 
B.  &  Ad.  125,  it  was  held  that  dii-ect-      att,  15  Jur.  238,  V.-C.  K.  B. 
ors  are  not  impliedly  entitled  to  any  pay  {z)  10  Ch.  96. 

for  their  services  ;  and  see  as  to  making 

707 


*590  DUTY    TO    OBSERVE    GOOD    FAITH.  [uOOK  III. 

become  liis  ;  the  duty  of  the  directors  to  the  shareholders  with  re- 
spect to  the  disposal  of  the  shares  had  not  been  performed  when 
thev  were  taken  off  liis  hands,  and  the  shares  were  in  effect  under 
the  control  of  the  directors  as  unissued  shares  when  the  defendants 
themselves  sold  them  at  a  profit. 

"Aerain,  the  directors  of  a  comi)anv  are  not  entitled  to  retain  for 
Bonuses,  Ac,  their  own  benefit  any   advantages  they  may  re- 

on  sales.  &c.       ^^g^     ^^j^^^  ^^^  ^^.^^,  ^^|.  ^yQ^^y^Q^  commission,  or  otlier- 

Gaskell  v.  .  '     ,  i    "      i        j?  ,  i  ?      i        • 

ciiambers.  wisc  Oil  the  Sale  of  tlie  company's   business,  or 

on  tlie  amalgamation  of  tlie  company  with  some  other  (a).  In 
Gaskell  V.  Chambers  {b),  the  directors  of  a  company,  which  amal- 
gamated with  another  company,  received  from  the  latter  a  consid- 
erable sum,  the  particulars  of  which  they  kept  secret.  In  a  snit 
instituted  on  behalf  of  the  shareholders  in  the  first  company,  this 
money  was  held  prima  facie  to  belong  to  them,  audit  was  ordered 
to  be  paid  into  Court.  (^) 

So,  if  on  the  formation  of  a  company,  its  directors  receive  bonuses 
or  other  advantages  from  the  promoters  on  a  sale  to  the  company, 
or  on  the  adoption  or  ratification  of  a  contract  by  the  company,  they 
can  be  compelled  to  account  for  what  they  so  receive,  (c) 

Another  illustration  of  the  same  general  principle  is  afforded  by 
Directors  quaii-  tliosc  cascs  in  wdiicli  a  director  has  had  shares  allotted 
of  a  fompany.  to  him  as  a  qualification,  and  has  had  them  paid  up 
out  of  money  belonging  to  the  company,  and  been  compelled  to 
refund  the  money  so  paid.  (cZ) 

Indeed,  it  is  not  going  too  far  to  say  that  every  director  of  acom- 
contractsbe-  P^'IY  is  bouud,  wheu  his  personal  interest  conflicts 
and'^^their''^^'^^  witli  liis  duty  to  the  shareholders,  to  perform  his  duty 
companies.  towards  them  at  the  sacrifice  of  hi  s  own  interest;  and 
a  transaction  in  wdiich  a  director,  on  behalf  of  the  company,  has  in 
fact,  been  dealing  with  himself  as  an  individual,  cannot  stand.' 
This  was  solemnly  decided  in  the  House  of  Lords,  where  it  was 
unanimously  held,  tiiat  a  contract  entered  into  between  a  firm  of 
ironfounders  for  the  supply  of  railway  chairs  to  a  company,  one  of 
the  directors  of  which  was  a  member  of  the  firm,  clearly  could  not  be 

(rt)  General  Exchange  Bank  v.   Hor-  (d)  Hay's  case,  10  Cli.  593.   See,  also, 

ner,  9  Eq.  480.  Carling's  case,  1  Ch.  D.   115.      These 

{]))  26  Bf  av.  360.  cases  will  be  noticed  hereafter  under  the 

fc)  See  Madrid  Bank  r.  Pelly,  7  Eq.  head  Contributories. 

442,  and  th.^  last  two  notes,  and  the  cases  ^  See,  generally,   1    Story's  Eq.   Jur. 

ante  §  323,  and  notes. 
708 


C!IAI>.  II.]     DIRECTOKS  CANNOT  MAKE  riiOFIT  OUT  OF  THE  COMPANY,      "^'tl'l 

enforced  a^'ainst  the  company,  (e)  This  doci.-ion  did  not  turn  upon 
any  act  of  Parliament,  but  was  based  upon  the  general  principles 
applied  by  courts  of  equity  to  trustees  and  assents  in  their 
dealings  witli  those  whose  interests  are  ^committed  to  their  *.V.'l 
charge.  The  same  principles  unfortunately  were  not  for- 
merly recognized  at  law  to  the  same  extent  as  in  equity;  and  it  was 
therefore  to  be  regretted  that  the  Companies  act,  18G2,  contained 
no  provisions  similar  to  those  in  the  repealed  act  7  &  8  Yict.  c.  110, 
making  void  contracts  between  companies  and  their  own  directors 
unless  sanctioned  by  the  shareholders.  (/)  But  since  the  Judica- 
ture act  this  has  probably  ceased  to  be  of  any  consequence. 

"Whetlier,  however,  this  be  so  or  not  it  is  clearly  settled  that  the 
directors  of  a  company  cannot,   without   its  consent.  Profits  made  by 

^        •'  .  tmnsarting 

make  a  profit  at  its  expense  in  the  course  of  business  business. 
transactions  with  it  or  for  it.  This  is  shown  by  Albion  Steel  and 
Iron  "Works  Co.  v.  Martin  ((/),  already  alluded  to,  and  by  Imperial 
Mercantile  Credit  Association  v.  Coleman,  (h)  In  that  case  a 
director  of  a  financial  company  was  autlicrized  to  do  some  business 
for  it  at  a  certain  commission  to  be  ]^aid  to  the  company.  lie  in 
fact  got  a  larger  commission,  and  it  was  held  the  company  was  en- 
titled to  it,  although  he  had  told  the  other  directors  that  he  had  an 
interest  in  the  transaction.  He  never,  however,  told  them  what 
his  interest  was;  and  it  was  held  that  in  order  to  entitle  himself  to 
the  commission  he  was  bound  to  make  a  full  disclosure  of  his  in- 
terest, (i) 

But  directors  may  issue  debentures  of  a  company  at  a  discount 
if  they  cannot  issue  them  at  par;  and  it  has  been  held  Taking  debcn- 

1  .',,  ■,.  1  />     1  1  •  1 /»  1         tures  at  a 

tliat  it  a  director  takes  some  oi  them  himseli  at  the  disiuunt. 
same  price  as  they  are  issued  to  other  people,  he  cannot  be  com- 
pelled to  pay  their  full  value,  (k) 

The  principles  illustrated  and  enforced  in  the  preceding  ]iages 

(e)  Aberdeen  Rail.  Co.  v.  Blaikie.   1  (r/)   1  Ch.  D.  580,  mite,  p.  rm. 

:MacQ.  461.    See,  also,  Flanagan  v.  Gt.  (/()  L.  R.  6  H.  L.  189,  rcvcrsinfr  S. 

Western  Rail.  Co.,  7  Eq.  116 ;  Murphy  r.  C.  6  Ch.  558. 

O'Shea.  2  Jo.  &  Lat.  422.  See  Foster  r.  (?)    See,  also,  Dunne  r.  Engli.sh.   1*^ 

The  Oxford  Riiil.   Co.   13   C.  B.   200,  Eq.  524. 
ante,  p.  553.  {k)  Campbell's  ca^e,  4  Ch.  D.  470. 


(/)  See  ante,  p.  553. 


'99 


*592  DUTY    TO    OBSERVE    GOOD    rAITII.  [noOK  III. 

are  moreover  applied  where  all  the  persons  interested  in  the  com- 
c'ase  where  an  P'^^^y  Commit  that  whicli  is  a  fraud  on  those  only  who 
SwduuHvido  subsequently  join  it.  Thus,  in  The  Society  of  Practical 
uuuu  to't'iVr'*"  Knowledge  v.  Abbott  (l),  a  corporation  was  created  by 
cumpany'""^^  charter  w'ith  a  capital  of  20,000Z.  in  four  hundred  50Z. 

shares.  At  the  time  of  the  granting  of  the  charter,  four 
*592     persons  only  held  shares,  *and  they  appropriated  the  whole 

of  tlie  sliares  equally  amongst  themselves,  and  debited 
themselves  in  the  books  of  the  company  with  the  20,000Z.  This 
^odet^yofPrac-  sum  they  did  not  pay,  but  after  spending,  as  they  al- 
edgeu  Abbott,  leged,  16,000Z.  in  taking  and  fitting  up  the  Adelaide 
Gallerj',  they  paid  4000Z.  into  a  l)ank  to  the  credit  of  the  company. 
They  then  sold  shares;  each  for  his  own  benefit,  and  for  what  he 
could  get.  It  M-as  afterwards  alleged  that  SOOOZ.  only,  and  not  16,- 
000/.,  had  been  expended  for  the  purposes  mentioned,  and  that  in 
point  of  fact,  the  four  original  members  of  the  society  had  bene- 
fited themselves  at  the  expense  of  the  society  to  the  extent  of  8000?. 
A  bill  was  filed  by  the  company  against  them  for  an  account,  in 
order  to  compel  them  to  pay  this  amount;  and  a  demurer  to  the 
bill  was  overruled,  although  it  was  strongly  urged  on  behalf  of  tlie 
defendants,  that  they  were  the  company  at  the  time  when  the  acts 
complained  of  were  done,  and  that  they  therefore  had  a  right  to  do 
as  they  liked  with  the  shares.  • 


The  duties  of  the  directors  as  trustees  are  by  no  means  confined 
to  an  obligation  to  account  to  the  company  in  respect  of  gains 
made  by  themselves  at  its  expense. 

Directors  are  responsible  for  the  loss  of  the  company's  assets  if 
Liability  for  ^^^^^  ^^^^  ^^  attributable  to  the  employment  of  the  assets 
assets  lost.  jj-,  ^  manner  and  for  purposes  not  warranted  by  the 
constitution  of  the  company,  (m)  Thus,  in  the  Land  Credit  Co.  of 
Ireland  v.  Lord  Fermoy  (n),  the  directors  of  a  company  who  had 

(?)    2  Beav.  559.     See,  also,  the  ob-  where  they  act  bona  fide  and  with  the 

servations  of  Jessel,  M.  R.,  in  5  Ch,  D.  sanction  of  a  majority  of  shareholders. 

113,    as    to    duties    to    future    share-  (n)  8  Eq.  7,  and  5  Ch.  763.     See, 

liolders.  also.  Joint  Stock  Discount  Co.  v.  Brown, 

(w)  But  see  Pickering  v.  Stephenson,  8  Eq.  381.    Compare  Turquand  v.  Mar- 

14  Eq.  342,   as    to    their  nou-liabihty  shall,  4  Ch.  876. 
800 


criAP.  II.]  DiKKcroits  i.i.M'.LE  FOR  ^•i•;(;i,u . i.N(  K.  *i303 

inipropcrlv  employed  its  I'mids  in  liuyin<T^  np  its  own  slmres  were 
lield  liable  to  r('j)lace  the  liiiids  so  spent.  So  in  Grimes  v.  Harri- 
son (o)  the  directors  of  a  bnilding  society  were  lield  liable  to  make 
good  money  of  the  society  improperly  ex]>ended  in  the  pnr- 
chascofland.  So  if  directors  are  parties  *to  a  fraudulent  ^oOo 
transaction  by  which  their  company  suffers  loss,  thev  can  be 
com])elled  to  indemnify  it  against  such  loss,  (j)) 

The  ])rupertyof  a  company  is  so  far  regarded  as  in  the  nature  of 
trust  property  that  it  can  be  recovered  by  the  c.)nipa-   Actionstore- 

'  .  -    ,  1  1  •       •over  property 

ny  from  any  person   who  has    ol»tained   it  Ircnn   the  di-   oiacoiupuny. 
rectors  with  notice  that  they  are  acting  beyond  their  powers  (q.) 

Although,  generally  speaking,  directors  have  a   wide  discretion, 
and  in  the  absence  of  proof  of  wa?^  ;?^/t^5,   it    may    be    Cnipabic  ncgu- 

*  t^  '  "  fioiue  unci  wil- 

difhcult  to  establish  a  case  of  culpable  negligence  or  mi  default, 
willful  default,  yet  if  such  a  case  be  proved,  and  loss  by  the  compa- 
ny attributable  thereto  be  also  proved,  the  directors  will  be  liable 
to  make  good  such  loss  (r.)  Thus  in  Evans  v.  Coventry,  it  was 
sought  to  make  the  directors  of  a  company  responsible  xcfriigence  in 
for  monies  of  the  coin])any  embezzled  by  its  secretary,  taking  security, 
on  the  ground  that  the  directors  had  neglected  to  obtain  security 
for  liis  good  conduct,  as  they  were  required  to  do  by  the  company' 
deed  of  settlement.  The  deed  only  required  the  directors  to  take  sucl 
security  as  they  thought  proper,  and  no  collusion  or  dishonesty  was 
imputed  to  them,  and  under  these  circumstances  the  Y.-C.  Kin- 
derslev  held  that  thej  were  not  liable  to  make  good  the  monies  in 
question  (s.)     But  on  appeal,  an  iixpiiry  on  the  subject  was  direct- 

(o)  26  Beav.  4.S.5.  ny.    Its  title  was  based  on  a  sham  and 

ip)  See  Parker  r.  Lewis,  8  Ch.   10.%,  fraudulent  transaction.     In  Grimes    v. 

where  the  court  held  there  was  no  loss  Harrison,  26  Beav.  4^1'^,  the  purchaser 

caused  by  the  fraudulent  transaction.  of  the  company's  property  wa.s  held  to 

((7 )  Biyson  r.  Warwick  and  Binning-  have  had  no  notice  of  the    directoi-s' 

ham    Rail.  Co.  4  DeG.   M.  &  G.   711,  want  of  authority  to  sell  it.     As  to    or- 

and  Ernest  v.  Croysdill.  2  DeG.  F,  &  J,  dering  defendants  in  such  cases  not  to 

175,  which  require  to  be  studied  togeth-  part  with  the  property  pembng  litiga- 

er.     See,   also,  Hardy  i'.   Metropolitan  tion,  see  Bank  of  Turkey  »•.  Ottoman 

Land,  &c.,  Co.,  7  Ch.  427,  reversinff  12  Co.  2  Eq.  366  ;  Hagell  v.  Currie,  2  Ch. 

Eq.  886.   .Gray  r.  Lews,  8Eq.  r)26.  was  449. 

decided  on  this  prmciple,  and,  although  (r)  See  Charitable  Corp.  r.  Sutton,   2 

reversed,  8  Ch.  10:i-"),  may  be  usefully  re-  Atk.  400.  and  Overend,  Gurney,    &   Co. 

fen-ed  to  as  illustrating  the  principle.  i'.  Gibb.  L.  R.  •">  H.  L.  4S0. 
'i'he  money  there  sought  to  be  recovered  is)  Evans  r.  Coventry,  2  Jur.  N.    S. 

never,  in  fact,  belonged  to  the  compa-  557. 

"  801 


'  s 
I 


*j94:  cui.pabi.e  nkgligknce  and  wilful  default,     [book  in. 

ed,  witli  a  view,  it  is  conceived,  to  make  the  directors    responsible, 
if  the  result  of  the  inquiry  should  pi'ove  adverse  to  them  (t.) 

"od4:       Although  the  ^directors  had  a  discretion  as  to  what  security 
tliey   should  require,  they  were  culpably  negligent  in  taking- 

none  at  all. 

Again,  in  Western  Bank  of  Scotland 'W.  Bairds  ('?^),  directors  were 

„  ^  ^  held  liable  for  losses  sustained  by  reason  of  their  ne<^- 

Not  stopping  _  -^  " 

Company.  ]ect,  in  iiot  causiug  the  business  of  the  company  to  be 

stopped  pursuant  to  a  provision  to  that  effect  in  its  articles  ;  and 
although  in  a  subsequent  English  case  of  a  similar  nature  the  de- 
cision was  different,  that  ease  was  decided  on  the  ground  that  the 
shareholders  had  sanctioned  the  continuance  of  the  business,  (a?) 

It  is  clearly  established  that  directors  who  keep  within  the  limits 
No  liabilities      of  their  authority,  and  act  hond  fide  to   the  best   of 

for  orrctrs  of  ,  ' 

judgment.  their    judgment,  are   not  liable  to   make  good  to  the 

company  the  losses  which  may  result  from  their  acts.  Thus  it 
has  bt-en  held,  that  directors  acting  hona  fide^  and  within 
their  powers,  are  not  liable  for  a  loss  arising  from  a  loan  to 
a  co-director  who  had  died  insolvent  (y),  nor  for  losses  oc- 
casioned by  purchasing  a  business  which  they  knew  to  be  insolv- 
ent at  the  time  of  purchase  {z)\  nor  for  omitting  to  take  mort- 
gage securities  to  cover  the  amount  of  the  insolvency,  {a)  Nor- 
are  directors  acting  ho ti A  fide  and  within  their  powers  liable  to  re- 
i'und  to  the  company  sums  paid  by  way  of  commission  and  promo- 
tion money,  to  persons  other  than  themselves,  although  such  paj^- 
ments  may  have  been  made  for  very  inadequate  considerations.  (J) 
Moreover,  if  judgment  has  been  obtained  against  a  company  for 
In  compromis-  ^  hirgc  sum  of  mouey,  and  the  directors,  instead  of  ap- 
ingtaini!,.  pealing,  hond  fide  compromise  the  matter  by  paying 
less  than  the  sum  recov^ered,  they  cannot  becom;»elled  to  refund  to 

(0  S.  C.  8  DeG.  M.  &  G.  835.     See  (//)  Turquanl  v.  Marshall,  4  Ch.  376, 

clause  6  of  the  decree  on  appeal.     Com-  see  p.  386. 

pare  Overend,  Gurney  &  Co.  v.  Gurney,  {z)  Overend,  Gumey  &  Co.  ?'.  Gibb,  L. 

4Ch.  701,  and  Overend,  Gumey  &  Co.  R.  5H.  L.  480,  affirming^  Overend,  Gur- 

r.  Gibb,  L.  R,  5  H.  L.  480,  where  there  ney  &  Co.  f.  Gumey,  4Ch.  701. 

was  no  obligation  to  take  any    security.  (a)  lb.     Compare  Evans  v.   Coventry. 

(w)  Cited  in  4  Ch.  381.  8  DeG.  M.  and  G.  835,  el.  6  of  the  de- 

{x)  Turquand  r.  Mai-shall,  4  Ch.  376,  cree  on  appeal, 

reversing  6  Eq.  112.     See  also,   Leth-  {h)  General  Exchange   Bank    v.  Hor 

bridge  v.  Adams,  13  Eq.  547.  ner,  9  Eq.  480. 

802 


CHAP.  II.]  LIABILITY    OF   DIRECTORS    AS   TRUSTEES.  *590> 

the  company  wliat  tliej  so  pay,  although  the  judgment  against  the 
company  may  have  been  erroneous  (c.) 

*The  most  difficult  question  which  arises  with  reference     *595 
to  the  liability  of  directors  is  the  extent  to  which  each  is 
liable  for  the  acts  of  the  other.     The  foHowing  appear   linbjiityof 
to  be  the  principles  ap])licable  to  this  subject  : —  mtsof ^ach 

1.  All  those  directors  who  are  actually  implicated  in   ''^'*'-"''- 

a  breach  of  trust  by  misapplj-ing  the  company's  money  (even 
although  they  only  sign  cheques  prepared  by  others),  are  jointly 
and  severally  liable  for  the  losses  arising  therefrom,  (d) 

2.  Directors  who  know  of  and  sanction  such  a  breach  of  trust 
are  implicated  in  it  within  the  meaning  of  this  rule,  although  they 
do  not  actively  take  part  in  it.  (e) 

3.  So  are  directors  who  know  of  the  breach  of  trust,  but 
take  no  steps  to  prevent  it  beyond  writing  a  letter  of  disap- 
proval. {/) 

4.  Where  their  liability  is  to  account  for  profits  improperly 
received  by  them,  they  are  only  severally  lial)le  for  their  own 
receipts,  and  are  not  jointly  and  severally  liable  for  each  other's 
receipts,  (g)  But  it  is  submitted  that  their  liability  is  joint  and 
several  if  there  has  been  a  joint  receipt  by  them  all,  and  then  a 
division  amongst  themselves  of  what  they  have  all  received;  or  if 
they  have  all  been  implicated  in  some  joint  breach  of  trust  result- 
ing in  profit  to  them  all. 

5.  It  has  been  decided  that  a  director  who  is  not  cognizant  of  a 
breach  of  trust  committed  by  his  co-directors,  and  who  takes  no 
part  in  it,  is  not  liable  for  it.  (A)  This  point,  however,  involves 
the  question,  whether  a  director  is  not  bound  to  make  himself 
acquainted  with  what  his  co-directors  are  doing,  and  to  take  such 
steps  as  may  be  in  his  power  to  prevent  them  from  doing  wrong. 
On  tiiis  question  opinions  differ,  and  it  can  scarcely  be  con- 
sidered as  settled,  {i)      If,  *indeed  (as  often   happens),  the     *596 

(c)  See  Parker  v.  Lewis  8  Ch.  10^5.  Brown,  8  Eq.  381. 

(rf)  Joint  Stock  Discount  Co.  ».  Brown,  (g)  Parker  r.   McKenna,  10  Ch.  96  ; 

8  Eq.   381  ;  Land  Credit  Co.   v.   Lord  General  Exchange  Bank  r.   Homer,   9 

Fennoy,  8  Eq.  7,  5  Ch.  763.  Eq.  480. 

(e)  Land  Credit  Co.  r.  Lord  Fermoy.  (/»)  Joint  Stock  Discount  Co.  r.  Brown, 

8  Eq.  7,  and  5  Ch.  763,  where  the  sub-  8  Eq.  381  ;  Ashurst  r.  Mason,  20  Eq. 

committee  were  the  persons  more  imme-  225. 

diately  to  blame.  (/)  Compare  the  judgment  of  the  M. 

(/)    Joint    Stock    Discount   Co.    r.  R.  in  the  Land  Credit  Co.  r.  Lord  Fer- 

803 


*507  DIRKCTOUS'    POWERS    TREATED    AS    TRUSTS.  [bOOK  III. 

co'.istitu  I  ion  of  tlie  company  is  such  as  to  justify  a  director  in 
kavinir  certain  matters  to  his  co-directors,  or  some  of  them,  he 
is  jufctlticd  in  trusting  them  with  such  matters,  and  is  not  responsi- 
ble for  breaches  of  trust  committed  by  them  and  concealed  from 
iiim.  (k)     But  in  other  cases  his  irresponsibility  is  by  no  mcfin  so 

clear. 

6.  Xor,  it  seems,  is  a  director  liable  for  breaches  of  trust  com- 
mitted by  liis  co-directors  before  he  became  a  director  but  after- 
wards discovered  by  him.  (l)  In  this  case  the  new  director's  lia- 
bility, if  any,  can  only  be  for  the  loss  sustained  by  the  company 
by  reason  of  his  omission  to  make  known  what  he  has  discovered, 
and  to  compel  the  real  delinquents  to  make  good  their  breach  of 
trust;  and  it  is  very  questionable  whether  an  incoming  director  is 
liable  in  point  of  law  for  such  omissions. 

That  powers  reposed  in  directors  are  regarded  as  being  in  the 
Po^vers  of  di-  nature  of  trusts,  is  clearly  shown  by  Gilbert's  case  {m), 
^Imstr^'^*^  in  which  it  was  held  that  a  director  could  not  ex- 
ercise his  power  of  making  calls  for  his  own  benefit  and  without 
regard  to  the  interests  of  the  company:  and  in  that  case  a  call  was 
postponed  in  order  to  enable  a  director  to  transfer  his  shares,  and 
a  transfer  by  him  in  the  interval  was  held  invalid.  There  are 
other  cases  which  show  that  directors  have  no  right  to  favor  ona 
set  of  shareholders  more  than  another  (71);  and  that  powers  of  ac- 
cepting surrenders  of  shares  and  of  forfeiting  them,  must  be  exer- 
cised lond  fide  for  the  purposes  for  which  they  are  conferred.  {0) 
Before  leaving  the  subject  of  the  liability  of  directors  to  make 

„      ,  sood  assets  oif  the  company  improperly  lost  or  parted 

Effect  of  t^  \.  1       1        . 1  i.    J.1 

acquiescence,  -^yith,  or  to  accouut  for  profits  made  by  them  at  the 
expense  of  the  company,  it  is  material  to  consider  whether  the 
shareholders  have  acquiesced  in  what  has  been  done  or  not.  Cases 
indeed  may  occur  where  their  acquiescence  is  immaterial, 
*597     but  *this  is  only  where  the  company  is  incorporated  and  its 

moy.  8  Eq.  7,  with  the  last  cases,  and  contra  there  cited. 

see  Turquand  v.  Marshall,  4  Ch.  385.  {m)   5  Ch.   559.      See,    also,    Sykes' 

(k)  Land  Credit  Co.  v.  Lord  Fermoy,  case,  IB  Eq.  255,  as  to  paying  caUs  in 

b  Ch.  763,  reversing  on  this  point,  S.  C.  advance,  and  then  talring  them  back  for 

8  Eq.  7.  fees. 

(?j  See  Ashurst  v.  Mason,  20  Eq.  226;  (")  Richardson  v.  Lari^ent,  2  T.  &  C 

Turquand  v.  Marshall,  4  Ch.  385  ;  Evans  C.  C.  507  ;  Han-is  v.  The  North  Devon 

V,  Coventry,  8  DeG.  M.  &  G.  835,  de-  Rail.  Co.  20  Beav.  384. 

cree  cl.  2  ;  but  observe  the  Scotch  cases  (0)  Infra,  c.  5,  §§  7  &  8. 
8.04 


CHAP.  II.]  LIABILITY    OF    DIRECTORS    AS   TRUSTEES.  *59S 

funds  have  been  applied  in  a  manner  wlilch  the  shareholders 
could  not  in  point  of  law  sanction  or  ratify,  (p)  In  other  cases  the 
acquiescence  of  the  shareholders  affords  a  complete  defense  to  the 
directors:  e.  g., 'svhcve  it  is  attempted  to  make  them  refund  divi- 
dends improperly  paid  to  the  shareholders  (j);  or  to  make  good 
losses  sustained  by  the  company  after  its  business  ought  by  the 
articles  to  have  been  stopped,  but  which  the  shareholders,  knowing 
the  facts,  allowed  to  be  continued,  (r)  Again,  where  a  director  has 
made  a  profit  at  the  expense  of  the  company,  and  this  panctionbv 
circumstance  is  known  to  the  other  directors,  and  they,  other  diructore. 
acting  ho)idJide,  sanction  it,  having  power  so  to  do,  the  shareholders 
and  the  company  will  be  bound  by  their  sanction,  (s) 

The  right  of  directors  as  trustees  to  be  indemnified  by  the  com- 
pany against  expenses  and  liabilities  incurred  by  them 

•        1  •  ■     1      .  -,11         1,      1     1  1  Indemnity. 

in  the  exercise  ot  their  powers,  will  be  alhided  to  here- 
after. (^)  But  it  may  be  pro})crly  observed  here  that  directors  may 
be  entitled  to  contribution  and  indemnity  amongst  themselves  in 
respect  of  a  dcjuand  against  them  on  the  part  of  the  company,  (u) 
Thus,  where  shares  in  a  company  were  ]Mirchased  and  transferred 
into  the  name  of  a  director  as  trustee  lor  the  company,  pursuant 
to  a  resolution  of  the  board  which  was  not  binding  on  the  com- 
pany, it  M'as  held  that  he  was  entitled  to  be  indemnified  by  the 
other  members  of  the  board  who  had  concurred  in  the  transaction 
against  the  claims  made  on  him  by  the  company,  (a?) 


•SECTION  III.— OF  THE  POWERS  OF  MAJORITIES.'         *59S 

In  the  event  of  a  difference  arising  between  partners,  it  becomes 
necessary  to   consider  whether  there  is  an\'-  method  of   Disputes 

1  ••  I'lPi  •  •  1  between 

deternnning  which  or  them  is  to  give  way  to  the  other,   pamiers. 
It  is  not  uncommonly  supposed  by  the  public,  that  the  minority  of 

ip)  As  in  Society  of  Practical  Knowl-  informed  of  the  fact.'', 
edge  V.  Abbott,  2  Beav.  559,  ante,  pp.  {f)  Infra,  book  lii.  c.  6,  §  1. 

591,  592  ;  and  see  p.  258,  et  seq.  (»)  See  Asliurst  v.  Mason,  20  Eq.  225, 

{q)  Turquand  v.  Marshall,  4  Ch.  376.  and  Ashurst  r.  Fowler,  ib. 

(r)  Ibid.  See,  also,  anie,  p.  594.  (x)  See  the  cases  in  the  last  note.     A 

(s)   Imperial  Mercantile  Credit  Assoc.  director  who  wius  only  present  when  the 

V.  Coleman,  6  Ch.  558,  reversed,  L.  R.  6  transfer  was  formally  approved  wiis  held 

H.  L.  189,  but  only  on  the  ground  that  not  liable, 
the  other  dii-ectors  were  not  sutticiently  '  See  post,  899,  et  seq. 

805 


*598  POWER   OF    MAJORITY.  [bOOK  UI. 

the  partners,  if  they  are  nnequallj  divided,  must  submit  to  the  major- 

it}'.     But  this  is  by  no  means  the  case;  for,  as  will  be  seen  presently, 

the  majority  cannot  oblige  the  minority  except  within  certain  limits. 

The  first  point  to  determine  is,  whether  the  partnership  articles, 

or  in  the  case  of  a  company  the  act,  charter,  or  deed 

How  to  be  ,,,,,.. 

seuicd.  Qf  settlement,  or  regulations  by  which  it  is  governed, 

do  or  do  not  contain  any  express  provision  applicable  to  the  matter 
in  question  ;  for  if  they  do,  such  provision  ought  to  be  obeyed,  (y)' 
If  they  do  not,  then  the  nature  of  the  question  at  issue  must 
be  examined  ;  for  there  is  an  important  distinction  between  differ- 
ences which  relate  to  matters  incidental  to  carrying  on  the  legiti- 
mate business  of  a  partnership  or  company,  and  differences  which 
i-elate  to  matters  with  which  it  was  never  intended  that  the  part- 
nershij)  or  company  should  concern  itself. 

"With  respect  to  the  first  class  of  differences,  regard  must  be  had 
1.  Disputes  on    to  the  State  of  things  actually  existing  ;  for,  as  a  rule, 

matters  arising     .„     ,  n        t"    •  i     i     .i  i        <>     i  •  i 

iiior.iinary        if  the  partners  are  equally  divided,  those  who  forbid  a 

course  of  ^  ,     ,  .  .  , 

business.  change  must  have  their  way  :  %n  re  comimim  j^otior 

est  conditio  prohihentis.  {z)  Upon  this  principle  it  is  that  one 
partner  cannot  either  engage  a  new  or  dismiss  an  old  servant 
Power  of  against  the  will  of  his  co-partner,  (a)     If,  however,  in 

major  ty  in  "  -?   .1  •       i  •     -  •  •  ^    j    v        ^ 

such  cases.  a  case  of  this  description,  unprovided  for  by  previous 
agreement,  the  partners  are  unequally  divided,  the  minority  must 
give   way   to   the   majority,  {by       This   doctrine   has   been   held 

('//)  The  distinction  bet.ween  clauses  Robinson  v.   Thompson,  1  Vern.   465; 

that  are  directory  and  those  that  are  ina-  as  to  opening:  accounts,  Morgan's  case, 

perative  will  l^e  adverted  to  hereafter.  1  M.  &  G.  235. 

The  general  obligation  to  observe  the  ^  In  directing  the  business  of  a  part- 
provisions  of  companies'  deeds  of  set-  nership,  a  majority  shall  govern,  not- 
tleraent  will  be  found  well  put  in  withstanding  the  dissent  of  the  minor- 
Brown's  case,  19  Beav.  97.  and  Lawes'  ity.  Peacock  v.  Curamings,  5  Phila. 
case,  1  DeG.  M.  &  G.  421.  253;  46  Pa.  St.  434;  Kirk  v.  Hodgson, 

■■'See  Waterbury  v.   Express  Co.  50  3  John.  Ch.  400;  Waterbury  t;.  Express 

Barb.  157;  3  Abb.  Pr.  (N.  S.)  163.  Co.  50  Barb.  157;  S.  C.  3  Abb.  Pr.  (N. 

(z)  But  see  as  to  the  employment  of  a  S.)  163;  Peacock  v.  Cummings,  46  Penn. 

ship,  Abbott  on  Shipping,  p.  82,  ed.  9  ;  St.   434;  Johnston  v.   Button,  27  Ala. 

and  as  to  completing  contracts  already  245;  Campbell   v.   Bowen,  49  Ga.  417. 

entered  into,  Butchart  v.  Dresser,  4  DeG.  See,  also,  Livingston  v.  Lynch,  4  John. 

M.  &  G.  545.  Ch.  573;  Western  Stage  Co.  v.  Walker, 

(a)  See  Donaldson  v.   Williamson,  1  2  Iowa,  504;  Irvine  v.  Forbes,  11  Barb. 

Cr.  &  M.  345.  587.    See,  however,  Yeager  v.  Wallace, 

{h)  See  Gregory  v.  Patchett,  33  B«av.  57  Penn.  St.  365. 
595 ;  Const  r.   Hanis,  T.   &   R.   518  ; 

806 


CHAP.  II.] 


MATTERS    WITHIN    SCOPE   OF    BUSINESS. 


*r 


99 


to  ajiply  wliere  the  *majority  wished  to  make  a  division  of  *599 
profits,  without  first  paying  an  outstanding  debt  (c);  where 
the  majority  wislied  to  borrow  money (</);  where  the  majority 
resolved  to  assign  all  the  joint  property  to  trustees,  upon  trust  for 
sale  and  distribution  amongst  the  joint  creditors  (e);  wliere  the 
majority  resolved  on  leasing  a  part  of  the  property  of  the  com])any 
for  a  temporary  purpose  (/);  where  the  majority  of  the  subscribers 
to  an  abortive  company  resolved  that  the  subscriptions  should  be 
i-etiirned  (;/);  and  where  the  majority  approved  and  adopted  ac- 
counts fairly  laid  before  them.  (A)     But  it  seems  that  a  majority 


The  members  of  a  private  association, 
as  a  telegraph  company,  are  not  part- 
ners. They  are  tenants  in  common  of 
the  property  and  franchise  belonj,nn^ 
to  the  company,  and  the  majority  cannot 
bind  the  minority, unless  by  special  agree- 
ment.    Irvine  r.  Forbes,  11  Barb.  51^7. 

Three  persons,  acting  together,  bor- 
rowed a  sum  of  money  from  a  bank, 
and  shipped  a  lot  of  cattle  to  market 
consigned  to  another  person  to  sell,  who, 
after  making  sale  and  paying  expenses 
and  charges  and  a  mortgage  on  the 
cattle,  held  about  half  of  the  proceeds 
in  his  hands.  One  of  the  partners  di- 
rected him  to  pay  this  balance  to  the 
bank,  and  he  agreed  to  hold  it  subject 
to  the  order  of  the  partners,  and  he 
paid  it  to  one  of  the  partners  by  his  and 
the  direction  of  another,  they  two  con- 
stituting a  majority:  Held,  that  the 
direction  of  one  partner  to  pay  to  the 
Ijank.  and  what  he  said,  gave  the  bank 
no  lien  on  the  fund.  The  agent  wiis 
authorized  to  pay  it,  as  he  did.  under 
the  direction  of  the  other  two  partners; 
and  as  he  paid  the  money  before  the 
bank  filed  their  bill  to  enforce  payment 
out  of  the  fund,  there  was  nothing  up- 
on which  an  equitable  lien  could  atiach. 
Steele  v.  First  Nat.  Bank,  GO  111.  L>.S. 

A  co-partnership  had  been  esta1)lished 
to  purchase  Cherokee  lands,  and  to  work 
them  for  mining,  etc.,  as  partners.  One 
of  the  specifications  in  the  agreement 
of  co-partnership  was  to  be  that  such 


disposition  was  "  made  of  their  property 
as  a  majority  should  deem  advisable,  " 
two  of  the  partnei-s  having  become  in- 
solvent, and  a  third  nearly  so,  and  all 
having  abandoned  the  work  and  neg- 
lected payment  of  the  installments  for 
the  purchase  money,  leaving  the  whole 
burden  upon  the  fourth  partner;  neither 
of  these  three  partners  has  a  right  to 
complain  in  equity  that  the  fourth  part- 
ner in  order  to  relieve  his  sureties,  has 
disposed  of  the  land  without  the  concur- 
rence of  a  majority,  especially  is  this 
true  as  to  a  purchaser  hondjide,  and 
without  notice,  for  value,  from  such 
fourth  partniT,  all  they  can  ask  is  an  ac- 
count from  the  fourth  partner.  Rhea  r . 
Vannoy,l  Jones'  Eq.  283;   ib.  290. 

(c)  Stevens  v.  The  South  Devon  Rail. 
Co.,  9  Ha.  326.  and  see  Gregory  r. 
Patchett,  3:3  Beav.  595. 

{d)  See  B)'ron  v.  The  Metropolitan 
Saloon  Omnibus  Co.  3  De  G.  &  J.  123, 
affirming  S.  C.  4  Jur.  N.  S.  680  ;  Aus- 
tralian Auxiliary  Steam  Clipper  Co.  f. 
Mounsey,  4  K.  k  J.  7:«. 

{)')  Lord  r.  Governor  and  Co.  of  Cop- 
per Miners,  2  Ph.  740. 

(/)  Simpson  v.  Westminster  Palace 
Hotel  Co.  2  De  G.  F.  &  J.  141.  See, 
also.  Forest  r.  Manchester  and  Sheffield 
Rail.  Co.  30  Beav.  40,  and  on  appeal, 
4  De  G.  F.  &  J.  126. 

((/)  Kent  V.  .Jiickson,  14  Beav.  367, 
and  2  Del  J.  M.  Sc  G.  49. 

(;i)  Kent  r.  Jackson,  2  Pe  G.  M.  Sc 

807 


-=•000 


rOWEU    OF    MAJOKITY.  [iJOOK  III. 


cannot  a-ainst  the  will  of  the  minority  delegate  to  a  manager  the 
right  to  sign  the  partnership  name,  {i) 
"Moreover,  the  legitimate  business  of  a  partnership  or  company 
,   ,    includes  whatever  may  be  necessary  for  carrying  on  its 

Mutters  includ-  ,  .    ,     .      .  •, .  .1  •     t 

ediiior.ii-         l.n^iness  in  the  w^av  in  which  it  is  oramarilv  carried  on 

narv  course  of      '^"'^'  ./  - 

business.  ■!,,„  Qthcr  people.  {Jc)     Hence,  wliere  the  directors  ot  a 

fire  insurance  company,  the  policies  of  which  did  not  cover  losses 
occasioned  by  explosions  of  gunpowder,  paid  claims  made  iu  con- 
sequence of  losses  so  occasioned,  and  it  was  proved  that  other  com- 
panies generally  did  the  same  .thing,  although  not  bound  to  do  so, 
it  was  held  that  such  payments  could  not  be  restrained.  (/)  So  a 
railway  and  ferry  company  may  use  its  fen-yboats  for  excursion 
tri])s  when  not  wanted  for  the  ferry,  (w) 

In  questions  of  the  class  now  under  consider- 
wiS' '°        *^jt)0     ation,  the  views  *of  the  majority  may  vary  from 
time  to  time,  and  effect  must,  it  is  conceived, 
be  given  to  them  as  they  cliange.  {n) 

A  very  important  rule  respecting  the  powers  and  votes  of  major- 
Aii  partners  itics  is,  that  a  majority,  to  have  any  weight,  must  act 
heariL  "^  ^  and  bc  constituted  with  perfect  good  faith  ;  for  every 
partner  has  a  right  to  he  consulted,  to  express  his  own  views,  and 
to  have  those  views  considered  by  his  co-partners.  In  the  language 
of  Lord  Eldon,  "  that  is  the  act  of  all  which  is  the  act  of  the  majority, 
provided  all  are  consulted,  and  the  majority  are  acting  boful  Jide, 
meeting  not  for  the  purpose  of  negativing  what  any  one  may  have 
to  offer,  but  for  the  purpose  of  negativing  what,  when  they  are  met 
together,  they  may  after  due  consideration  think  proper  to  nega- 
tive. For  a  majority  of  partners  to  say,  We  do  not  care  what  one 
partner  may  say  ;  we,  being  the  majority,  will  do  what  we  please, 
is,  I  apprehend,  what  a  court  of  equity  will  not  allow."  (o) 

a.  40.  and   14  Beav.  3G7  ;  Stupart  v.  field  Rail.   Co.  30  Beav.  40,  and  4  De 

Arrowsmith,  3  Sm.  &  G.  176.  G.  F.  &  J.  126. 

((')  See  Beveridge  v.  Beveridge,  L.  R.  (n)  See  Exeter  Rail.  Co.  v.  Bnller,  5 

2  Sc.  App.  183.  Ra.  Ca.  211,   and  A.-G.  v.   Gould,  28 

(k)  See  ante,  p.  236,  et  seq.  Beav.  485. 

(/)  Taunton    v.  Royal  Insur.  Co.   2  (0)  Const  v.  Hams,  Tnm.  &  R.  525, 

Hem.  &  M.  135.     See  on  this  case,  and  and  see  ib.  518,  and  Blissett  v.  Daniel, 

and  those  cited  in  note  (/),  Joint  Stock  10  Ha.  493  ;  Great  Western  Rail.  Co.  t?. 

Discount  Company  v.   Brown,    3    Eq.  Rushout,  5  DeG.  &  Sm.  310,  and  fur- 

139.  ther  as  to  agreements  precluding  im- 

{m)  Forrest  v.  Manchester  :.nd  Shef-  partial  voting,  ante,  p.  548. 


CHAP.  II.]  MATTEUS    UE/^  ND    SCOPE    OF    BUSINESS.  *601 

Moreover,  where  pr>\vcrs  are  conferred  on  a  innjority  present  at  a 
meeting  of  not  less  than  a  certain  .number  of  persons,  Majorities  at 
unless  such  meetinf;  be  diilv  convened  and  the  requisite  °'^^  '"''^' 
number  be  present  at  tlie  meeting  the  powers  in  question  cannot  be 
exercised  ;  and  altliough  it  may  be  true  that  the  required  number 
of  persons  was  summoned,  and  that  the  absentees  could  not  iiave 
turned  the  scale,  this  will  not  render  valid  the  acts  of  the  majority 
of  those  actually  present,  for  that  is  not  such  a  majority  as  was 
originally  contemplated,  (p) 

Passing  now  to  a  second  class  of  differences,   viz.,   those  which 
relate  to  matters  witli  which  the  i)artnership  was  never  2.   Disputes  on 

^  '  matters  involv- 

intended  to  concern   itself,  it  has  been  over  and  over  ing  a  change 

'  111  the  nature  01 

again  decided  that  no  mojority,  however  large,  can  law-  the  business, 
fully  engage  the  partnership  in  such  matters  agadnst  can  Sd^'^°' 
the  will  of  even  one  dissentient  partner.'     Each  part-  change. 
ner  is  entitled  to  say  to  the  others,  "I  became  a  partner  in  a  con- 
cern  formed  for  a  definite  purpose,  and  upon  terms  which 
were  agreed  upon  by  all  of  us,  *and  you  have  no  right,     *601 
without  my  consent,  to  engage  me  in  any  other  concern,  or 
to  hold  me  to  any  other  terms,  or  to  get  rid  of  me,  if  I  decline  to 
assent  to  a  variation  in  the  agreement  by  which  you  are  bound  to 
me  and  I  to  you."     Nor  is  it  at  all  material  that  the  new  business 
is  extremely  profitable,  {q)     This  principle  is  applicable  to  all  part- 
nerships and  companies,  whether  great  or  small,  and  is  in  companies 

1  '  '  ^  as  weU  as  in 

evidently  one  which  requires  only  to  be  stated  to  be  at  partnerships, 
once  assented  to  as  being  just.'     No  cases  upon  this  subject  can  be 
referred  to  with  greater  advantage  than  Natusch  v.  Irving  anc 
Const  v.  Harris,  both  of  which  were  decided  by  Lord  Eldon.  (;•) 

In  Natusch  V.  Irving  {s),  a  company  was  formed  in   the  early 
part  of  the  year  1824  for  granting  tire  and   life  assur-  f,l^^,?,r,;l.e^''"^ 
ances.     The  capital  was  5,000,000Z.,  divided  into  titty  g"ii;:^i'>;X: 
thousand    100^  shares.     The  plaintitf  was  one  of  the  ancl^'company 

ip)  See     Howbeach     Coal     Co.     v.  536  et  seq. 
Teague,  5  H.  <fe  N.  151  ;  Ex  parte  Mor-  (r)  See,  too,  Davies  v.  Hawkins,  3  M. 

rison,   DeG.  539.      See,  too,  the  cases  &   S.   488;    Fenninprs  r.    Givnville,    1 

cited  ante,  p.  244,  et  seq.  Taunt.  241;  Glassington  v.  Tliwaites,  1 

'  See  Abb#tt  v.  Johnson,  32  K.  TI.  9  ;  Sim.  &  Stu.  131. 
Livingston  v.  Lych,  4  John.  ch.  573.  (.s)  Gow  on  Partnership,   App.  398, 

{q)    A.-G.  V.  Great  Northern  Kail.  od.  3.    See,   also,    The    Phoiuix    Life 

Co.  1  Dr.  &  Sra.  1.54.  Insur.  Co.  2  J.  &  H.  441. 


'  See  Ang.  &  Ames  on  Corp.  §§  391, 


809 


*G02  POWER    OF    MAJORITY.  [bOOK  III. 

original  subscribers,  and  held  fifteen  shares,  in  respect  of  which 
lie  had  iiaid  the  required  deposit,  but  he  had  not  exe- 

Natusch  V.  '  T       1      J.  1  T  r 

Irving.  cuted  the  company's  deed  of  settlement.     In  contorm- 

ity  with  the  rules  of  the  company  he  had  effected  a  policy  with  it 
on  his  life  for  1,500Z.  In  the  summer  of  1824,  the  act  of  6  Geo.  1, 
])rohibiting  companies  from  carrying  on  the  business  of  marine 
insurance,  was  repealed,  and  shortly  afterwards  advertisements 
appeared  in  the  newspapers,  stating  that  the  company  would 
commence  the  business  of  marine  insurance.  The  plaintiff,  in 
answer  to  an  inquiry  whether  this  announcement  was  authorized 
by  the  directors,  was  informed  that  it  was,  and  that  if  he  objec'.ed 
to  the  course  about  to  be  pursued  he  might  receive  back  his  deposit 
with  interest,  and  have  his  policy  cancelled  and  the  premium  re- 
turned. In  reply  to  this,  the  plaintiff  stated  that  he  was  ready  to 
execute  any  deed  which  was  in  conformity  with  the  prospectus; 
that  he  conceived  it  competent  for  him  to  insist  that  the  business 
in  which  he  was  a  partner  should  be  carried    on  according   to  the 

agreement  which  united  the  partners  together;  that  he  could 
•••G02     not  think  his  doing  so  would  entitle  *thc  managers  of  that 

partnership  to  pay  him  out  his  capital,  and  deprive  him  of 
a  share  in  a  concern  of  which  he  had  the  highest  opinion;  that  he 
therefore  required  the  directors  to  abstain  from  any  contracts  or 
engagements  relating  to  marine  insurance,  as  not  being  contem- 
plated by  himself  and  those  who  joined  the  company  upon  the 
terms  of  the  prospectus,  and  that  he  required  an  undivided  at- 
tention on  the  part  of  the  directors  to  the  objects  defined  therein. 
The  plaintiff  afterwards  attended  at  the  ofBce  of  the  company, 
to  execute  its  deed  of  settlement,  but  finding  that  it  contained 
provisions  enabling  the  company  to  carry  on  the  business  of  marine 
insurance,  he  refused  to  execute  it,  as  not  being  conformable 
to  the  terms  on  which  the  company  was  formed.  In  ]iursuance 
of  the  advertisements,  the  company  had  commenced,  and  it  was 
carrying  on,  the  business  of  marine  insurance;  but  there  was  no 
evidence  to  show  acquiescence  on  the  part  of  the  plaintiff,  and  there 
was  evidence  to  sliow  continued  opposition  by  him  to  the  carrying 
on  of  such  business.  The  plaintiff  applied  for  an  injunction  to 
restrain  the  directors  from  effecting  marine  insurances,  and  an  in- 
junction was  granted,  (t)     The  judgment  of  Lord  Eldon,  as  far  as 

{t)  The  bill  was  filed  by  the  plaintiff      shareholders  of  the  company,    against 
on  behalf  of  himself  and  aU  others  tha      the  directors,  and  prayed  a  dissolution, 

810 


CUAP.  II.J  POWER   OF    MAJORITY.  *603 

it  relates  to  the  power  of  a  jn<ij(jrity,   is  particularly  valuable,  aud 
the  following  extracts  from  it  are  constantly  referred  to: 

With  respect  to  the  liberty  given  to  the  plaintiff  to  retire,    his  lordship  said: 
"  An  offer  is  made  to  the  plaintiff  that  he  may  receive  back  his    Answer  to  ob- 
deposit,   with  interest  from  the    date   of   the  payment,    and  he    iiKse',iacuU:an 
is  desired  to  consider  himself  as  having  received  notice  thereof.    ii--tiru. 
But  it  is  not,   I  apprehend,  competent  to  any  number  of  persons  in  a  partner- 
ship  ( unless  they  show  a  contract  rendering  it  competent  to  them )  formed 
for  specified  purposes,  if  they  propose  to  form  a  partnership  for  very  differ- 
ent purposes,   to  effect  that  formation  by  calling  upon  some  of  their  partners 
to  receive  their  subsci-ibed  capital  and  interest  and  quit  the  concern;  and  in  ef- 
fect, merely  by  compelling  them  to  retire  upon  such  terms,  so  as  to  form  a  new 
company.     This  would,  as  to  partnerships,  be  a  most  dangerous  doctrine. 
*Where  a  partnership  is  dissolved  (even  where  it  can  be  in  a  sense  dis-      *603 
solved  the  instant  after  notice  to  dissolve  is  given,  if  there  be  no  contract 
to  the  contrary),  it  must  still  continue  for  the  purjjose  of  winding  up  its  affairs, 
of  taking  and  settling  all  its   accounts,  and  converting  all  the  proi^erty,  means, 
and  assets  of  the  partnership,  existing  at  the  time  of  the  dissolution,  as  bene- 
ficially as  may  be,  for  the  benefit  of  all  who  were  partners,  according  to  their 
respective  shares  and  interests;    and  the  other  partners  cannot  say  to  him  to 
whom  they  have  given  an  offer  of  his  deposit  and  interest.  Take    _ . 
that,  and  we  are  a  new  company,   keeping  the  effects,  means,    need  net  accept 
assets,  and  property  of  the  old,  as  the  property  of  the  new  partner-   iuVemni'iy. 
ship.     The  company  will  indemnify  the  plaintiff  against  loss  by  its 
transactions  already  had,  or  hereafter  to  be  had,  not  for  the  specified  purposes 
of  the  institution.     But  the  right  of  a  partner  is  to  hold  to  the  specified  \mr- 
poses  his  partners  whilst  the  partnership  continues,  and  not  to  rest  upon  indemni- 
ties with  respect  to  what  he  has  not  contracted  to  engage  in.     A  dissatisfied  part- 
ner may  sell  his  shares  for  double  what  he  originally  gave  for  them.     But  he  cannot 
be  compelled  to  part  with  them  for  that  reason  ;  it  may  be  his  principal  reason  for 
keeping  them,  having  the  partnership  concern  carried  on  according  to  the  contract. 
The  original  contract  and  the  loss  which  his  partners  would  suffer  by  a  dissolution, 
is  his  security  that  it  shall  be  so  carried  on  for  him  and  them  beneficially,  and  with 
augmented  improvement  in  the  value  of  his  shares  and  their  shares." 

With  respect  to  the  alteration  of  the  law  enabling  companies  to  carry  on  the 
business  proposed,  his  lordship  observed:     "  llie  repeal  of  the  act, 
6  Geo.  1,  which  merely  made  it  lawful  for  societies  or  partnerships,    argument  thnt 
however  numerous  their  members  might  be,   to  insure  against    'varran'ted^^by'" 
marine  risks  could  not  make  it  lawful  for  companies  or  societies   statute, 
which  were  formed  for  specified  purposes  of  insurances  upon  lives  and  against  fire, 
to  insure  against  marine  risks,  unless  the  contracts  by  which  such  companies  were 
formed,  either  expressly  or  impliedly  (where  individual  partners  did  not  consent  to 
embarking  in  new  projects,  either  originally,  or  subsequently  to  the  fonuation  of 

and,  if  necessaiy,  a  receiver,  and  an  in-  from  using  the  name,  and  from  apply- 

junction  to  restrain  the  defi'udants  from  ing  the  capital  of  the  company  for  such 

effecting  marine  insurances  in  the  name  purijoses. 
and  on  account  of  the  company,   and 

811 


*00.j.  POWER   OF    MAJORITY.  [bOOK  III. 

the  companies),  created  an  authority  in  some  part  of  the  body  to  bir-i  all  the  body 
to  the  adoption  of  such  new  undei-takings." 

With  respect  to  the  power  of  a  majority,  his  lordship  laid  it  down  that,  "If  six 
persons  joined  in  a  partnership  of  life  assurance,  it  seems  clear  that 
on  pov^er^^  neither  the  majority  nor  any  select  part  of  them,  nor  five  out  of  the 

majorities.  gj^  could  engage  that  partnership  in  marine  insurances,  unless  the 

contract  of  partnership  expressly,  or  impliedly  gave  that  power:  because  if  this 
was  otherwise,  an  individual  or  individuals,  by  engaging  in  one  specified  concern, 
might  be  implicated  in  any  other  concern  whatever,  however  different  in  its  nature, 
agamstlris  consent.  But  if  a  part  of  the  six  openly  and  publicly  professed  theii- 
intention  to  engage  the  partnership  in  another  concern,  and  clearly  and  distinctly 
brought  this  to  the  knowledge  of  one  or  more  of  the  other  partners,  and  sucli  one 
or  more  of  the  other  partners  could  be  clearly  shown  to  have  acquiesced  in  such 
intention,  and  to  have  permitted  the  other  partners  to  have  entered  upon,  and  to 
have  engaged  themselves  and  the  body  in  such  new  pi-ojects,  and  thereby  to  have 
placed  their  partners  so  engaged  in  difficulties  and  embarrassments  unless  they  were 

permitted  to  proceed  in  the  farther  execution  of  such  projects,  if  a  court  of 
*G04      equity  would  not  go  the  length  of  holding  that  such  conduct  was  *consent, 

it  would  scarcely  think  parties  so  conducting  themselves  entitled  to  the 
fesfinum  remedium  oi' injunction.""  *  *  *■  *  "  Courts  must  struggle  to  pre- 
vent particular  members  of  those  bodies  from  engagmg  other  members  in  projects 
in  which  they  have  not  consented  to  be  engaged,  or  the  engaging  in  which  they 
have  not  encouraged,  assented  to,  or  empowered,  or  acquiesced  in,  expressly  or 
tacitly,  so  as  to  make  it  not  equitable  that  they  should  seek  to  restram  them.  The 
principles  which  a  Com't  would  act  upon  in  case  of  a  partnership  of  six,  must,  as 
far  as  the  nature  of  things  will  admit,  be  applied  to  a  partnership  of  600."  *  * 
"  They  who  seek  to  embark  a  partner  in  a  business  not  originally  part  of  the  part- 
nership concern,  must  make  out  clearly  that  he  did  expressly  or  tacitly  acquiesce." 

In  Const  V.  Harris  {u),  the  proprietors  of   Covent 
ons  V.   arris.   Q.^j,^gj^  Theatre  agreed  that  the  profits  should  be  ex- 
clusively  appropriated  to  certain  definite  purposes.     Afterwards, 
Aiterin    rin-     ^^^^  proprietors  of  seven  out  of  eight  shares,  entered 
cipie  on  which  ^j^^q  qji  agreement  to  apply  the  profits  in  a  different 

pronts  snould  ^        a  r  r  j  i 

be  dealt  with,  manner,  but  they  had  not  consulted  the  owner  of  the 
other  eighth  share,  and  he  disapproved  of  the  alteration.  It  was 
held  by  Lord  Eldon,  that  the  majority  had  no  power  to  depart 
from  the  terms  of  the  original  agreement ;  and  upon  a  bill  filed  b}'- 
the  one  dissentient  partner  for  a  specific  performance  of  that  agree- 
ment, a  receiver  of  the  pi-ofits  was  appointed.  In  a  long  and  elab- 
orate judgment.  Lord  Eldon  distinctly  recognized  the  principle, 
that  articles  which  had  been  agreed  on  to  regulate  a  partnership, 
cannot  be  altered  without  the  consent  of  all  the  partners,  {x) 

(t<)  Turn.  &  R.  496.  whole  judgment  is  well  worthy  of  at- 

{x)  See  Turn.   &  R.  517,  523.     The      tentive  perusal ;  but  being  much  to  the 

812 


CHAP.  II.]  rOWEIi    OF    MAJOKITV.  *GOJ 

In  modern  cases  the  same  principle  lias   been  constantly  recog- 
nized and  followed.  (?/)      Indeed  it  may  1)3  said  never  Modem  cases 
now  to  be  disputed;    the  contest  always   turning  on  '/hese'^priacu^ 
the  question,  whether  the  acts  of  the  majority  do  or  p^*"^- 
do  not  belong  to  the  class  under  consideration,  rather  than  to  the 
question  whether,  if  they  do,  the  minority  is  or  is  not  bound  by 
them.     With  reference  to   the  former  question,  it  has  been  held 
not  competent  for  a  majority  of  shareholders  in  a  company  formed 
lor  thc*pnrj)0se  of  making  a  railway  between  two  places,  to 
make  *a  railway  between  two  other  places  (2);    nor  for  the     *605 
majority  of  the  members  of  a  tire  and  life  insurance  company 
to  convert  the  company  into  a  marine  insurance  company  (rt);   nor 
for  a  majority  of  tlie  members  of  a  railway  comjiany  to  engage  it 
in  the  business  of  coal  sellers  (J);  nor  for  a  majority  of  the  mem- 
bers of  any  company  to  employ  the  property  or  funds  of  the  com- 
pany otherwise  than  as  contemplated  by  themselves  and  the  othtr 
members  ;  e.cj.^  by  dividing  the  capital  amongst  themselves  (c),  or 
even  amongst  all  the  shareholders  whether  they  approve  or  not(r/); 
by  making  presents  to  the  directors  (^');  by   i)aying   the  costs  of 
actions,  ifec,  instituted  by  or  against  the  directors  as  individuals, 
and  not  as  trustees  or  agents  of  the  company  (y);  by  paying  divi- 
dends out  of  ca]>it;vl  {(j)\  by  applying  the  funds  of  the  company  in  de- 
fravino'  the  expenses  of  an  application  to  Parliament  to  alter  the  con- 
stitution orol)jects  of  the  company  (A);  or  in  the  purchase  of  shares 

same  effect  as  that  in  Xatusch  V.  Ii-ving,  9  Ch.  350;    Griffith  v.  Paget,  5  Ch.  D. 

the  wiiter  has  not  felt  it  necessary  to  894. 

make  extracts  from  it.  (rf)  Holmes  v.  Newcastle,  <S:c.,  Abat- 

(//)  See  Morgan's  case,  1   Mac.  &  G.  toir  Co.  1  Ch.  D.  682. 
225  ;  Davidson's  case,  4  K.  &  J.  688  ;  (e)  York  and   North    Mid.   Rail.  v. 
Smith  V.  Golusworthy,  4  Q.  B.  430  ;  Da-  Hudson,  16  Beav.  485.     See,  too,  Ross- 
vies  V.  Hawkins,  3  M.  k  S.  488.  more   v.  Mowatt,    15  Jur.   238,  V.-C. 

{z)  Bagshaw  v.  The  Eastern  Union  K.  B. 

Rail.  Co.  7  Ha.  114,  and  2  Mac.  &  G.  (/)  See  Pickering  r.   Stephenson,  14 

389;  Simpson  v.  Denison,  10  Ha.  51.  Eq.  322  ;  Kernaghan  v.  Williams,  6  Eq. 

(«)  Natnsch  v.  Irving,  anie,  p.  601  ;  228. 

Phcenix  Life  Insur.  Co.  2  J.  &  H.  441.  {g)  McDoughall  v.  Jersey  Hotel  Co. 

In  Rogers  v.   Oxford,   &c.,  Rail.  Co.  2  2  Hem.  &  M.  528. 

DeG.  &  J.  062,   the  railway  company  {h)  Lyde  v.  Eastern  Bengal  Rail.  Co. 

had  express  power  to  become  a  canal  36  Beav.  10 ;  !Munt  v.  The  Shrewsbury 

company  also.  and  Chester  Rail.  Co.  13  Beav.  1  ;  Simp- 

{V)  A.-G.  V.  Great  Northern  Rail.  Co.  son  r.  Denison,    10   Ha.   51  ;  Vance   r. 

1  Dr.  &  Sm.  154.  The  East  Lancas.  Rail.  Co.  3  K.  &  J. 

(c)  Menier  v.  Hooper's  Telegraph  Co.  50,  and  th?  cares  there  cited. 

813 


•5^006  POWER   OF   MAJORITY.  [bOOK  III. 

of  retiring  shareholders,  (i)  Upon  the  same  principle  by-laws  which 
are  not  warranted  hy  the  terms  of  the  instrument  which  confers 
the  power  of  making  them,  are  altogether  invalid  (/t);  and  a  ma- 
jority cannot,  unless  empowered  so  to  do  by  the  company's 
*G06  act,  charter,  deed  of  settlement,  or  *regnlations,  or  by  some 
statute,  forfeit  shares  (l)  or  reduce  the  capital  of  the  com- 
pany (m),  or  issue  preference  shares,  {n) 

A  company  incorporated  by  charter  or  special  act  of  Parliament 
Transfer  of  Cannot  delegate  its  powers,  and  cannot  therefore  trans- 
business.  fgj.  j|-g  b^iginess  cvcn  for  a  time  to  another  company  (o); 

nor  can  the  majority  of  the  shareholders  of  any  company  bind  the 
minority  by  an  agreement  to  transfer  its  property  and  business, 
unless  sucii  power  is  conferred  by  the  original  constitution  of  the 
company,  (p)  Nor  is  it  competent  for  the  majority  of  one  com- 
pany to  purchase  the  assets  and  liabilities  of  another  without  sim- 
1  am  -  ^^^^  powers.  ( q)  "Whence  it  follows  that  two  companies 
^^^^-  cannot   amalgamate   with    each   other,  unless   such   a 

transaction  is  authorized  by  the  constitutions  of  both  companies, 
or  unless  all  the  shareholders  in  both  consent  to  the  amalgama- 
tion, (r)  And  where  there  is  power  to  amalgamate,  that  power 
must  be  strictly  pursued,  or  at  least  there  must  be  no  substantial 
departure  from  it.  (s) 

{i)  Hope  V.    International    Financial  881  ;  Charlton  v.  Newcastle  and  Carlisle 

Soc.  4  Ch.  D.   327  ;  Hodgkinson  v.  Na-  Rail.  Co.  5  Jur.  N.  S.  1096;    Winch  r. 

tional  Live  Stock  Insur.  Co.  26   Beav.  Birkenhead,  &c.,  Rail.  Co.  5  DeGr.  &  S. 

478,  and  4  DeG.  &  J.  422 ;  Gregory  v.  562 ;  Beman  v.   RufFord,  1  Sim.  N.  S. 

Patchett,  33  Beav.  695.  550  ;  Salomons  v.  Laing,  12  Beav.  377. 

(A-)  Calder,  &c.,  Nav.  Co.  v.  Pilling,  Compare  Clay  v.  Rufford,  5  DeG.  &  S. 

14  M.  &  W.  76 ;  Adley  v.  Whitstaple  768. 

Co.  17  Ves.  315;    19  ib.  304;  1  Mer.  {p)  See  Ernest  r.  Nicholls,  6  H.  L. 

107.  C.  401  ;  Era  Assur.  Co.'s  case,  2  J.  &  H. 

(0  Barton's  case,  4  Drew.  535,  and  4  400,  and  1  H.  &  M.  672  ;  and,   further, 

DeG.  &  J.  46.  as  to  amalgamating.   Ex  imrte   Bag- 

(m)  Smith  v.   Goldsworthy,  4  Q.   B.  shaw,   4  Eq.   341  ;  Stace  and   Worth's 

4.30  ;  Hope  V.   International  Financial  case,  4  Ch.   682 ;   Gilbert  v.  Cooper,  10 

Soc.  4  Ch.  D.  327.  Jur.  580,  V.-C.  E.,  and  Shrewsbury  and 

(;?)  Hutton  v.  Scarborough  Cliff  Co.  2  Birm.  Canal  Co.  v.  Stour  Valley  Rail. 

Dr.  &  Sm.  514  and  521  ;  and  on  appeal,  Co.  2  DeG.  M.  &  G.  866. 

6  N.  R.  10.     Although  this  was  a  limit-  {q)  Ibid, 

ed  company,  the  principles  on  which  it  (r)  Ibid. 

was  decided  appear  to  apply  to  all  com-  (s)  Clay  v.   Rufford,  5  DeG .  &  Sm. 

panics.  768. 

(o)  Hattersley  v.  Shelbume,  10  W.  R. 
814 


CHAP.  II.]  POWER    OF    MAJORITY.  *007 

The  rii^'ht  of  a  majority  of  partners  or  slmreliolders  to  apply  to 
the  Lc-ithitiire  or  the  Crown  for  an  act  of  Tarlianient   Ritihtofma- 
or  charter  for  the  purpose  of  cliatif^ini?  the  constitution   J,'[^|";^;(,';^'^' 
of  tlie  partnership  or  conijiany,  has  t>ccasioneJ    mncli   of  company. 
discussion  and  no  little  ditference  of  opinion.     The  right  of  every 
person  to   apply  to   Parliament  or   the  Crown    on  any  subject  he 
pleases  is  founded  upon  ]>rinciples  of  constitutional  law,  wiiich  are 
paramount  to  all  others;  and  although  there  is 

.  .  1  .    1     *  •         -i.        1-         1        I         1       iccc\y    Ward  v. Society 

an  instance  in  whicli  *a  mmority  oi  a  cnartered     ^b\)i    of  Attorneys. 
society  obtained  an   injunction,  restraining  the 
majority  from  surrendering  the  existing  charter  with  a  view  to  pro- 
cure a  new  one  materially  differing  from  it  ^t\  the  authority  of  this 
case  is  questionable.     The  Court  will,  even   at  the  in-   s„chappUca- 
stance  of  one  dissentient  shareholder,  grant  an  injunc-  ||;'"f,."imt  not 
tion   restraining  the  application  of   the  funds  of  an  oi  tile  cwu-*^"^*^ 
incorporated  company  in  defraying  the  expenses  of    ^''"*" 
obtaining  an  act  of  Parliament  altering  the  constitution  of  that 
company  {u)\  but  upon  constitutional  princi])le8  the  Court  declines 
to  go  further,  and  will  not  restrain  shareholders  in  a  company  from 
applying  at  their  own  expense  for  an  act  which,  if  passed,  will 
affect    the   whole   company   and   change   its   constitution  :    those 
shareholders  who  object  to  the  application  must  oppose  it  in  Par- 
liament, {x) 

With  respect  to  the  effect  of  an  unanimous  agreement  to  depart 
from  the  ori'j-inal  basis  of  the  partnership  or  company,    Effect  of  unani- 

®  '  1  •  1    mous  resolve  t'j 

there  is  a  material  ditference  between  partnerships  and   ch.uipeihe 

'  f-    T->      1  •  nature  of  the 

companies  incorporated   by  charter,  or  act  oi  1  arlia-   company, 
ment.     A  partnership,  whether  large  or  small,  is  an  association 
based  and  depending  entirely  upon  the  agreement  of  its  members, 

(0  Ward  V.  Society  of  Attorneys,  1  2  R.  &  M.  470;    and  as  to  injunctions 

Coll.  370.  restraining  applications  to  Parliament. 

(m)  Hunt  r.  The  Shrewsbury  and  Ches-  Steele  v.  The  Metropolitan  Rail.  Co.  2 
ter  Rail.  Co.  13  Beav.  1;  Simpson  v.  Ch.  237;  Telford  v.  Metropolitan  Board 
Deni-son,  10  Ha.  51;  Vance  v.  East  Lane.  of  Works,  13  Eq.  674;  The  Lancashin; 
Rail.  Co.  3  K.  &  J.  50;  and  the  case  and  Carlisle  Railway  Co.  r.  The  North- 
there  cited.  As  to  the  costs  of  such  ac-  West<^m  Rail.  Co.  2  K.  &  J.  293;  Heath- 
tions,  where  individual  members  are  cote  v.  The  North  Statfordshire  Rail.  Co. 
made  defendants,  see  Solicitor-General  2  Mac.  &  G.  100.  See,  :d-*o.  Bill  v.  Sier- 
V.  Lord  Mayor  of  Dublin,  L.  R.  Ir.  1  C.  ra  Nevada,  &c..  Co.  1  T  G.  F.  i.-  J.  177, 
D,  166.  in  which  an  injunction  to  restrain    aii 

(a:)  See  the  last  cited  cases,  and  Ware  application    to    a  fore'gn    govirnmeut 

r.  The  Grand  Junction  Waterworks  Co.  was  also  refused. 

815 


*60S  I'OWEii    OF    MAJORITY.  [iJOOK  III. 

and  consequently  it  is  perfectly  competent  for  all  those  members 
at  any  time  to  annul  or  vary  the  agreement  into  which  they  have 
entered,  and,  by  uiaking  a  new  agreement,  entirelj^  to  change  the 
objects  of  the  partnership,  and  to  embark  in  any  speculations  of 
which  they  all  appi-ove.  The  same  observation  applies  to  those 
companies  which  resemble  partnerships  by  being  based  upon  a 
hiere  agreement,  {y)  But  with  respect  to  companies  whicii 
'■60S  are  created  by  a  special  act  of  Parliament,  or  ^by  charter, 
or  by  letters  patent,  or  by  registration,  the  case  is  very  differ- 
ent; for  every  company  so  established  is  governed  by  a  law  defining- 
its  objects  and  limiting  its  powers,  and  such  law  cannot  be  abrogated 
by  any  agreement  between  the  members  of  the  company  however 
unanimous  they  may  bc;  A  registered  company  cannot  alter  the 
nature  of  its  business  as  defined  in  its  memorandum  of  associa- 
tion (s);  nor  can  even  all  the  members  of  a  chartered  company  do 
what  they  like  with  its  property,  e.  </.,  divide  it  amongst  themselves 
without  accounting  for  its  value  to  the  company  («);  nor  can  even 
all  the  members  of  a  railway  company  apply  the  funds  of  a  com- 
pany to  a  purpose  which  js  not  authorized  by  the  act  of  Parliament 
by  which  the  company  is  governed.  (5) 

On  the  other  hand,  it  is  to  be  observed,  that  a  corporation  acts 
ro\yersof  ^J  ^  majority;  the  will  of  the  majority  is  the  will  of 

thecascsVf^  the  Corporation;  and  whatever  it  is  competent  for  the 
corporations,  corporation  to  do  can  be  done  by  a  majority  of  its 
members  against  the  will  of  the  minority,  (c)'  It  follows  from 
this,  that  the  power  of  a  majority  of  tlie  sliareholders  of  a  company 
incorporated  by  charter  or  act  of  Parliament,  is  limited  only  by 
that  charter  or  act,  unless  those  vv'ho  compose  the  majority  have 
restricted  their  powers  by  some  special  agreement. 

(.//)  Keene's  Executors'  case,  3  DeG.  Co.  1  Dr.  &  Sm.    154;    East   An.q-Iian 

M.  &  G.  272.  Ran  Co.  r.  Eastern  Counties  Eail.  Co. 

{z)  See  ante,  pp.  558,  559.  11  C.  B.  775. 

(rt)  Society  of  Practical  Knowledge  v.  [c)  See  Grant  on  Corporations,  p.  r,9, 

Abbott,  2  Beav.  559;  ar^te,  p.  591.  et  seq.;  Australian  Aux.  St.  Clipper  Co. 

{h)  Bag-shaw  v.  The  Eastern  Union  v.  Mouns\v,  4  K.  &  J.  733;  Exeter  Rail. 

Rail.  Co.  7  Ha.  114,  and  2  Mac.  &  G.  Co',  v.  Buller,  5  Ra.  Ca.  211.     See  also 

389;    Winch  v.  The  Birkenhead,  Lan-  the  statute  33  Hen.  8,  c.  27. 
cashire,  and  Cheshu-e  Rail.  Co.  5  DeG.  ^See  Ang.  &  Ames  on  Corp.  §§221, 

k  S.  562;  Beman  v.  RufFord,  1  Sim.  N.  499. 
S.  550;  A.-G.  V.  Great  Northern  Rail 
816 


CHAP.  II.]  rOWEK    OF    ilAJOIilTV.  *C09 

Iteca]>itnlat*mg  the  results  now  arrived  at,  it  appe:irs— 

1.  That  within  the  limits  set  bv  the  orii'inal  consti-  ,    . 

.  ^  Recapitulation. 

tution  of  a  i)artnership  or  company,  the  voice  of  a  m;i- 
joritv  must  ])rovail. 

2.  That  it  is  not  competent  for  any  number  of  partners  or 
shareholders,  less  than  all,  to  pass  beyond  those  limits. 

3.  That  it  is  competent  for  all  to  do  so,  unless  they  are  bound 
together  not  only  by  agreement  amongst  themselves,  but  by  some 
charter,  letters  patent,  or  act  of  Parliament. 

'•'Before  quitting  the  subject  whicli  has  been  *G09  Distinction  be- 
discussed   in   the   loregomg    pages,  it  may   be  tiveand  direc- 

oljservcd,  that  the  various  provisions  found  in  partner-  tions.''^ 
ship  articles  and  companies'  deeds  of  settlement  are  not  all  of 
equal  importance,  and,  that  whilst  it  is  not  competent  for  any  num- 
ber of  partners,  less  than  all,  to  disregard  those  provisions  wliich 
form  essential  parts  of  the  partnership  contract,  the  non-observ- 
ance of  others  is  comparatively  of  little  consequence.  This  matter 
will  be  adverted  to  hereafter  in  the  chapter  on  partnership  articles, 
and  on  companies'  deeds  of  settlement  {d) ;  and  in  applyino-  the 
principle  to  registered  companies,  the  express  power  given  by  statute 
to  alter  the  articles  of  association  as  distinguished  from  the  mem- 
orandum of  association  must  be  kept  in  mind,  (e) 

(d)  See  Re  The  Norwich  Yam    Co.      Bough,  3  Q.  B.  845. 
22  Boav.  143  ;  Thames  Haven  Dock  Co.  (e)  See  Sheffield  Nickel  Co.  v.  UnwTn, 

V.  Rose,  4  Man.  &  Gr.  552 ;  Miles  v.      2  Q.  B.  D.  214. 

52  Q^j 


S-610  CAPITAL   OF    rART>'ERSlJirS.  [bOOK  III. 


*610  ^CHAPTER  III. 

OF  THE  CAPITAL  OF  PAETNERSHTPS  AND  COMPANIES,  AND  OF  ITS 
PAYMENT  BY  CALLS. 


SECTION  I.— GENERAL  OBSERVATIONS  ON  THE  CAPITAL   OF   PART- 
NERSHIPS AND  COMPANIES. 

1.     Cci])ital  of  jpartiiersliips. 

By  the  capital  of  a  partnersliip  is  meant  the  ags^regate  of 
cn  itaiof  ^^^®  sums  Contributed  by  its  members  for  the  purpose 
partnerships.  Qf  commencing  or  carrying  on  the  partnersliip  busi- 
ness, and  intended  to  be  risked  by  them  in  that  business.  The  cap- 
ital of  a  partnership  is  not  therefore  the  same  as  its  propei-ty  ;  tlie 
capital  is  a  sum  fixed  by  the  agreement  of  tlie  partners  ;  whilst  the 
actual  assets  of  the  firm  vary  from  day  to  day,  and  inc'ude  every- 
thing belonging  to  the  firm  and  having  any  money  value.  More- 
over, the  capital  of  each  partner  is  not  necessarily  the  amount  due 
to  him  from  the  firm  ;  ibr  not  only  may  he  owe  the  firm  money,  so 
that  less  than  his  capital  is  due  to  him  ;  but  the  firm  may  owe  him 
money  in  addition  to  his  capital,  e.  g.,  for  money  advnnced  by  him 
to  the  firm  by  way  of  loan,  and  not  intended  to  be  wholly  lisked  in 
the  business.  The  distinction  between  a  partner's  ca]iital  and  what 
is  due  to  him  for  advances  b}^  way  of  loan  to  the  firm,  is  frequently 
very  material  ;  e.  g.^  with  reference  to  interest ;  with  reference  to 
clauses  in  partnership  articles  fixing  the  amount  of  capital  to  be 
advanced  and  risked,  and  prohibiting  the  withdrawal  of  capital; 
tand  above  all  with  reference  to  priority  of  payment  iu  the  event  of 
dissolution    and   a  deliciency  of  assets,  {a)     Tlie  amount  of  each 

(«)  See  on  this  subject,   infra,   book,       iii.  eh.  8,  §  1,  on  jjartnership  accounts. 

818 


CHAP.  III.] 


CAPITAL   OF   PAKTNEUSIII1>S. 


■Oil 


partner's  capital  ought,  therefore,  always  to  be  accurately 
*stated,  in  order  to  avoid  disputes  on  a  final  adjustment  of 
account;'  and  this  is  more  important  where  the  capitals  of 


'Gil 


'  The  amount  of  capital  furnished  by 
each  partner  in  a  firm,  and  the  manner 
of  payint?  it  in,  may  Vje  proved  by  other 
evidence  than  the  articles  of  co-partner- 
ship.    Boyers  v.  Elliott,  7  Humph.  204. 

Where,  in  a  suit  for  a  dissolution  of 
a  partnership,  it  appeared  that  there 
was  a  mistake  as  to  the  amount  of  capi- 
tal put  in  by  the  complainants,  and  it 
appeared  that  more  was  put  in  than  wtis 
(  j-i'nally  stated,  but  how  much  more 
was  uncertain:  Held,  that  the  burden 
of  proof  was  upon  them,  and  that  they 
should  be  restricted  to  the  smallest 
amount  proved,  especially  as  one  of 
the  complainants  was  the  book-keeper, 
and  should  have  kept  the  books  so  as 
to  show  the  true  state  of  the  affairs. 
Moon  v.  Story,  8  Dana,  226. 

A  paiinei-ship  consisting  of  four  part- 
ners was  dissolved,  two  assignintr  their 
shai'cs  to  one  of  the  others,  and  the  re- 
maining two  formed  a  new  partnership. 
In  their  articles  they  agreed  that,  of  the 
property  on  hand,  a  sufficient  amount 
should  be  set  apart  and  appropriated  to 
paying  the  debts  of  the  old  firm;  and 
another  amount  for  improvements  made 
on  real  estate,  and  that  the  remainder 
should  be  deemed  the  capital  stock  of 
the  firai:  Held,  that  the  amount  set 
apart  for  improvements  made  on  real 
estate  did  not  make  a  part  of  the  capi- 
tal stock,  blathers  r.  Patterson,  o) Pa. 
St.  485. 

Where  a  former  clerk  is  taken  into 
co-partnership  by  a  finn  whii'h  wa.s  in- 
debted to  him,  and  the  amount  of  such 
indebtedness  is  placed  to  his  credit  upon 
the  new  books,  to  which,  on  dissolution 
of  the  firm,  is  added  his  share  of  the 
net  profits,  such  indebtedness  will  not 
be  regarded  as  capital  put  in  by  the 
new  member,  but  rather  as  a  loan  to 


the  firm  to  be  repaid  him,  with  his  shar..* 
of  the  profits.  Topping  v.  Paddock, 
92  111.  92. 

An  incoming  partner  paid  the  two 
original  members  of  the  firm  money  as  in- 
dicatt'd  in  the  receipt:  "  Received  of  K. 
$2,000  for  and  in  consideration  of  one- 
half  interest  in  one  safe,  two  desks,  two 
pair  of  scales,  one  stove  and  pipe;  also 
the  undivided  half  of  our  trade  and  good 
will,  and  the  benefit  accniing  therefrom : 
also  one-half  of  the  contract  of  pota- 
toes for  future  deliveiy,  and  the  benefits 
of  the  same  as  per  contract  of  co-part- 
nership made  this  date  between  H.  E. 
and  M.:"  Held,  that  the  money  so 
paid  belonged  to  the  two  original  part- 
ners, especially  if  it  was  credited  on  the 
books,  in  equal  amounts  to  their  stock 
account.     Evans  v.  Hanson,  42  111.  2."!4. 

Two  persons  agreed  to  foiin  a  plant- 
ing partnership  with  a  third,  and,  for 
that  purpose,  to  sell  him  for  his  portion 
of  the  capital  one-third  of  a  plantation, 
the  price  to  be  paid  out  of  his  share  of 
the  profits :  Held,  that  the  joint  owaier- 
f-hipwiis  not  to  be  treated  as  if  acquii-ed 
from  different  vendoi-s,  but  as  a  subsid- 
iary to  a  partnership  to  whose  terms  it 
was  subject;  and  that  as  by  those  temis 
the  vendee  could  not  take  his  capital 
out  of  the  partnership  until  payment  of 
the  price,  neither  he,  his  creditors,  nor 
his  representatives,  could  take  his  third 
interest,  until  the  other  partners  were 
fully  reimbursed.  Thompson  v.  Mylne, 
6  La.  Ann.  80. 

^\'here,  by  the  teiTns  of  the  agree- 
ment, the  defendant  furnished  the  capi- 
tal stock,  and  the  plaintiff  contributed 
his  skill  and  service,  and  the  profits  of 
the  co-partnership  were  to  be  equally  di- 
vided, the  plaintiff  is  not  to  be  entitled 
to  any  paa-t  of  the  capital  stock,   on  a 

810 


*(3H  CAPJTAL    OF   PAKTNERSUIPS.  [bOOK  III. 

the  partners  are  unequal,  for  if  there  is  no  evidence  as  to  the 
amounts  contributed  by  them,  the  share  of  the  whole  assets  will  be 
treated  as  equal,  {b). 

When  the  agreed  amount  of  capital  of  a  partnership  has  been 
incrcaseand  exhausted,  and  the  business  cannot  be  carried  on  to  a 
cSr'""  °^  prolit,  the  partnership  may  be  dissolved,  as  has  been 
already  pointed  out.  (c)  A  partner  cannot  be  compelled  to  furnish 
more  capital  than  he  has  agreed  to  bring  in  and  risk;  although  he 
cannot,  by  limiting  the  amount  of  his  capital,  limit  his  liability  for 
debts  incurred  by  the  firm,  {d)  On  the  other  hand,  a  partner  who 
has  agreed  to  furnish  a  certain  amount  of  capital,  is  bound  not  only 
to  bring  it  into  the  firm,  but  also  to  leave  it  in  the  business  until  the 
firm  is  dissolved. 

It  follows  from  these  considerations  that  the  capital  of  a  partner- 
ship cannot  be  either  increased  or  diminished  except  with  the  con- 
sent of  all  the  members  of  -the  partnership;  and  this  rule  is  per- 
fectly consistent  w^ith  the  obvious  fact,  that  the  assets  and  liabili- 
ties of  a  partnership  are  necessarily  liable  to  fluctuation,  and  that 
the  value  of  each  partner's  share  of  such  assets  constantly  fluctu- 
(ates  also. 

The  difi'erence  between  borrowing  money  on  the  credit  of  a  firm 
and  increasins:  its  capital,  has  been  already  adverted 

Borrowing  ^  ,  i   ,  i  i  i 

money  and  in-  ^^  (^\.  ^nd  it  lias  been  sccn,  that  although  each  member 

creasing  capi-  \  J  >  '  i     t        • 

tai-  of  an  ordinary  trading  partnership  can  pledge  its  credit 

for  money  borrowed  in  order  to  carry  on  its  business,  he  cannot 
render  it  liable  to  repay  money  borrowed  by  him  to  enable  him  to 
furnish  the  amount  of  capital  which  he  has  agreed  to  bring  in.  (/) 

settlement  of  the  affairs  of  the  partner-  port  it.  The  rights  and  benefits  result- 
ship.  He  has  no  interest  in  any  part  ing  to  partnei-s  constitute  the  considera- 
of  the  capital,  excepting  so  far  as  in  tion  he  receives  for  the  capital  he  may 
the  progress  of  the  business  the  same  advance;  he  receives  the  consideration 
may  have  been  converted  into  profits.  for  his  capital  by  being  admitted  a  part- 
Conroy  v.  Campbell,  13  Jones  &  Sp.  326.  ner.    Stafford  v.  Fargo,  35  lU.  481. 

A  note  given  by  a  partner  to  his  co-  (b)  See,  as  to  the  equality  of  shares, 

partner,   as  collateral  security  for    the  ipfra,  book  iii.  ch.  5,  §  2. 

capital  advanced  by  the  latter,  being  (c)  A^ife,  p.  222. 

intended   simply  as  a  receipt  for  the  {d)  Ante,  p.  376. 

money,  and  to  secure  the  return  of  the  {e)  Ante.  pp.  273,  274. 

capital  in  the  event  that  no  loss  oc-  (/)  lb. 
cuired,  is  without  consideration  to  sup- 

820 


CHAT.  III.]  CAI'ITAL   OF   COMrAKIES.  *fil2 


2.     Capital  of  Companies. 

Tlie  forcf^oing  observations  apply  as  much  to  companies  as  to 
partnerships;  but  owing  to  tlie  division  of  the  capitals  of  com- 
panies into  transferable  shares,  and  to  the  circumstance  *that     *611^ 
the   capitals   of  companies  are  seldom  raised  all   at  once, 
some  further  observations  respecting  them  are  necessary. 

The  caj)ital  of  a  company  is  one  of  the  matters  determined 
upon  as  soon  as  its  formation  is  seriou&ly  undertaken,  capital  of 
The  sum  fixed  upon  ought  to  be  so  large  as  to  be  suffi-  companies, 
cient  to  enable  the  company  to  carry  on  its  business  with  success; 
but  it  ought  not  to  be  larger  than  is  necessary  for  this  purpose;  for 
the  greater  the  capital  sunk  in  any  undertaking,  the  less  will  be 
each  subscriber's  share  of  profit,  unless,  indeed,  the  profits  increase 
with  the  capital  sunk,  a  result  not  so  often  obtained  as  anticipated. 
The  probable  success  of  any  company  depends  very  much  upon  the 
capital  intended  to  be  embarked  in  its  projected  business;  if  that 
capital  is  inadequate,  it  will  probably  be  wholly  lost;  whilst  if  it  is 
more  than  is  required,  the  interest  upon  it  may  eat  up  all  the 
profits.     Hence  the  amount  of  a  company's  capital   is  van-ingthe 

*  ^  '-''.'■  ^  aiudimt  of 

one  of  those  things  whic-ii,  when  fixed,  cannot  be  varied  capital, 
without  the  consent  of  all  who  join   the  company,  unless  there  is 
some  special  provision  to   the  contrary   in   the  statute  by  which  a 
company  is  governed,  or  in  its  charter  or  deed  of  settlement.     This 
is  well  illustrated  by  Smith  u  Goldsworthy  (j/),  where  gj,^;,,, ,, 
it  was  held  that  notwithstanding  the  very  large  powei's  Oouisworthy. 
which  by  a  company's  deed  were  conferred  upon  a  general  meeting 
of  shareholders,  such  a  meeting  was  not  authorized  in  so  far  alter- 
ing the  constitution  of  the  company  as  to  convert  its  capital  from 
2,b0O,QOOZ.  divided  into  20,000  shares  of  100?.  each,  into  a  capital  of 
1,000,000?.  divided  into  20,000  shares  of  50?.  each.     Upon  the  same 
principle,  a  person  who  agrees  to  take  shares  in  a  company  with  a 
given  capital,  is  lyrima  facie  not  bound  to  take  shares  in  a  company 
with  a  different  capital  (A);   but  persons  not  unfrequently  agree  to 
take  shares  in  companies   the  capital  of  which  is  not  defined;  and 

(,7)  4  Q.  B.  480.  Compare  Amber-  632;  Fox  \\  Clifton,  6  Bing.  776;  Pitch- 
gate,  <^'c..  Rail.  Co.  r.  jMitchell,  4  Ex.  ford  r.  Davies,  h  M.  &  W.  2,  noticed 
640,  noticed //(/Vrt,  p.  618.  unie,  pp.  lOS,  109. 

(/i)  See  Bourne  r.  Freeth,   9  B.  k  C. 

821 


*QIS  ALTERING    CAriTAL.  [bOOK  III. 

in  such  cases  tliey  are  bound  by  their  agreement,  althougli  the  capi- 
tal ultimately  fixed  upon  may  differ  materially  from  that  originally 

proposed,  {i) 
^013  "^The  capital  of  a  company  is  usually  divided  into  a  defi- 
nite number  of  equal  parts  or  shares;  and  the  value  and 
amount  of  such  parts  are  by  no  means  matters  of  smaH  impor- 
Pivisiouof  tance  to  the  subscribers  or  shareholders  ;  for  not  only 
shares.  Is  a  Small  share  more  marketable  than  a  large  one,  but 

the  extent  to  which  a  subscriber  or  shareholder  is  liable  to  con- 
tribute to  the  capital  or  debts  of  a  company  depends  on  the  num- 
varying  the  bcr  and  amount  of  his  shares.  When,  therefore,  the 
shares.  number   and   amount   of  the   shares    into  which  the 

capital  of  a  company  is  to  be  considered  as  divided  are  once 
fixed,  no  change  in  these  respects  ought  to  be  valid  unless  made 
under  some  statutory  or  other  special  power,  or  unless  assented  to 
by  all  the  shareholders  ;  and  there  are  cases  to  this  effect.  (^') 
Ambcr^ate  Howcver,  in  the  Ambergate,  etc.,  Kailway'  Company  v. 
pam"^''^  ^°^'  Mitchell  (I),  a  company  was  incorporated  by  a  special 
Mitchell.  g^Qj.^  which  enacted  that  the  capital  was  to  be  divided 

into  shares,  and  that  for  the  purpose  of  voting,  each  sum  of  251. 
of  the  capital  should  be  considered  as  representing  one  share.  The 
shares  were  at  first  251.  shares,  but  the  company  {i.  e.,  apparently 
the  directors)  afterwards  reduced  them  to  201.  shares,  and  it  was 
contended  in  an  action  for  calls  on  a  201.  share,  that  the  alteration 
in  the  number  and  value  of  the  shares  was  invalid,  and  that  the 
call  was  not  recoverable.  But  it  was  held  that  there  was  nothing 
in  the  company's  special  act  which  prevented  the  directors  from 
making  shares  of  less  than  251.  each  ;  that  they  were  not  bound 
to  fix  the  amount  of  the  shares  once  for  all ;  and  that,  as  to  the 
voting,  the  alteration  could  not  deprive  any  one  of  his  rights,  inas- 
much as  the  only  effect  of  it  was,  to  give  every  holder  of  a  251. 
share,  one  share  and  a  quarter,  instead  of  one  share  as  before. 
Issuing  too  Persons  who  conspire  to  issue  as  good,  more  shares 

many  shares,  .(-j^g^j^  ^^g  authorized  number,  may  be  criminally 
prosecuted,  (in) 

It  is  not  usual  for  the  whole  of  the  sum  fixed  upon  as  the  capital 

(i)  See,  for  example,  Norman  r.Mitcli-  714;  Sewell's  case,  3  ib.  131;  Smiths, 

ell,    5  DeG.   M.  &  G.   648;    Nixon  v.  Goldsworthy,  4  Q.  B.  430. 

Brownlow,  2  H.  &  N.  455  and  3  ib.  686.  [l)  4  Ex.  540. 

{k)  See  ace.  Felling's  case  and  others;  (wt)  SeeR.  v.  Mott,  2  Car.  &  P. 
In  re  the  Financial  Coi-poration,  2  Ch. 

822 


ClIAT.   III.]  CAl'lTAL    OF    Ct  ».M1'ANIKS.  *Gl-i 

uf  a  com])!!!!}',  to  be  paid  uj)  at  once  by  the  subscribers  or  share- 
holders.    The    capital,    and    the    number    and 
amount  of  '''the  shares  into  which  it  is  to  be     *G1J:   ><''-'mi»ai  anJ 

I»ald-upcuplUil. 

divided,  havin<;  been  determined  upon,  and  such 
shares  havini^  been  subscribed  for,  an  installment  only  of  the 
money  thej  represent  is  paid,  and  the  rest  of  that  money  is  left  to 
be  ]>aid  as  occasion  may  re(|uire.  Hence  the  distinction  between 
pcu'd-ap  and  noiiilnal  capital.  The  former  is  the  money  which  the 
eomj)aiiy  actualh'  has  or  has  had  ;  the  latter  is  the  sum  to  which  it 
i.-^  entitled  by  virtue  of  the  contract  entei'ed  into  by  its  subscribers 
and  shareholders. 

A  share,  the  whole  nominal  amount  of  which  has  been  paid  to 
the  company  is  called  a  paid-up   share  :    wliether  a 

I  1  ii-  n  •  1  1  •  1  •        raid-up  shares. 

siiare  can  be  enectuiiilj  paid  uj)  otlierwise  than  m 
money  has  been  much  discussed.  The  result  of  the  decisions 
seems  to  be  that  unless  the  contrary  can  be  shown  by  reference  to 
some  statutory  enactment,  payment  in  money's  worth  e.  g.,  in 
services  rendered  or  goods  supplied  to  the  company,  is  equivalent 
to  payment  in  money  {ji)  :  whence  it  follows  that  paid-up  shares 
can  be  issued  in  consideration  of  such  services,  etc.  The  abuse, 
however,  of  this  rule  led  to  the  insertion  in  the  Companies  act, 
1S67,  of  a  provision  to  the  effect  that  shares  in  companies  regis- 
tered under  the  Companies  act,  1SG2,  must  be  paid  up  in  cash 
unless  some  agreement  in  writing  for  payment  otherwise  is  entered 
into  and  registered  before  the  issue  of  the  shares,  {o) 

The  issue  of  paid-up  shares  otherwise  than  for  value  (j9)  is  a 
breach  of  trust  on  the  part  of  the  directors  ;  and  the  eomjtany  and 
its  creditors  are  entitled  to  have  such  shares  treated  as  not  paid 
u])  [q)\  unless  they  are  in  the  hands  of  bond  Jlde  holders  for  value 
without  notice  of  the  facts.  (?^) 

(n)  See  Cun-ie's  case,   3  DcG.  J.  &  tones. 
Sm.  367;  Pell's  case,  5  Ch.  11;  Scliro-  {p)  As  to  inquiring  into  the  value, 

dei-'s  case,  11  Eq.  131.     But  see  the  ob-  see  Pell's  ciise,  5  Ch.  11,  and  the  others 

servations  of  V.-C.   Stuart  in  Leeke's  cited  above, 
case,  11  Eq.  100.  ( q)  See  Bunn's  civse,  2  DeG.  F.  &  J. 

[o)  See  30  &  31   Vict.    c.  31,   §25.  295,  Wood's  claim  and  Brown's  claim, 

Spargo's  case,  8  Ch.  407,  as  to  what  is  9  W.   K.  360;  V.-C.  K.;  and  the  ca.ses 

equivalent  to  cash.    The  articles  of  as-  in  the  next  note. 

sociation  are  not  a  sufficient  agreement  (r)  See  Guest  t'.  Worcester  Rail.  Co. 

in  writing,  Pritchard's  case,  8  Ch.  956.  L.  U.  4  C.  P.  9;  Waterhouse   v.  Jamie- 

Seo,  fm-ther,  in  book  iv.  §  10,  Contribu-  son,    L.    R.   2    Sc.    App.    29.      British 

8:23 


•5^615  CAriTAL  OF  coMrA^N^iES.  [booic  iji. 

Where  the  liability  of  the  members  of  a  compan_y  is  limited  by 

charter,  statute,  or  registration,  it  is,  to  sa}^  the  least,  questionable 

whether  it  can  lawfully  issue  paid-up  shares  at 

Issue  at  a  *61o     a  *discount,  and  exonerate  the  taker  from  lia- 

bility  to  pay  the  diiference  between  the  price  at 

which  he  takes  them  and  their  nominal  value,  (-s) 

In  the  absence  of  any  special  provision  to  the  contrary,  after  the  ! 
Effect  of  ex-      capital  originally  agreed  upon  has   been  raised  and  ex-  j 

hiiusting  capi-  ^  i  i      ii        •  t      -i.     i  i  ' 

tai.  pended,  any  shareholder  in  an  unlimited  company  has 

a  right  to  say,  I  will  subscribe  no  more,  and  if  the  company  cannot 
now  be  carried  ori  to  a  profit,  I  insist  ujion  its  being  dissolved,  {t)  \ 
This  right  is  the  only  security  which  a  shareholder,  whose  liability 
is  not  limited,  has  against  being  made  responsible  for  an  unlimited 
amount  of  debts.  It  certainly  sometimes  happens  that  call  after 
call  is  made  long  after  the  original  capital  has  been  paid  up  and  ex- 
pended, but  in  order  that  the  shareholdei's'  may  be  liable  to  pay 
such  calls,  they  must  either  have  agreed  to  submit  to  them,  or  must  , 
have  allowed  their  directors  to  go  on  and  contract  debts  which  at 
last  have  to  be  met  by  a  general  contribution. 

A  company  has  no  power  to  increase  its  capital,  unless  such 
Increasing  powcr  is  cxprcssly  Conferred  upon  it,  or  unless  all  the 
shareholders  agree  to  subscribe  or  raise  more  than  the 
sum  originally  determined  upon  (u);  and  if  the  capital  of  a  com- 
pany is  fixed  by  its  charter,  letters  patent,  or  special  act,  sucli  capi- 
tal cannot  be  increased,  even  by  the  consent  of  all  the  members  of 
the  company.  The  distinction,  however,  between  borrowing  money 
and  increasing  capital,  which  was  adverted  to  on  a  former  occasion 
must  not  be  overlooked;  for  it  does  not  follow  that  because  a  major- 
ity of  the  shareholders  of  a  company  cannot  increase  the  capital  of 
the  company,  they  cannot  lawfully,  and  against  the  will  of  the  mi- 
nority, borrow  nioney  on  the  credit  of  the  company,  (v) 

To  the  rule  that,  in  the  aljsence   of  special  powers,   the  capital 

Farmers'  Linseed  Cake  Co.   7  Ch.  D.  nies,  32  &  33  Vict,   c:  19,   §12.'   See. 

533.     Compare  with  case  last  cited,  Pot-  also,  infra,  p.  619. 

ter  &  Brown's  Appeal  (V.-C.  Hall),  W.  {t)  See  Electric  Telegrraph  Co.  of  Ire- 

N.  1878,   p.   81,  affirmed  by  the  Com^;  land,  22  Beav.   471;  Jennings  v.  Bad- 

of  Appeal  May  15,  1878.  dely,  3  K.  &  J.  78;  ante.  p.  222. 

(s)  See  Hoole  v.   Gt.   Western  Rail.  (w)  See  the  cases  hi  the  last  note,  and 

Co.  3  Ch.  262;  West  Cornwall  Rail.  Co.  Fisher  r.  Taylor,  2  Ha.  218. 

c.  Mowatt,  12.Jm-.  407;  30  &  31  Vict.  {r)  See  Bryon  r.  MetropoHtan  Saloon 

c.  131,  §2),  and  us  to  cost-book  compa-  Omnibus   Co.    3  DeG.   &   J.    123;  and 


CIIAl'.  Ill  ]  CAPITAL    OF    COMPANIES.  *C1G 

of  a  company  cannot  be  increased  ai^ainst  the  increaMn^cap- 

^vill  of  a  *single  dissentient  shareliolder,  there     *G16  ""'kVil'iiing 
is,  apparently,  an  exception  in  the  case  of  cost-  companies, 

book  mining  companies.  It  is  stated  by  Mr.  Ta]>ping,  in  his  nse- 
ful  essay  on  the  cost-book,  that  tlie  capital  of  a  cost-book  mining 
company  may  be  increased  in  ])nrsuance  of  a  resolution  of  a  special 
general  meeting,  (a?)  No  authority  is  cited  for  this  statement,  but 
it  certainly  is  the  constant  practice  of  cost-book  companies,  which 
have  spent  all  their  capital,  to  make  further  calls  on  their  share- 
holders, and  to  proceed  against  them  in  the  Stannary  court  in  case 
of  non-payment.  But  it  must  not  be  overlooked  that  the  capital 
of  a  true  cost-book  company  is  seldom  if  ever  fixed  beforehand  {y\ 
and  that  shareholders  in  cost-book  mining  companies  have  the 
power  of  relinquishing  their  shares  if  all  calls  upon  them  have 
been  paid  up;  and  that  if  they  do  not  choose  to  avail  themselves 
of  this  power,  they  may  with  pro]iriety  be  treated  as  agreeing  to 
go  on,  and  to  furnish  more  capital,  should  it  be  found  necessary, 
for  the  purposes  of  the  mine. 

Passing  now  to  the  various  statutory  enactments  bearing  upon 
the  capital  of  companies,  it  may  be  observed,  that  there  g,„tytory 
is   no  statutory   provision   relating  to  the  capital  of  i;"h;g"'to°^pt 
banking  companies  governed  by  7  Geo.  4,  c.  46,  nor  to   ^"^■'^'=- 
that  of  companies  governed  by  the  Letters  Patent  act  of  7  Wm.  4 
&  1  Yict.  c.  73. 


Companies  governed  "by  the  Companies  clauses  consolidation  act. 

The  capital   of  companies  incorporated  by   special  act  of  Par- 
liament  is   determined   by   such  act,   and  is    divided  capital  of 
into  shares  of  the  number  and  amount  thereby  pre-  gXTuudbys 
scribed,    (s)     And  by  the  Companies  clauses  consoli-  '*' '-^  ^ '^t- c- 1<'- 
dation  act  it  is  enacted,  that  the  subscribers  shall  pay  the  sums  sub- 
scribed by  them  respectively,  or  such  portions  thereof  as  shall  from 
time  to  time  be  called  for  by  the  company  (a);  and  the  comjiany 
is  empowered  to  make  calls  on  the  sliareholders  (Z»),  and  so  enforce 

Auxiliary  Steam  Clipper  Co.  v.   Moiin-      I^Iitrhell,   4  Ex.    540,   noticed  anti',  p. 
sey,  4  K.  &  J.  733,  noticed  ante,  p.  274.      61:'.. 

\x)  Tapping  on  the  Cost-Book,  p.  22.  (a)  8  &  9  Vict.  c.  16,  §  21. 

(//)  See  ante,  pp.  146,  147.  {b)  lb.  §  22. 

(r)  See  Ambergate,  &c.,  Kail.  Co.  v. 

825 


■••G17  GOVEKNED    BY    8    &    9    VICT.    C.    16.  [bOOK  III. 

payment  by  action  (c),  and  to  forfeit  the  shares  of  defaulters.  {(T) 
*G17  ^Subject  to  certain  restrictions,  new  shares  in  these  compa- 
nies may  be  issued  at  a  discount,  [e)  The  act  in  question 
dues  not  itself  confer  any  power  to  borrow,  but  it  contains  import- 
ant provisions  rehitingto  the  borrowing  of  money  by  companies  em- 
powered to  borrow  by  tlieir  special  acts  {f),  and  enacts  that  money 
authorized  to  be  borrowed  may,  unless  it  be  otherwise  j^rovided  by 
the  special  act,  be  raised  by  the  creation  of  new  shares  [g),  which, 
with  reference  to  the  payment  of  calls,  are  to  be  on  the  same  foot- 
ing as  original  shares  (A),  and  are  to  be  oflered  to  the  existing 
shareholders  if  the  old  shares  are  at  a  premium,  {i)  It  is  also  de- 
clared, that  it  shall  be  lawful  for  the  company  to  convert  or  consol- 
idate shares  wholly  paid  up  into  capital  stock,  to  be  divided 
amongst  the  shareholders  according  to  their  respective  interests 
therein  (^);  and  provision  is  made  for  registering  the  owners  for 
the  time  being  of  such  stock  and  for  the  transfer  thereof,  and  for 
securing  to  the  holders  such  rights  as  they  would  have  enjoyed  if 
their  shares  had  not  been  converted  into  capital  stock  of  the  com- 
pany. (I)  The  act  authorizes  the  directors  to  receive  payment  from 
any  shareholder  of  the  whole  amount  of  his  shares,  and  to  pay  him 
interest  on  the  diiference  between  such  amount  and  the  amount 
of  calls  actually  made  in  respect  of  the  same  shares,  {no) 

The  company's  moneys  are  to  be  applied  first  in  payment  of  the 
expenses  incurred  in  obtaining  the  special  act,  and  secondly  in  car- 
rying out  the  objects  of  the  company,  {n) 

The  Companies  clauses  act,  1863  ((?),  contains  some  further  im- 
,g^27  Vict  portant  provisions  relative  to  additional  capital  andde- 
c.  118.  benture  stock  of  companies  governed  by  special  acts  of 

Parliament.  The  act  in  question  does  not  confer  any  power  to  in- 
crease capital,  or  to  issue  preference  shares,  or  to  create  deben- 

(c)  lb.  §  23.  shareholder  must  accept  the  offer. 

(c?)  lb.  §  29.  (A-)  8  &  9  Vict.  c.  16,  §  61. 

(e)  See  26  &  27  Vict.  c.  118,  §  21,  as  (0  lb.  §§  62-64.  Stock  will  pass  un- 
amended by  30  &  31  Vict.  c.  127,  §  27,  der  a  bequest  of  shares.  See  Morrice  v. 
and  by  32  &  33  Vict.  c.  48,  §§  5-7.  Ayimer,  10  Ch.  148. 

(/)  8  &  9  Vict.  c.  16.  §  38,  et  seq.  {m)  lb.  §  24. 

( ^ )  lb.  §  56.  [n)  lb.  §  65.    See,  also,  27  &  28  Vict. 

[h)  lb.  §  57.  c.  121.  §§  3  et.  seq. 

(0  8  &  9  Vict.  c.  16,  §  58.    See  Pear-  (o)  26  &  27  Vict.  c.  118  ;  amended  by 

son  V.  London  and  Croydon  Rail.  Co.  14  30  k  31  Vict.  c.  127,  and  32  &  33  Vict. 

Sim.  541,  as  to  the  time  within  which  a  c.  48. 

826 


CHAP.  III.]  GOVERNED    15Y   THE    COMPANIES    ACT,  1S62.  ^GIU 

ture  *but  only  regulates  the  mode  of  exercisinij  such  \)ow-  *G1S 
ers  where  they  are  conferred  by  the  coinjjtiny's  s})eci!d  act. 
There  is  one  provision,  however,  relating  to  the  rights  of  j»refcr- 
ence  shareholders  wliich  requires  special  notice.  The  prefer,.„pi, 
provision  in  (piestion  (§  14)  is  to  the  eflect  that  prefer-  shareholders, 
ence  shares  or  stock  shall  be  entitled  to  the  preferential  dividend  or 
interest  assigned  thereto  out  of  the  profits  of  each  year  in  priority 
to  the  oriiinary  shares  and  stock  of  the  comjuany  ;  but  if  in  any 
year  there  are  not  profits  available  for  the  payment  of  the  lull 
amount  of  preferential  dividend  or  interest  for  that  year,  no  part 
of  the  deficiency  shall  be  made  good  out  of  the  profits  of  any  subse- 
quent year,  or  out  of  any  other  funds  of  the  company.  Prior  to  the 
]vassing  of  this  act,  it  had  been  held  that  preference  shareholders 
were  entitled  to  have  any  deficiency  of  profit  in  one  year  made  good 
out  of  the  profits  of  a  subsequent  year,  even  although  nothing 
might  be  left  for  the  ordinary  shareholders,  {p)  The  enactment  al- 
tering this  rule  only  extends,  it  is  conceived,  to  preference  shares 
issued  under  some  special  act  passed  after  July,  l^GZ. 

Companies  governed  hi/ the  Companies  ad,  1862. 

The  capital  of  a  company  formed  under  the  act  of  18G2,  and  lim- 
ited by  shares,  must  be  specified  in  the  memorandum   capital  of 
of  association  (§  8),  and  the  capital  of  other  companies  Pd'hy^'J i'^^' 
formed  under  the  act,  and  having  a  captal  divided  into  vict.c.89. 
shares,  must  be  specified  in  the  registered  articles  (§  14). 

The  number  and  amount  of  the  shares  into  which  the  capital  is 
divided  must  also  appear  in  the  memorandum  or  articles,  as  the  case 
may  be  (§§  8  and  14);  and  the  shares  must  be  numbered  (^  22); 
but  the  omission  to    number  them    -will  not  ])revent  their     "GH» 
holder  from  being  a  contributory  in  respect  of  them  {q). 

(;))  See  as  to  preference  shares,  Webb  263;  Smith  r.   Cork  and  Bandon  Rail. 

f\  Earle,  20  Eq.  556;  Bangor  and  Port  Co.  Ir.  L.  R.  3   Eq.  356,   and  5  ib.  6&, 

Madoc  Slate  Co.  ib.  59;   Henry  r.  Great  where   the  preference  sharehoUlei-s  es- 

Rail.  Co.  1  DeG.  &  J.  60G,  and  4  K.  Si  tablished  their  riyht  to  many  years,  ar- 

J.l;    Sturge  r.  Eastern  Union  Rail.  Co.  rears.     In  Griffith   r.   Paget.  G  eh.  D, 

7  DeG.  M.  &  G.  158;  Crawford  r.  North  511,  prefen-ed  and  deferred  shareholders 

Eastern  Rail.  Co.  3  K.  &  J.  723;    Ste-  were  held  entitled  to  share  the  cai)ital  of 

vens  &  South  Devon  Rail.   Co.  9  Ha.  a  company  being  wound  up  in  propor- 

313;  Matthews  v.  Great  Northern  Rail.  tion  to  their  respective  shares. 
Co.  5  Jur.  N.  S.  284  ;    Coates  v.  Not-  {q)  See  Ind's  a\)^e.  7  Ch.  4S5.     S.^e 

tinghamW.  W.  Co.  30  Beav.86;  Corry  ;•.  ante,  p.  132,  as  to  numbering  shares. 
London  k  Enniskillen  Rail.  Co.  29  Beav. 

827 


com- 
eni- 


*620  CAl'ITAL    OF    COMrANIES.  [bOOK  UT^ 

Whether  fully  paid-np  shares  in  limited  companies  formed  under 
this  act  can  be  issued  at  a  discount  has  not  been   de- 

Issue  at  a 

discount.  cided.  (r) 

The  orio-inal  capital  may  be  increased  by  the  issue  of  new  shares 

C§§12  and   50)  (s):  but  notice  of  the  increase  must  be 

Increase  of  \«"  y  \  /'  .         /-.        \ 

capital.  given  to  the  registrar  of  joint-stock  companies.  (§  34) 

The  capital  of  a  company  not  limited  by  shares,   may  appa- 
,     .      ,      rentlv  be  reduced  (see  S§  14  and  50);  but  to  reduce  the 

Reduction  of  "^  ;      .  ,  .  .,  , 

capital.  capital  of  a  company  limited  by  shares  was  impossible 

as  the  act  originally  stood,  [i)  This,  however,  may  now  be  done 
under  the  provisions  of  tlie  Companies  acts,  1867  and  1877  {u),  and 
with  the  sanction  of  the  Court  (a?);  but  not  otherwise,  e.g.,  by  buy- 
ino-  up  and  cancelling  shares,  (y)  But,  as  will  be  seen  hereafter, 
inability  to  reduce  capital  does  not  prevent  shares  from  being  for- 
feited or  surrendered  in  the  usual  way.  (s) 

These  acts  and  the  orders  of  Court  relating  to  the  reduction  of 
caj^ital  will  be  found  in  the  appendix  to  the  present  treatise.  By 
reference  to  them  it  will  be  seen  that — 

1.  Shares  never  taken  up  or  agreed  to  be  taken  up  by  any  person 
may  be  cancelled  by  a  special  resolution  of  the  shareholders,  and 
without  any  application  to  the  Court,  [a) 

2.  In  all  other  cases  an  order  of  the  Court  having  jurisdiction 

to  wind   up  the  com])any  {i.e.,  in    England   the    Chancery 
*620     *Di vision  of  the  High    Court  of  Justice)  is    necessary    in 
order  to  effect  a  reduction  of  capital.  (5) 

3.  With  snch  sanction  and  the  approval  of  a  special  resolution 

(r)  See  ante,  p.  614  ;  30  &  31  Vict.  c.  Droitwich  Patent  Salt  Co.  v.  Curzon,  L. 

131,  §  25,  does  not  apparently  author-  R.  3  Ex.  35, 

ize  an  issue  of  paid-up  sliares  for  less  (»)  30  &  31  Vict.  c.  131,  %9  et  seq.; 

money  than  their  nominal  amount.  De-  40  &  41  Vict.  c.  26. 

bentures  may  be  issued  at  a  discount,  (x)    §11.      For  the  practice  of  the 

Regent's  Canal  Ironworks  Co.  3  Ch.  D.  CoTu-t  in  these  matters,  see    the  cases 

43;    Anglo-Danubian  Steam,    &c.,  Co.  cited  in  the  next  note  but  one,  and  The 

20  Eq.  339;  Campbell's  case,   4  Ch.  D.  General   Mming   Co.  Ir.   L.   R.  6  Eq. 

470.  213. 

(s)  See  Campbell's  case,  9  Ch.  1,  as  (i/)  Hope  v.   International  Financial 

to  the  necessary  meetings.  So;.  4  Ch.  D.  327. 

(0  See  §  12,  and  the  cases  of  Felling  (z)  Teasdale's  case,  9  Ch.  54.     Com- 

and  others,  2  Ch.  714 ;  Sewell's  case,  3  i^are  the  last  case. 

Ch.  131.     Even  a  company  which  had  (a)  40  &  41  Vict.  c.  26,  §  5. 

power  to  reduce  its  capital  lost  it  by  be-  (h)  30  &  31  Vict.  c.  131,  §  11. 
ing  registered  as  a  limited   company, 

828 


CIIAl'.  in.]    GOVERNED  BY  TUE  COMPANIES  ACT,  1862.        *(!21 

of  the  sliarcliolders,  tlio  capital  may  be  reduced  whether  fully  paid 
up  or  not,  and  whether  lost  or  not.  (d) 

4.  Where  the  reduction  of  the  capital  involves  either  the  dimi- 
nution of  a  shareholder's  liability  or  the  payment  to  unj  share- 
holder of  any  paid-up  capital  (<?),  notice  of  an  intended  application 
to  the  Court  must  be  given  to  the  creditors  (y*);  and  security  must 
be  given  to  those  creditors  who  will  not  assent,  (g) 

5.  The  words  "and  reduced  "  must  be  temporarily  added  to  the 
name  of  the  company  in  all  cases  where  the  sanction  of  the  Court 
to  a  reduction  of  capital  is  required,  nnless  the  Court  dispenses 
with  such  addition  (A);  and  the  Court  has  only  power  to  dispense 
with  it  where  the  reduction  does  not  involve  either  the  diminution 
of  any  liability  in  res])ect  of  unpaid  capital  or  the  payment  to  any 
shareholder  of  any  paid-up  capital,  {i) 

6.  The  special  resolution  conlirmcd  by  the  order  must  be  regis- 
tered, (k) 

7.  All  copies  of  the  memorandum  of  association  issued  after  the 
reduction  must  be  in  accordance  with  it.  [I) 

AVhcre  the  liability  to  calls  is  to  be  diminished  or  a  division  of 
])aid-up  capital  is  to  be  made  {m),  a  time  is  fixed  for  creditors  to 
come  in  and  object,  and  if  they  do  not  come  in  Mithin  the  time 
fixed  for  the  purpose,  they  cannot  afterwards  etiectually  dissent.  («) 
But  creditors  who  receive  no  notice  of  the  intended  reduc- 
tion are  entitled  to  be  paid  their  debts  not  only  *by  the  ^G'21 
company,  but  if  necessary,  by  compelling  the  tlien  mem- 
bers of  it  to  contribute  to  their  payment,  (o) 

Provision  is  also  made  by  the  Companies  act,  1S6T,  for  subdivid- 
ing a  company's  shares.     This  may  be  done  by  special  subdivision  of 
resolution,  without  the  sanction  of  any  court  {p)  ;  but  ^'"^'■'^^• 
the  proportion  between  the  amount  paid  and  unpaid  on  the  exist- 

{d)  lb.  §  9,  and  40  &  41  Vict.  c.  26,  §  Eq.  155;  but  see  Credit  Foncier  of  En- 

3.     Prior  to  this  act  the  law  was  other-  ghmd,  11  Eq.  356,  where  fourteen  days 

wise.    See  Ebbw  Vale  Steel,  &c.,  Co.  4  were  fixed. 

Ch.  D.  827;  Kirkstall  Brewery  Co.,  5  ib.  (i)  See  40  &  41  Vict.  c.  26,  §  4. 

5:«.  and  compare  Credit  Foncier  of  En-  (A-)  30  &  31  Vict.  c.  131,  §§  15,  16,  and 

nland,  11  Eq.  356.  see  40  &  41  Vict.  c.  26,  §  4. 

(e)  See  40  &  41  Vict.  c.  26,  §  4.  [1)  30  &  31  Vict.  c.  131,  §  10. 

(/)  30  &  31  Vict.  c.  131,  §§  ll.and  17.  (m)  40  &  41  Vict.  c.  26,  §  4. 

(//)  Ib.  §§  11,  13,  and  14.  (")  Credit  Foncier  of  England,  11  Eq. 

(/()  Ib.  §  10.     The  Court  usually  di-  356,  foot-note, 

ivcts  this  addition  to  be  used  for  three  (o)  30  k  31  Vict.  c.  131,  §  17. 

months,  Sharp  v.  Stewart  and   Co.  5  {p)lh.  §21. 

829 


■"G22  CAI'ITAL    OF    COMI'AXIES.  [bOOK  III. 

ing  shares  must  be  preserved  {q)  ;  and  all  copies  of  the  memor- 
andum of  association  issued  after  tlie  subdivision  must  be  in  accord- 
ance with  it.  (r) 

Notwithstanding  tlie  large  powers  given  by  the  Companies  act, 
Preference  1S62,  to  shareholders,  and  enabling  them  to  modify 
shares.  their  articles  of  association  by  special  resolution  (.§),  it 

has  been  held  not  competent  for  them  to  issue  preference  shares 
unless  the  articles  as  originally  framed  authorize  such  issue,  (t) 
But  it  is  otherwise  if  they  do,  although  the  memorandum  of  asso- 
ciation is  silent  on  the  subject,  {ic)  By  the  act  of  1867,  special  res- 
olutions may  be  passed  authorizing  arrangements  on  the  issue  of 
shares  for  a  difference  between  their  holders  in  the  amount  of  calls 
to  be  paid,  and  the  time  of  payment  of  such  calls,  (x) 

The  capital  of  companies  governed  by  the  Companies  act,  1862, 
r^  „  •„«  may  be  consolidated  and  divided  into  shares  of  larger 
into  stock.  amouut,  and  may  be  converted  into  stock  (§§  12  and 
50);  but  notice  of  any  such  chanire  must  be  given  to  the  registrar 
(§28). 

The  amount  of  a  com])any"'s  capital  or  stock,  the  shares  into 
Return  show-  '^^'hicli  the  former  is  divided,  and  in  which  the  latter  is 
ing capital,  &c.  \^q\(\^  the  ])ersons  to  whom  the  shares  or  stock  belong, 
the  dates  of  transfers,  and  the  amounts  of  calls  paid  and  unpaid, 
must  appear  with  other  matters  in  the  returns  required  to  be  made 
annually  to  the  registrar  {§§  26  and  29). 

By  the  regulations  in  Table  A.,  the  directors  may,  with  the  sanc- 
tion of  a  special  resolution  of  the  members,  increase  the  capital  of 
Companies  the  Company  by  issuing  new  shares  (No.  20). 

*622     The  ^amount  of  the  increase  and  the  amounts  of 

Table  A. 

Provisions  as  ^he  shares  into  which  the  increased  capital  is  to 

to  capital.  i^Q  divided,  rest  with  the  members;  but  if  they  give  no 

directions  upon  the  subject,  then  with  the  directors  (ih.).  Unless 
the  meeting  authorizing  the  increase,  give  directions  to  the  con- 
trary, all  new  shares  are  to  be  offo-ed  to  the  mem  bers  in  proportion 
to  the  existing  shares  held  bj  them  (No.  27).     Shares  not  accepted 

(q)  lb.  Co.,  2  Dr.  &  Sm.   514  and  521,  and  9 

(r)  §  22.     As  to  the  illegality  of  sub-  Jur.  N.  S.  551.     See  as  to  the  constnic- 

dividing  otherwise  than  under  the  act,  tion  of  articles  on  this  point,  Melhado  v. 

see  the  cases  of  Foiling  and   others,  2  Hamilton,  21  W.  R.  874. 

Ch.  714.  (u)  Harrison  v.  Mexican  Rail.  Co.  19 

is)  25  &  2G  Vict.  c.  89,  §  50.  Eq.  358. 

(0   Hutton  V.  Scarboro'   Cliff  Hotel  (x)  30  &  31  Vict.  c.  131,  §  24. 
8 1)  J 


CHAT 


III.j  CALLS.  *623 


by  tlie  incinbcrs  may  be  disposed  of  by  the  directors  as  they  think 
most  beiieficinl  to  the  company  (ib.).  Any  capital  raised  by  the 
creation  of  new  sliares  is  to  be  considered  as  part  of  the  orii^inal  capi- 
tal, and  is  subject  to  the  same  provisions  as  regards  culls  and  for- 
feiture of  shares  (No.  28).  (y) 

By  the  same  regulations,  the  directors  may,  with  the  sanction  of 
the  members,  convert  any  paid-n]>  shares  into  stock  (No.  23,  §§  12, 
28  and  3i  of  the  act).  The  transfer  of  stock  is,  as  far  as  practicable, 
subject  to  the  same  regulations  as  the  transfer  of  shares  (No.  2-i), 
and  the  rights  of  stockholders  are  assimilated,  as  nearly  as  circum- 
stances will  permit,  to  the  rights  of  shareholders  (Xos.  24  and  25; 
and  see  §  29  of  the  Act). 

With  respect  to  existing  companies  registered  under  the  Act,  the 
amount  of  their  capital  and  the  number  of  their  shares,  capital  of exist- 
and  the  persons  to  whom  thcv  belong,  and  the  amounts  i"g  ^^ompames. 
paid  on  them  must  all  be  stated  in  the  documents  sent  to  the  Eeg- 
istrar  (§  183);  and  if  the  capital  has  been  converted  into  stock,  the 
amount  of  such  stock,  and  the  persons  entitled  to  it,  must  be  simi- 
larly stated  (§  185).  Shares  in  tliese  companies  need  not  be  num- 
bered if  they  were  not  numbered  before  registration  (§  11»0,  cl.  2). 
Subject,  however,  to  the  provisions  of  any  special  act  of  Parliament, 
or  letters  patent,  the  foregoing  remarks  concerning  the  capital  and 
shares  of  new  companies  appear  to  be  applicable  to  existing  compa- 
nies after  their  registration  (see  §  196  ;  and  as  to  companies  regis- 
tered under  the  acts  of  1856-1858,  see§§  176-178). 


♦SECTION  IT.— OF  CALLS.  *023 

Capitals   of   companies  are    usually  raised    by  installments   or 

calls. 

"A  call,"  is  an  expression  used  to  denote  both  a  demand  for 
money,  and  also  the  sum  demanded;  and  in  this  la.>;t  pin-erent  kin.is 
sense  it  signifies  either  the  whole  sum  required  to  be  ofcaiis. 

(//)  Clauses  similar  to  these  were  con-  Steam  Clipper  Co.  r.  ^lounsoy.   4  K.  «fe 

tainecl  in  Table  B.  to  the  act  of  18-V).  J.  7:^:5;  and  with  rforence  to  the  issu- 

They  were  discussed  with  reference  to  of  pn^f.Tcnce  shar-s.  in  Hutton  r.  Sear- 

boiTOwing  money,  in  Bryon  v.  Metropol-  horo"  Clitt"  Hotel  Co.  2  Dr.  iV  Pui.  ol4 

itan  Saloon  Omnibus  Co.  4  Jur.  N.  S.  and  521.  and  Harrison  r.  Mexican  Hail. 

680,    and  3  DcG.    &  J.  123;  Auxiliary  Co.    19  Eq.  358. 

obi 


"024  CALLS.  [book  iil 

raised  at  one  time  from  the  members  of  a  company  by  a  contribu- 
tion amongst  themselves,  or  tliat  proportion  of  this  entire  sum 
wliic'h  is  payable  in  respect  of  each  share. 

There  are  two  kinds  of  calls.  First,  there  are  those  calls  which 
are  nothing  more  than  the  un|iaid-up  portions  of  the  nominal  cap- 
ital of  a  company  (5);  and,  secondly,  there  are  those  calls  which  are 
contributions  required  after  that  capital  has  been  raised  and  ex- 
hausted. Calls  of  the  first  kind  are  payable  by  virtue  of  the 
agi-eement  entered  into  by  the  subscribers  and  shareholders  to 
contribute  the  suras  fixed  upon  as  the  capital;  but  calls  of  the  last 
kind  are  payable  in  consequence  of  the  liability  of  shareholders  to 
discharge  their  debts,  (a)  If  this  liability  is  unlimited,  the 
amount  of  calls  (of  the  second  kind)  which  a  shareholder  may  be 
compelled  to  pay,  depends  entirely  on  the  amount  of  the  debts  to  be 
liquidated,  and  upon  the  number  of  the  solvent  co-shareholders. 
But  no  shareholder  can  be  required  to  pay  calls  of  the  first  kind 
beyond  his  unpaid  proportion  of  the  capital  of  the  company.  In 
the  ensuing  pages  it  is  proposed  to  examine  the  law  respecting  calls 
of  the  first  kind,  so  far  as  it  relates  to  the  persons  empowered  to 
make  them,  the  purposes  for,  and  the  manner  in  which  they  may  be 
made,  and  the  persons  liable  to  pay  them.  The  right  to  forfeit  shares 
for  the  non-payment  of  calls,  and  the  law  relating  to  actions  for 
their  recovery,  will  be  noticed  in  subsequent  parts  of  the  work. 


*62-i        *1.  Of  the  persons  hy  v^Jiom  calls  may  1)6  made. 

The  tei'ms  of  the  instrument  which  regulates  the  internal  afifairs 
Bvwhom"ans  of  cacli  Company  must  be  ascertained  before  the  per- 
maybemade.  g^j^g  empowered  to  make  calls  on  its  shareholders  can 
be  known.  Generally  speaking,  this  power  is  naturally  vested  in 
In  companies     the  directors  of  the  company.     There  is  no  statutable 

governud  by  .    .  i   •  t       i  i  ^         ^  • 

7  Geo.  4,  c. 46,     provisiou  upou  tliis  sumcct  applicable  to  banking  com- 

7Wm,  4&I  ^        .  ^  J  i  1  & 

Vict.  c.  73.  panics  governed  by  7  Geo.  4,  c.  46;  nor  to  companies 
governed  by  the  Letters  Patent  act  of  7  Win.  4  &  1  Yict.  c.  73.  In 
ordinary  cost-book  companies  calls  are  made  by  the  shareholders.  (J) 

{z)  Payments  on  allotment    are  not  ley,  6  H.  &  N.  38,  in  which  it  was  held 

calls.     See  CroskeyiJ.  Bank  of  Wales,  4  that  calls  made  by  liquidators  might  be 

GifF.  314.  recovered,  although  the  notices  required 

(rt)  The  difference  here  alluded  to  is  for  other  calls  had  not  been  given, 

illustrated  by  Hull  Flax  Co.  v.  Welles-  {h)  See  32  &  33  Vict.  c.  19,  §  10. 
832 


CirAP.  in.]  BKFOKK    WHOLE    CAPITAL    SUBSCRIBED.  *625 

By  the  CoMipaiiies  clauses  consolidation  act  the  power  to  make 
calls   is   "-ivcii  to  the  compaiiv  where   its  special   act  is  in  oompnnios 
silent  on  the  snhject  (>•);  and  it  has  been  held,  that  this   &9Vici.  c.  ig. 
power  is  one  which  may  he  exercised  by  the  directors,  and  that  con- 
sequently a  general   meeting  of  the  shareholders  need  not  be  held 
lor  the  pur])ose  of  making  a  call,  (d) 

By  the  schedule  to  the  ComiMinies  act,  1802,  the  power  of  mak- 
calls  is  exercisable  by  the  directors (6);  and  this  rule  compnniesgo- 
applies  to  all  coni)>anies  limited  by  shares  and  formed  ^l^'lJpiiiK'ct, 
under  that  act,  and  having  no  articles  of  association  of  ^^~ 
their  own.  Tlie  act  itself,  however,  is  silent  ujjou  the  subject,  and 
leaves  the  authority  to  make  calls  to  be  settled  by  the  regulations 
of  each  company. 

Where  the  power  to  make  calls  resides  in  the  directors,  a  call 
made  by  those  directors  who  are  so  "c?^  jure  is  valid,   caiismadeby 

•J  "  directors 

although  an  attemjit  may  have  been  made  to  remove  AcjaTc. 
tliem,  and  other  directors   may  have  been  (improperly)  elected  to 
take  their  place.  (/) 

It  need  hardly  be  observed,  that  a  call,  made  by  persons  who 
liave   not    the   riirht    to    make    it,    is    altogether    in-  caiismndeby 

valid.  {Cj)  I-crsoiis. 

Where  the  power  to  make  a  call  is  exercisable  by  a  certain 
♦number   of  persons   collectively,   a  valid    call  cannot    be     *625 
made  at  a  meeting  at  which  less  than  the  requisite  number 
is  present.     The  authorities  on  this  point  are  numerous  oaUsmustbe 
and   conclusive,    {li)     However,    in    the   Southampton   rcu'uisiJe  mun- 
Dock  Company  t'.   Richards  {i\  power  to   make  calls  ^-r  "f  Lc-n^n^. 
was  c-iven  by  a  special  act  of  Parliament  to  the  directors   Southampton 

f^  •'  '  11  1      1  Dock  Coiiu«aiiv 

of  a  comjiany,  and  it   Avas  held   that  a  call  made  by   a  r. uichanis. 
court  of  directors  (/.  e.,  by  three  of  them)  was  valid,  inasmuch  as 
in  the  act  the  expressions  "  the  directors  ''  and  "  a  court  of  direct- 
ors "  were  used  indiscriminately. 

(c)  8  &  9  Vict.  c.  16,  §22.  Eastern  Rail.  Co.  r.  ncbblowliito,  12  A. 

(rf)  lb.   §90.     See  Ambergate,   (Src,  &  E.  497. 

Rail.  Co.  V.  Mitchell,  4  Ex.  540.  (/»)  See   Kirk  r.  Bell,   16  Q.  B.  290, 

(c)  Table  A.,  No.  4.  and  similar  cases  cited  anie,  p.  244,  and 

(/)  Swansea  Dock  Co.  r.  Lovein,  20  compare  Thames   Haven  Dock  Co.   r. 

L.  J.  Ex.  447.  Rose,  4  Man.  k  Gr.  "vVi. 

{g)  Seellowbeach  Coal  Co.  i'.  Tcagne,  (0  1  Man.  &  Gr.  44>«.     Southampton 

5  H.   k   N.    ir>l.      The   greneral   issue  Dock  Co.  t'.  Anictt,  ib. 
raised  the  question  of  validity.     South- 

w  833 


*626  CALLS.  [book  III. 

2.  The  ptirposes  for  wliicli  calls  may  he  made. 

First,  as  fo  starting  the  comjyany. 

It  has  been  seen  already  tliat  a  person  who  agrees  to  take  shares 
Calls  made  to  in  a  Company  formed  for  a  given  purpose,  and  with  a 
puny.  given  capital,  is  not  bound  to  accept  shares  in  a  com- 

pany formed  lor  another  purpose,  or  with  a  diiferent  capital;  and 
it  follows  from  this  that  a  variation  in  the  original  scheme,  if  un- 
assented  to  by  a  subscriber  to  it,  affords  an  answer  to  any  applica- 
Caiis  on  allot-  tion  for  calls  which  may  be  made  upon  him.  {k).  And 
&c.  '      if  no  concluded  agreement  has  been  entered  into,  bind- 

ing an  allottee  of  shares  to  accept  them,  and  to  become  a  share- 
liolder,  he  cannot  be  liable  to  calls,  {l)  But  if  a  subscriber  to  a 
company  binds  himself  to  take  shares  in  a  compan}''  which  may 
differ,  more  or  less,  from  that  originally  proposed  to  be  formed,  he 
cannot  set  up  a  variation  in  the  original  scheme  as  an  answer  to  a 
demand  for  payment  of  the  capital  he  has  undertaken  to  contrih- 
Beforet'ie  ^^^^-  (^'0  -^.gaiu,  although  the  whole  of  a  company's 
hi!s'bee^nsub-  intended  capital  has  not  been  subscribed,  it  does  not 
scribed.  follow  that  tliose  who  have  subscribed  are  not  bound 

to  furnish  funds  to  enable  it  to  commence  operations.  If 
*626     by  a  company's  ^special  act  or  charter  the  subscription  of 

the  whole,  or  a  definite  part  of  the  proposed  capital  is  made 
a  condition  precedent  to  the  right  to  require  payment  of  anything 
from  those  who  have  subscribed,  effect  must  be  given  to  such  a 
condition  (?i);  but  there  is  nothing  in  any  general  act  now  in  force 
having  any  such  effect  (o);  and  consequently,  where  there  is  no 
special  act  or  charter  affecting  the  question,  the  liability  of  a  sub- 
scriber to  a  comjmny  to  contribute  to  its  capital  before  the  whole 
lias  been  subscribed  for,  depends  entirely  upon  the  contract  into 
which  he  may  have  entered;  and  there  are  several  instances  in 

(h)  See  Galvanized  Iron  Co.  r.  West-  Beav.   278.     See,   too,    Kidwelly  Canal 

oby,  8  Ex.  17.  Co.  r.  Raby,  2  Price,  93. 

(?)  Duke  V.  Andrews,  2  Ex.  290.  (n)  Norwich  and  Lowestoft  Nav.  Co. 

(m)  Ante,  pp.  109  ct  seq.  and  p.  159;  v.  Theobald,  1  Moo.  &  M.  151, 
Midland,  &c.  Rail.  Co.  v.  Gordon,  16  M.  (o)  There  was  a  clause  to  the  effect 

&  W.  804;  Cork  and  Youghal  Rail.  Co.  in  question  in  the  repealed  act  relatin<f 

1".  Paterson,  18  C.   B.   414;  Norman  v.  to  banking  companies  formed  after  May, 

Mitchell,  5  DeG.  M.  &  G.  648,  and  19  1844.    See  7  &  8  Vict.  c.  113,  §  5. 
834 


CHAP.  III.]  BEFORE    WHOLE    CAl'ITAL    SUBSCRIBED.  *627 

which  persons  have  been  held  bound  so  to  contribute,  althou<''-h  the 
whole  capital  of  the  company  which  they  had  joined  had  not  been 
subscribed  for.  Prima  facie,  however,  they  are  not  so  bound  (^); 
and  in  all  the  cases  in  which  they  were  hold  bound,  the  defendants 
had  entered  into  a  contract  which  precluded  them  from  maintaining 
that  the  subscription  of  the  whole  of  the  originally  proposed  capi- 
tal was  an  express  or  implied  condition  to  their  becoming  share- 
holders. (^) 

With  respect  to  companies  formed  under  the  Companies  act, 
1SC2,  and  having  no  special  articles  of  their  own,  it  is  conceived 
that  the  directors  have  power  to  commence  business,  and  make  calls 
before  the  whole  capital  is  subscribed  for.  (r) 


Secondly,  as  to  carrying  on  the  hus'iness  of  the  company. 

The  nnpaid-np  instalments  of  a  capital,  agreed  to  be  subscribed 
for  a  given  purpose,  cannot  be  lawfully  required  to  be  paid  up  fur 
any  purpose  other  than  that  to  which  the  capital  cniismadeto 

♦itself  is  by  agreement  properly  applicable.     In     *G27   company's^** 
other  words,  a  call  cannot  be  lawfully  made  upon  business, 

the  shareholders  of  a  company  for  any  purpose  not  warranted  by  the 
constitution  of  that  company,  {s)  If  it  is  made  by  the  proper 
authority,  in  the  proper  form,  and  for  a  purpose  which  is  not  im- 
proper, then  although  some  of  the  shareholders  may  disapprove  of 
it,  the  call  will  be  valid,  and  a  court  will  not  take  upon  itself  to 
decide  whether  it  ought  or  ought  not  to  be  made,  but  will  leave  that 
question  to  the  decision  of  the  shareholders  themselves,  {t)      But 

ip)  See  Fox  v.  Clifton,  6  Bing.  776,  North  Stafford  Steel  Co.  v.  Ward,  L.  R. 

and  North  Stafford  Steel  Co.  v.  Ward,  3  Ex.    172,  which,  however,  turned  on 

L.  R.  3  Ex.  172.  the  articles. 

(?)  See  Hutt  v.  Giles,  12  M.  &  W.  (s)  In  an  action  for  calls  this  defense 

492;  Waterford,   Wexford,    &c.,   Rail.  was  open  on  a  plea  of  never  indebted. 

Co.  V.  Dalbiac,  6  Ex.  44:^;  London  and  South-East  Rail.  Co.  t-.  Hibblewhite,  12 

Continental  Ass.  Co.   v.  Redgrave,  4  C.  A.  k  E.  497. 

B.   N.  :S.   524;  Norman  r.   Mitchell,  5  (0  Yetts  r.  Norfolk  Rail.  Co.  3  DeG. 

DoG.  M.  &  G.  648,  and   19  Beav.  278.  k  S.  293;    Cooper  v.   Shropshire  Union 

(r)  Omainental   Tyrographic  Co.    v.  Rail.    &    Can.  ^Co.   6    Rail.   Ca.    136. 

Brown,  2  H.  &  C.  63.  and  McDoughal  r.  and  1.'?  Jur.  44;J.*    See,  also.  Orr  v.  Glas- 

Jersey  Hotel  Co.  2  Ilem.  &  M.  528;  Ly-  gow  Rad.  Co.  3  McQn.  799,  where  the 

on's  case,  35  Beav.  646.    Howbeach  Coal  money  already  obtained  was  applied  to 

Co.  v.  Teague,  5  H.  &  N.  151,  however,  a  purpose  which  wixs  improper,   unless 

contains  dicta  to  tht  contrary;  and  see  eanctionedby  a  majority  of  shareholders. 

835 


^.0:28  CALLS.  [book  iil 

if  a  call  is  made  for  a  purpose  not  warranted  by  the  constitution  of 
the  conii)aiiv,  such  call  will  be  invalid,  and  a  court  will  interfere, 
even  at  the  instance  of  one  single  dissentient  shareliolder,  to  j^re- 
vent  the  making  of  such  a  call.  The  authorities  bearing  upon  this 
subject  will  be  adverted  to  hereafter,  when  the  principles  which 
iruide  the  Court  in  interferini?  in  matters  connected  with  the  in- 
ternal  affairs  of  companies  come  to  be  discussed.  There  appears  to 
be  no  objection  in  principle  to  making  calls  to  meet  prospective  and 
estimated  expenses;  but  it  seems  that  in  ordinary  cost-book  com- 
]iaiiies  such  calls  were  considered  improper,  [u) 

The  power  of  making  a  call  must  be  exercised  as  a  trust  (a?),  so  as 

not  to  oppress  or  favor  one  shareholder,  or  set  of  share- 

improper  calls.  jj^^^|g,.g^  j^^^^.g  ^han  another;  and  if  a  call,  which  ought 

to  be  made  on  all  the  shareholders  rateably,  is  made  on  some  of 
them  exclusively  of  the  others,  redress  may  be  had.  (y)  So,  if  a  call 
is  made  on  one  shareholder  only,  with  a  view  to  enable  him  to  make 

default  and  have  his  shares  forfeited,  and  thus  get  out  of  the 
*62S     company,  the  call,  and  all  the  proceedings  ^founded  upon  it, 

will  be  nugatory  as  against  the  other  shareholders,  (s) 
A  creditor  who  has  obtained  judgment  against  a  company  and 
Mandamus  to  cauuot  obtain  satisfaction  by  execution  in  the  ordinary 
make  a  call.  y^^^y^  j^g^g  ]^gg,j  \^q[^  ^q^  entitled  to  a  mandamus  to  com- 
pel the  company  to  pay  him  by  means  of  a  call,  {a)  But  as  before 
Action  to  com-  the  Judicature  acts  a  court  of  equity  would,  so  now  it 
iugofacaii.  is  Submitted  any  Division  of  the  High  Court  will,  if 
necessaiy,  assist  a  person  entitled  to  payment  out  of  the  funds  of  a 
company  by  making  a  call  on  the  shareholders,  and  compelling 
them  to  furnish  so  much  of  the  unpaid-up  capital  as  may  be  re- 
quired to  liquidate  the  demand  upon  them.  (J)     Whether  they  can 

(it)  Such  calls  can,  however,  now  be  (a)  R.   v.  Victoria  Park  Co.    1  Q.  B. 

made  for  the  estimated  expenses  of  three  288.     See,  also,  the  York  Building   Co. 

months.    See  32  &  33  Vict.  c.  19,  §  11.  2  Atk.  56. 

(.t)  See  Gilbert's  case,  5  Ch.  559.  (&)  Law  v.  London  Indisputable  Pol. 

(</)  Preston  v.  Grand  Coll.  Dock  Co.  Co.  1  K.  &  J.   223;    Durham's  case,  4 

11    Sim.   327.      Compare    Mangles  v.  K.  &  J.  517;  Talbot's  case,  5  DeG.  &  S. 

Grand  Coll.  Dock  Co.  10  ib.  519;  Bailey  886.    The  7  &  8  Vict.  c.  113,  §  31,  provi- 

V.  Bu-kenhead,  &c.,   RaU.  Co.  12  Beav.  ded  for  making  calls  for  the  idemnity  of 

433.    Yetts  r.  Norfolk  Rail.  Co.  3  DeG.  a  shareholder  who  had  been  compelled  to 

&  S.  293.     These  cases  will  be  consid-  pay  a  debt  of  the  company.     No  act  now 

ered  hereafter.  m  force  contains  any  such  provision;  but 

{z)  Richmond's    case    and    Painters'  his  right  to  idemnity  in  such  a  case  is 

case,  4  K.  &  J.  305.  clear.    Whether  his  remedy  would  be 

836 


CHAP.  III.]  MANNER    OF    MAKING    TIIKM.  *629 

be  compelled  to  fiirnisli  more  than  their  respective  unpaid-up  in- 
stallments depends  in  each  case  npon  the  constitntiijn  of  the  com- 
pany, i.  6.,  upon  whether  the  liability  of  the  shareholders  is  limited 
or  unlimited. 

The  amount  of  each  call  (meaning  thereby  an  instalment  of  cap- 
ital) {g\  is  generally  fixed  by  those  to  whom  tlie  power  Amount  of  cau 
of  making  calls  is  entrusted.  Where  there  is  no  special  ^"^^^  ""*^^^- 
provision  in  a  company's  act,  charter,  or  regulations,  limiting  the 
amount  of  each  call,  that  amount  must  be  considered  discretionary, 
subject  only  to  the  limits  which  are  set,  iirst,  by  the  rule  tliatnocall 
can  be  made  upon  the  shareholders  of  any  company  for  any  purpose 
not  warranted  by  the  constitution  of  that  company  ;  and  secondly, 
by  the  rule  that  the  shareholders  are  not  bound  to  contribute  more 
than  the  capital  which  may  have  been  agreed  upon.  Statements 
are  sometimes  made  in  prospectuses  that  it  is  not  intended  to  call 
up  more  than  part  of  the  capital;  but  such  statements  afford  no 
defense  to  a  call  for  more  than  the  amount  stated.  A  statement  of 
a  present  intention  does  not  preclude  a  subsequent  change. 

■^Whether  a  call  can  be  made  on  persons  who  have  once     *G29 
])aid  up  their  shares  in  full  but  to  whom  i>art  of  the  paid-up 
capital   has   been   returned,  is  a  question  which  turns  caiis  to  compel 
on  the  true  construction  of  the  act,  cliarter,  or  other  reTiini"a"' ""' 
instrument,  conferring  the  power  to  make  calls.     But  cai""^- 
unless  there  are  words  showing  the  conti-ary,  the  power  to  make 
calls  in  such  a  case  would  be  considered  as  exhausted.     It  would 
not,  however,  follow  that  the  returned  capital  could  not  be  recovered 
back,  {d) 

Calls  not  paid  on  the  day  fixed  bear  interest  at  rates  varying  in 
difierent  companies;  in   the  cases  of  companies  gov-  interest  on 
erned  by  8  &  9  Vict.  c.  16,  the  rate  is  4  per  cent.,  see  ""P'^'^  •^^'^• 
§§23  and  25(6);  and  in  companies  governed   by  25  <&  26  Vict.  c. 
89,  and  Table  A,  the  rate  is  5  per  cent.,  see  Table  A,  Xo.  6.     Calls 
made  by  cost-book  companies   may  be  made  to  bear  interest  at  5 

by  action  or  bj'  a  petition  to  wind-iip  pror's  csi-^o,  4  Cli.  475;  Ranee's  coso,  6 

would  depend  on  circmnstanoes.  ib.  104. 

{c)  Ante,  p.  ()2:>.  (c)  The  act  .<:ays lawfid  interest.     Tlio 

(rf)   See  the  Companies  clauses  cons.  interest  should  not  be  added  to  the  prin- 

act,    1845,  ^V2\,  and   a-s  to   registered  cipal  and  be  claimed  with  it  as  part  of 

companies,  compare  tlie  Cardiff  Coal  Co.  the  call.     See  Southampton  Dock  Co.  v. 

11  W.  R.  1007,  with  Carditt'  Coal  Co.  t\  Richards,  1  Man.  it  Gr.  448. 

Norton,  2  Eq.  558  and  2  Ch.  405;  Stiin- 

837 


*u30  CALLS.  [book  in. 

per  cent.  (/)     Interest  on  calls  made  in  winding-up  proceedings 
will  be  alluded  to  hereafter. 


3.  Of  the  manner  of  making  calls. 

In  order  that  a  call  may  impose  any  obligation  on  those  on  whom 
Modeof  mak-  '^^  ^^  made,  it  must  be  made  not  only  by  the  proper  au- 
ing  calls.  thority,  but  in   the  proper  manner.  (^)     What  is  the 

proper  manner  varies  in  different  companies,  but  there  are  a  few 
rules  applicable  generally  to  making  calls  to  which  it  will  be  con- 
venient at  once  to  advert. 

Except  so  far  as  irregularities  may  have  been  waived  (A),  it  seems 
irrc'Kuiaritics  that  an  irregularity  in  making  a  call  renders  it  invalid  ; 
them.  and  an  irregularity  in  giving  notice  of  it  precludes  the 

comjiany  from  enforcing  its  payment  against  a  person  who  has  not 
received  a  proper  notice.  {%)  But  after  judgment  has  been 
*630  "^recovered  in  an  action  for  a  call,  such  judgment  will  not  be 
set  aside  on  the  ground  that  the  call  was  improperly  made; 
although  tlie  defendant  may  only  have  become  acquainted  with 
its  invalidity  since  the  judgment  was  obtained  against  him.  (^) 

The  irregularities  which  are  generally  relied  upon  as  exonerating 
a  shareholder  from  the  payment  of  a  call  may  be  reduced  to  two 
kinds,  viz.  (1),  those  which  affect  the  resolution  for  the  call,  and 
(2),  those  which  affect  the  notice  requiring  payment  of  a  call  which 
has  been  made.     It  may  be  useful  to  refer  to  each  of  these  in  turn. 

1.  As  to  the  resolution  making  the  call.  It  has  been  already 
Irregular  rrso-    seen  that  the  resolution  to  be  valid  must  be  made  by 

lution  making  •  i         i  i 

tall.  tliose  persons  with  whom  the  power  to  make  the  call 

lies,  and  also  by  a  competent  number  of  such  persons.  {I)  It  has 
also  been  seen,  in  an  earlier  part  of  the  treatise,  that  what  takes 
place  at  a  meeting  improperly  convened  is  not  legally  valid,  and  is 

(/)  32  k  33  Vict.  c.  19,  §  12.  J.  408. 

((/)  In  an  action  for  calls,  never  in-  (i)  See  Milea  v.  Bough,  3  Q.  B.  845, 
debted  put  in  issue  the  propriety  of  the  where  the  defendant  had  actually  prom- 
manner  in  which  they  were  made.  ised  to  pay  the  call. 
South-Eastern  Rail.  Co.  t'.  Hebblewhite,  (A;)  Thames  Haven  Dock  Co.  v.  Hall, 
12  A.  &  E.  497;  Shropshire  Union  Rail.  5  Man.  &  Gr.  274;  and  The  same  Co.  v. 
Co.  V.  Anderson,  3  Ex.  401 ;  Wetland  Rose,  4  ib.  552. 
Rail.  Co.  V.  Blake,  6  H.  &  N.  410.  (Z)  Ante,  p.  625. 

(/«)  British  Sugar  Refining  Co.  3  K.  & 

838 


CHAP.  III.]  MANNER    OF   MAKING    TUEM.  *G31 

not  Lincling  upon  those  who  have  not,  by  their  own  acts,  precluded 
themselves  from  objecting  thereto.  It",  therefore,  a  call  can  only  be 
made  at  an  extraordinary  meeting,  specially  summoned  for  the 
purpose,  a  call  made  at  a  meeting  not  duly  summoned  for  that  pur- 
])Ose  will  be  invalid.  But  if  a  call  can  be  made  at  an  ordinary 
meeting  not  sj)ecially  convened,  it  may  also  be  made  at  an  ad- 
journed ordinary  meeting,  although  such  meeting  may  have  been 
convened  specially  by  a  notice  not  stating  the  purposes  for  which  it 
was  to  be  held,  and  although  the  notice  was  not  sent  to  everybody 
entitled  to  be  ]u-esent.  (in) 

Although  the  persons  making  a  call  may  also  be  required  to  de- 
termine when,  where,  and  to  whom  the  call  is  to  be   Resolution 
paid,  it  is  not  necessary  that  they  should  do  this  by  the  "'"il'e''„"!^'ht.ref 
resolution  [making  the  call.     It  is  sufficient  if  these  caii'is^io  b^  * 
particulars  are  stated  in  the  notices  issued  in  pursuance  p*'*^* 
of  such  resolution,  (n) 

A  call  may  be  made  prospectively,  i.e.,  it  may  be  resolved  to-day 
that  a  call  be  made  a  month  hence,  and  be  pay-  prospective 

able  a  *month  after  that,  {o)  So,  a  call  may  be  *G31  *^''^^'*- 
made  payable  by  instalments.  (^9)  But  a  power 
to  make  calls,  as  from  time  to  time  may  be  thought  necessary,  does 
not  authorize  those  entrusted  with  the  power,  in  calling  up  the 
whole  capital  at  once,  and  make  the  same  payable  by  instalments, 
so  as  to  save  themselves  the  trouble  of  determininor  at  future 
periods  whether  any  call  should  be  made  or  not.  (q) 

It  is  frequently  provided   that  no  call  shall  be  made  at  less  than 
a  certain  interval   of  time  since  the  making  of  the  last   intervals be- 

,  1       i./r>       1         1  I  1'  1     •       1  tweeii  succes- 

call;  and  considerable  dithculty  Jias  been  lelt  in  deter-  sive calls, 
mining  the  exact   time  at   which  a  call  can  be   said   to   be  made. 
After  some  hesitation,  the  courts  have  determined  that  a  call  must 
considered   as    made   when   a  resolution  that   it  be  made    is  duly 

f»i)See  Wills  r.  Murray,  4  Ex.843;  5   M.    &  W.   a"35;  Northwostom   Rail, 

see  ib.  p.  802.  Co.  r.   McMichael,  6   Kx.  27;5;  Birken- 

(»)   Newry,    &c.,    Rail.    Co.  r.   Ed-  head,  A.c.  Rail.  Co.  r.  Webster,  ib.  277; 

munds,  2  Ex.    118;  Sheffield,  &c.,  Rail.  Ambergate,  &c.  Rail.  Co.  v.  Coulthard, 

Co.  V.  Woodcock,  7  M.  <t  W.  574;  Great  5  Ex.  459.     As  to  an  action  of  debt  for 

Northern  Rail  Co.  r.  Biddulph,  ib.  243.  tlie  recovery  of  instalments  before  all 

(o)  See   Sheffield,    &c.    Rail.    Co.   t'.  ai-e  due,  .see  the  last  three  cases. 

Woodcock,  7  M.  &  AV.  574.  (7)  Stratford  and  Moreton  Rail.  Co. 

(p)  Ambcrgate.  H-c.  Rail.  Co.  r.  Nor-  r.  Stratton,  2  B.  &  Ad.  518. 
cliffe,  6   Ex.  029;  Lawrence  v.  Wvnu, 

839 


*G32  CALLS.  [book  in. 

passed  (?■};  and  this  view  has  hecn  adopted  by  the  legislature  so 
far  as  regards  companies  registered  under  the  Companies  act,  1862, 
and  having  no  special  regulations  of  their  own.  (s)  Where,  there- 
fore, a  certain  time  is  required  to  elapse  between  the  making  of  two 
successive  calls,  that  time  must  be  reckoned  from  the  day  on  which 
the  resolution  for  theHrst  call  is  passed,  up  to  the  day  on  which  the 
resolution  for  the  second  call  is  passed;  and  if  this  period  is  too 
short,  the  call  will  be  invalid  {t);  and  if  the  time  required  to 
elapse  between  the  calls  is  so  many  days  at  least,  neither  of  the 
days  on  which  the  calls  are  made  ought  to  be  included  in  the 
reckoning,  {u) 

If  a  call  is  made  too  soon,  and  is  then  abandoned,  in  order 

*632     to  *be  replaced  by  another  duly  made,   the   irregular  call 

should  be  declared  void  before  the  second  is  made.  (») 

A  call  will  not  be  held  invalid  simply  because    the  minutes  of 

Minutes  of         the  meeting  making  it  were   siijned  after  the  meetinir 

meeting  mak-  7\t>^  n^^ 

ing  calls.  was  over.  (y)     In  Cornwall  Great  Consolidated  Min- 

ing Company  v.  Bennett  (2),  the  question  whether  a  call  could  be 
made  by  a  resolution  not  reduced  to  writing  and  signed  was  raised, 
but  not  decided.  The  judges  differed  upon  that  point,  but  they 
agreed  that  there  must  be  some  better  evidence  of  the  making  of  a 
call  than  a  minute  neither  signed  nor  confirmed  until  after  the 
action  was  commenced. 

2.  As  to  the  noiice  of  the  mahlng  of  a  call. — Inasmuch  as  a 
2.  Irregular  ^^^  ^^  ^^  ^^  Considered  as  made  when  a  resolution  that 
notice  of  call.  i|.  j^g  j^j^^jg  jg  ^j^^]^  passed,  and  inasmuch  as  it  would  be 
very  hard  upon  any  person  liable  to  pay  a  call  to  treat  him  as  in  de- 
fault unless  he  has  had  notice  of  the  making  of  a  call,  it  is  held  that 
such  notice  must  be  given  to  him  before  he  can  be  dealt  with  as  a 
defaulter;  and  this  rule  applies  not  only  where  notice  is  expressly 
required  to  be  given  by  the  company's  act,  charter,  or  deed  of  set- 

(r)  See  R.  v.   Londonderry  Rail.  Co.  one,    and   Stratford   and  Moreton  Rail. 

13  Q.  B.  998,  and  6  Rail.  Ca.    1,   sub  Co.  t'.  Stratton,  2  B.  &  Ad.  518. 

nomine  ii'a?  ;;arfe  Tooke;  Shaw  ».  Row-  (")  See   Watson  v.   Eales,  23  Beav. 

ley,  16  M.  &  W.  810;  Great  North  of  294. 

England  Rail.  Co.  v.  BidUulph,  7  M.  &  {x)  Welland  Rail.    Co.   v.    Berrie,  6 

W.  248.     See,    as  to  calls   made  pros-  H.  &  N.  416. 

pectively,   Sheffield,    &c.   Rail.    Co.    v.  {y)  Miles  v.  Bough,  8  Q.  B.  845,  and 

Woodcock,  7  M.  &  W.  574.  see  ante,  p.  551. 

(,s)  25  &  26  Vict.  c.  89,  Table  A.  No.  5.  [z)  5  H.  &  N.  423. 

(t)  See  the  cases  in  the  last  note  but 

840 


CHAP.  III.]  NOTIc:     OF    MAKING    TIIKM.  *633 

tltMnent,  but  a!so  M-lierc  tliere  is  no  express  ])ruvi5ion  upon  the  sub- 
ject, and  the  shareliolder  lias  entered  into  an  al)Sohite  covenant  to 
pay  such  calls  as  may  be  made.  («)  Indeed,  in  one  case  it  was 
said,  that  the  notice  made  the  call  (b);  but  this  is  not  in  conform- 
ity with  the  rule  now  establishd.  (c) 

The  notice,  to  be  valid,  must  be  in  such  form,  if  any,  as  may  be 
recjuired  by  the  ref^ulations  of  the  companv;  and  where 

1.1         .  11       ,1        ,.  '  .        .,,    Form  of  notice, 

a  notice  is  reijuired  to  be  signed  by  the  directors,  it  will 

not  be  sufficient  if  their  sicrnatures  are  affixed  by  a  clerk.  (rP) 

A  notice  re(|uirinfr  payment  to  the  account  of  a  person  at  a  partic- 
ular bank,  is  e(iuivaleiit  to  a  notice  to  ])My  to  that  ])erson.  (e) 

*A  list  of  ])ersons  prepared   by  a  deceased   clerk  whose     "^633 
business  it  was  to  send  the  notices,  and  ticked  or  marked  by 
him  so  as  to  show  that  notices  were  sent  to  the  persons   Evidence  of 

.  1..11.  .1  noticu  having 

on  the  list,  is  admissible  in  evidence  to  prove  that  a  been  given, 
notice  was  sent  to  them,  (y) 

The   notice   must  be    given   in  the    manner    required    by  the 
act  or  reii^ulations  applicable  to  each  particular  com-  „  ,     ,  .  . 

^  ri  r  Mode  of  giving 

pany.  (ij)  notice. 

lly  the  Companies  clauses  consolidation  act  it  is  provided  (A),  1, 
that  twenty -one  days'  notice  at  the  least  shall  be  given  in  companies 
of  each  call;  2,  that  no  call  shall  exceed  the  amount,  <fc9Vict. c.ie. 
if  any,  presci'ibed  b}'  the  company's  special  act;  3,  that  successive 
calls  shall  not  be  made  at  less  than  the  interval,  if  any,  prescribed 
by  the  same  act(t);  4,  that  the  aggregate  amount  of  calls  made  in 
any  one  year  shall  not  exceed  the  amount,  if  any,  prescribed  by 
the  same  act;  and  5,  that  all  calls  shall  be  ])aid  to  the  persons,  and 
at  the  times  and  places,  from  time  to  time  appointed  by  the  com- 
pany. Under  this  act,  therefore,  there  must  first  of  all  be  a  call 
made,  and  then  at  least  twenty-one  days'  notice  of  it  must  be 
given  (A;),  and  the  notice  must  state  the  person  to  whom,  and  the 

(a)  Miles  v.  Bough,    3  Q.   B.   84j.  ingCo.  1  Ch.  150. 

See,  too,  Edinburgh,   &c.  Rail.  Co.  r.  (/)  Eastern  Union  Rail.  Co.  r.  Sjnu- 

Hebblewhite,  G  M.  &  W.  707;  Paint<?r  onds,  5  Ex.  237. 

V.  Liverpool  Gas  Co.  3  A.  &  E.  4:i3;  and  (</)   See   "Watson  r.  Eales,   2:3  Bear, 

u^  to  cost-book  companies,  32  &  33  Vict.  294. 

c.  19,  §  10.  {},)  8  &  9  Vict.  c.  16,  §  22. 

(i)  Shaw  t'.    Rowley,    16  M.  &  W.  (i)  See  Anibergate  Rail.  Co.  r.  Mitch- 

810.  ell.  4  Ex.  540. 

(c)  Ante,  p.  631,  note  (r).  (k)  §  136  provides  for  giving  notices 

(d)  See  Miles  r.  Bough,  3  Q.  B.  84.5.  by  post. 
{e)  Ibid.    But  see  The  Leeds  Bank- 

841 


*QS4c  CALLS.  [book  III. 

])lace  and  time  at  which,  the  call  is  to  be  paid.  The  twenty-one 
days  are  reckoned  from  and  exclusively  of  the  day  on  which  the 
notice  is  given.  (I)  If  the  notice  states  to  whom,  and  when  and 
where,  the  call  is  to  be  paid,  it  is  immaterial  whether  the  resolution 
for  the  call  does  the  same  or  not.  (?;i) 

By  the  Companies  act,  1862,  it  is  provided  (in  Table  A.)  that  the 
directors  may,  from  time  to  time,  make  such  calls  upon 

In  companies  •'  '  n     ^y  •  3  i.i      • 

Kovcvnedby       f\.Q  jyjembers,  in  respect  ot  all  moneys  unpaid  on  tlieir 

the  act  of  1S62,  '  ^  ,  i         » 

Table  A.  shares,  as  they  think  fit  (^No.  4);  but  twenty -one  days' 

notice,  at  least,  must  be  given  of  each  call  (No.  4).  (/?-)  The 

*634     notice  may  be  sent  *by  post  (No.  95).     A  call  is  made  at  the 

time  when  the  resolution  of  the  directors  authorizing  it  is 

passed  (No.  5). 

The  act  makes  calls  specialty  debts  (§  16),  and  gives  a  short  form 
of  pleading  in  an  action  for  their  recovery  (§  70). 

4.  Of  the  persons  liable  to  pay  calls. 

In  order  that  a   person  may  be   liable   to   pay  a  call,  meaning 
thereby  a  portion  of  the  unpaid-up  capital  of  a  com- 

Persons  to  J         i  i  i         •  i       j.  i, 

pay  calls.  paiiy,  he  must  either  have  agreed  to  subscribe  to  sucn 

capital,  or  he  must  have  become  a  shareliolder  in  the  com])any,  or, 
thirdly,  his  liability  must  have  devolved  upon  him  as  the  repre- 
sentative of  a  subscriber  or  a  shareholder.  It  Avill  be  convenient 
to  allude — 1,  to  subscribers;  2,  to  shareholders;  3,  to  the  repre- 
sentatives of  subscribers  and  shareholders. 

1.  As  to  subscribers. — There  is  no  principle  of  common  law 
1  Calls  on  which  prevents  a  subscriber  to  an  undertaking  from 
subscribers.  beiiKJ-  liable  to  calls  before  he  has  become  an  actual 
shareholder  in  the  company  he  has  agreed  to  join.  His  liability  at 
common  law  depends  entirely  on  the  contract  into  which  he  has 
entered.  But  by  several  of  the  statutes  relating  to  companies,  a 
particular  mode  of  proceeding  for  the  recovery  of  calls  is  pointed 
out;  and  if  that  mode  of  proceeding  applies,  as  it  frequently  does, 
to  shareholders  only  (or  their  representatives),  a  person   who  is  a 

[1)  Re  .Jennings,  1  Ir.  Ch.  654,  revers-  (")  A  notice  by  a  company,  which 

ing  on  tliis  point,  ib.  236.  has  changed  its  name  since  the  call  was 

{ni)  Newry,    &c.,   Rail.    Co.    v.    Ed-  made,  may  be  given  in  the  new  name, 

munds,  2  Ex.  118;  Sheffield,  &c.  Rail.  Shackleford,  Ford  &  Co.  v.  Dangerfield, 

Co.  V.  Woodcock,  7  M.  &  W.  574;  Great  L.  R.  3  C.  P.  407. 
Northern  Rail.  Co.  v.  Biddulph,  ib.  243. 
842 


CHAP.  III.]  PERSONS    LIABLE   TO    TAY    CALLS.  "035 

mere  subscriber  as  di.stinguislieJ  from  a  sliareliokler,  cannot  be 
made  to  pay  a  call  by  that  particular  mode  of  ])n)cceding  (o),  wliat- 
ever  obliijation  he  mav  have  incurred  in-  airreein:'  to  take  shares 
and  to  contribute  his  ([uota  of  cai)ital.  (/>) 

By  tlie  Comj)anies  clauses  consolidation  act,  it  is  expressly  de- 
clared that  calls  may  be  made  on  the  subscribers  as   subs-ribers to 
well  as  on  the  shareholders  (9);  and  as  was  seen  in  an   em'yd'b^si'ai' 
earlier  part  of  the  work,  subscribers  may  be  registered    "^'i<^'- c- ic. 
as  shareholders  without  any  express  consent  on  their  part, 
and  when  registered  *they  may  be  sued  as  shareholders  for     *635 
calls.  (?•)     But  an   allottee  of  shares  who  is  not  a  subscriber, 
i.e.,  who  lias  not  executed  any  instrument  binding  himself  to  con- 
tribute towards  the  capital  of  the  company  («),  cannot  be  sued  for 
calls  under  the  act  in  question,  it) 

Under  the  Companies  act,  1862,  Table  A,,  calls  are  <sui)srni)crs  to 
only  authorized  to  be  made  on  the  members,  {u)  erneil'byThu"^ 

2.     As  to  sJiareholders. — Who  are  shareholders,  the 

.  .  2.    CaUson 

effect  of  being  on  or  on  the  register  of  shareholders,  shareholder. 
the  effect  of  acting  as  a  shareholder  without  being  one, — are  mat- 
ters which  were  discussed  in  Book  I.  Chap.  5.  In  the  present  place, 
therefore,  it  is  proposed  merely  to  reca[)itulate,  as  shortly  as  ])us- 
sible,  the  lesults  formerly  arrived  at,  so  far  as  they  relate  tu  the 
particular  question  of  liability  for  calls. 

A  person  who  has  never  become  a  shareholder  in  the  proper  sense 
of  the  word,  and  who  is  not  estopped  by  his  own  con-   person  must  be 
duct  from  denying  that  he  is  a  shareholder,  is  not  liable  asharehouier, 
to  calls  as  a  shareholder,  although  he  may  have  been   registered  as 
one.  {x)     Where  a  trustee  is  the  person  registered  and  recognized 

(0)  See  Galvanized  Iron  Co.  v.  West-  [s]  Thames  Tunnel  Co.  v.  Sheldon  6 

oby,  8  Ex.    17;  Thames  Tunnel   Co.  v.  B  &  C.  341. 

Sheldon,  6  B.  &  C.  ^41.  (/)     Carmarthen      Kailway    Co.     r. 

( j!))  For  instances  of  successful  actions  Wright,  1  Fos.  &  Fin.  282;   AVaterford, 

against  allottees  on  the  contracts  enter-  Wexford,  &c.  Rail.  Co.   v.  Pidcock,   8 

ed  mto  by  them,  see  Duke  v.  Forbes,  1  Ex.  279. 

Ex.  3-")();  Duke  v.  Dive,  ib.  3G;  Aldham  (»)  2o  k  26  Vict.  c.  89,  Table  A.  Mo. 

V.  Brown,  7  E.  &  B.    164,  atfiruied  ou  4  ;  and  as  to  who  are  members,  see  §  23 

appeal,  6  Jur.  N.  S.  41.  of  the  act,  and  ante  p.  170. 

{q)  8  and  9  Vict.  c.  16,  §§  21,  22.  {x)  (.Jalvanized  Iron  Co.  v.  Westoby,  8 

(rj  See,  accordingly.  Mid.  Rail.  Co.  w.  Ex.  17;  Waterford,  Wexford,  &c.  Kail. 

Gordon,  16  M.  &   W.   804  ;  Cork  and  Co.  v.  Pidcock,  8  Ex.  279;    Carmarthen 

Youghal  Rail.  Co.  v.  Paterson,  18  C.  B.  Rail.  Co.  r.  Wright,  1  Fos.  <t  Fm.  282  ; 

414,  ante  p.  110.  New  Bnanswick,  &c.  Rail.  Co.  v.   Mug. 

843 


*G36 


CALLS. 


[book  m. 


as  a  sliareliukler,  liis  cestui  que  trust  is  not  liable  to  the  company 
for  calls  (y);  and  as  a  general  principle,  there  must  be  some  special 
ground  lor  hulding  tliat  a  person  who  has  no  right  as  against  a 
compaii}^  to  share  profits,  is  compellable  bj  the  company  to  pay 
calls,  (s) 

At  the  same  time,  whether  a  person  is  actually  a  shareholder 

in  a  company  or  not,  if  he  is  estopped  by  his  own  conduct  from 

denying  that  he  is  a  shareholder,  he  cannot  es- 

fnmfdcmMu^'     '"636     capc  from   "^the  payment  of  calls  properly  made; 

that  he  is  cue  i  '       .^  i        /:■        ,  i     i  i       , 

and  npon  the  ground  oi  estoppel  by  conduct, 
subscribers  to  companies  have  frequently  been  held  liable  to  calls 
as  shareholders,  although  they  had  not  complied  with  all  the  for- 
malities necessary  to  render  them  shareholders  in  the  strict  sense 
of  the  word,  (a) 

A  person  who  is  a  shareholder  within  the  meaning  of  an  act  of 
Persons  who  Parliament  which  authorizes  calls  to  be  made  on  share- 
ere  liable  to^^'  holders,  is  liable  to  calls  made  in  pursuance  of  the  act, 
^'*"*-  although  if  his  liability  had  not  depended  on  statutory 

provisions,  he  might  have  been  able  to  resist  payment.  Upon  this 
ground  it  is  that  infant  shareholders  in  railway  companies  are  liable 
to  calls  (J),  if  they  do  not  repudiate  their  shares,  (c)      So,  a  person 


geridge,  4  H.  &  N.  160,  and  580.  See, 
^so,  Bloxam  v.  Metropolitan  Cab  Co. 
4  N.  R.  61,  where  an  injunction  was 
granted. 

{y)  Not  even  in  equity,  see  Newry 
Eail.  Co.  V.  Moss,  14  Beav.  64. 

(z)  Shropshire  Union  Rail.  Co.  v.  An- 
derson, 3  Ex.  401. 

(a)  HuU  Flax  Co.  v.  Wellesley,  6  H. 
&,  N.  38,  where  the  shares  were  issued 
irregularly;  Cromford,  &c.  Rail.  Co.  v. 
Lacey,  3  Y.  &.  J.  80;  Bumes  v.  PenneU, 
2  H.  L.  C.  497;  Sheffield,  &c.  Rail.  Co. 
V.  Woodcock,  7  M.  &  W.  674;  Chelten- 
ham, &c.  Rail.  Co.  V.  Daniel,  2  Q.  B. 
281 ;  London  and  Grand  Junction  Rail. 
Co.  t'.  Graham,  1  ib.  271;  Bu-mingham, 
Bristol,  &c.  Rail.  Co.  v.  Locke,  ib.  266. 
in  all  of  which  the  calls  were  recovered. 
Compare  these  with  Irish  Peat  Co.  v. 
Phillips,  1  B.  &  Sm.  598,  in  which  they 
were  not,  and  Wolverhampton  New 
Waterworks  Co.  v.  Hawksford,  6   C.  B. 

844 


N.  S.  336;  7  ib.  795;  and  11  ib.  456, 
where  an  action  for  calls  was  partly  suc- 
cessful and  partly  not.  The  defendant 
was  held  liable  for  calls  made  on  shares 
properly  issued  and  held  by  him,  al- 
though there  was  no  properly  sealed 
register  of  shareholders;  but  he  was 
held  not  liable  for  calls  on  shares  not 
numbered  or  distinguished  from  each 
other,  and  in  respect  of  which  there  was 
in  tiTith  no  register  at  all.  See  ante,  p. 
167;  and  quasre  whether  this  case  can 
be  relied  upon  after  Poiial  v.  Emmens, 
IC.  P.  D.  201. 

(6)  Cork  and  Bandon  Rail  Co.  v. 
Cazenove,  10  Q.  B.  93.5;  Leeds  and 
Thirsk  Railway  Co.  v.  Feamley,  4  Ex. 
26;  North- West.  Rail.  Co.  v.  McMichael, 
5  Ex.  114.  Compare  Birkenhead,  &c. 
Rail.  Co.u.  Pilcher,  6  Ex.  121. 

(c)  Nevrry,  <Src.  RaU.  Co.  v.  Coombe, 
5  Ex.  665;  Dublin  and  Wicklow  Rail. 
Co.  V.  Black,  8  Ex.  181. 


CriAP.  III.]  PERSONS    LIABLE    TO    PAY    CALLS.  *G37 

who  is  a  shareliolder,  and  is  as  such  under  a  statutory  liability  to 
pay  calls,  cannot  escape  from  sucli  liability  on  the  ground  that  he 
was  induced  to  become  a  siiareholder  by  the  fraud  of  the  company; 
he  must  go  further  and  show  a  repudiation  of  his  shares,  and  that 
he  is  not  in  truth  a  shareholder  {(/);  fraud  and  timely  repu- 
diation, however,  afford  a  defense,  (e)  *Again,  in  the  case  *G37 
of  a  registered  joint-stock  company,  tlie  company  being  ac- 
tually created  l)y  registration,  and  having,  when  created,  all  the 
powers  conferred  upon  properly  constituted  companies,  a  call  upon 
its  shareholders  will  be  valid,  although  the  company  ought  not  to 
have  been  registered;  and  a  shareholder  in  such  a  company  cannot 
escape  from  his  liability  t)  pay  the  call,  upon  the  ground  that 
things  required  to  be  done  before  registration  have  never  been  done 
at  all.  {/)  So,  in  the  case  of  a  company  incorporated  by  a  special 
act,  it  is  no  answer  to  a  call  that  the  act  was  obtained  by  fraud.  {(/) 

A  person  who,  by  being  a  shareholder,  has  once  become  liable  to 
pay  calls,  continue^  to  be  so  liable  until  he  has  ceased   p„r,„j„n  of 
to  be  a  shareholder,  or  until  some  valid  agreement  has  H»i>nit'y'to "^^ 
been  made  bet^voen  liim  and  the  coni]>auy  by  virtue  of    ''""^• 
which  the  compf\ny  is  precluded  from  treating  him  any  longer  as 
liable  to  pay  calls.  (//)     If  any  such  agreement  l)as   been  made,  it 
will  afford  a  defense  (^),  although  all  the  formalities  required  to  be 
observed  by  out-going  shareholders  may  not  have  been  rigorously 
complied  with,  {k) 

In  most  companies,  shares  are  not  transferable,  so  long  as  the 
owner  is  indebted  to  the  company  for  calls.  {I)     Where  y,^^^^  ^^^^ 
this  is  the  case,  a  person  who  has  sold  his  shares,  must  have  been  sold. 
pay  all  the  calls  made  whilst  the  shares  are  registered  in  his  namej 

{d)    Deposit     Life     Assur.    Co.      r.  Shortridge,   4  Ex.  699;    Shortridge  v. 

Ayscongh,  6  E.  &  B.  761.  As  to  giving  Bosanquet,    16    Beav.  84;  Bargate    r. 

particiilai-s  of  the  fraud,  see  McCreight  Shortridge,  5  H.   L.   C.   297 ;  Taylor  u. 

V.  St<>vens.  1  H.  &  C.  4r)4.  Huglios,  2  Jo.  &  Lat.  24,  noticed  ante, 

{c)  Bwlchy  Plwm  Load  Mining  Co.  v.  pp.  137,  138. 

Baynes,  L.  R.  2  Ex.  P.24.    See  infra,  c.  (i)  Plate  Glass  Co.  r.  Sunloy.  8  E.  & 

10,  §3,    as  to  rescinding  contracts  for  B.  47.    llie  validity  of  the  defendant's 

fraud.  retirement  in  this  case  was  admitted  by 

(/)  Banwen  Iron  Co.  r.  Barnett  8  C.  the  demurrer. 

B.  40G.    See,  too,   Agricultural  Cattle  {k)  See  Bargate  v.  Shortridge,   and 

Insur.  Co.  r.  Fitzgerald,  IG  Q.  B.  432.  Taylor  r.  Hughes,  auie,  pp.  137,  138. 

(f))  See  Waterford,  &c.  Rail.  Co.  v.  (?)    The  subject  of   the    transfer  of 

Logan,  14  Q.  B.  672.  shares  will  be  alluded  to  hereafter. 

(h)  See  the  cases    of  Bosanquet   v. 

845 


*()38  CALLS.  [book  III, 

before  he  or  the  purchaser  can  require  the  company  to  accept  the 
latter  as  a  shareholder  in  respect  of  the  shares  he  has  pur- 
cliased  (m);  and  so  long  as  the  purchaser  is  not  a  shareholder,  the 

vendor  continues  to  be  one,  and  to  be  liable  to  calls,  (n) 
*638         ^Shares  are  not  unfreqnently  sold  after  a  call  has  been 

made  and  before  it  has  become  payable;  and  if  in  such  a 
Effect  of  sale     casc  the  purchaser  is  accepted  as  a  shareholder  by  the 

after  call  is  ,  .^  ^      n      ■,    .        ■,  n  i  ^  -, 

made,  but  be-    companv,  it  may  possiblv  tind  itself  unable  to  sue  either 

lore  it  is  pay-  ,  V  i  i 

able.  the  vendor  or  t.he  purchaser  for  the  call  after  the  time 

for  its  payment  has  elapsed.  In  The  Aylesbury  Hailway  Company 
V.  Mount  (o),  which  was  a  case  of  this  sort,  turning  on  the  provis- 
ions of  a  s])ecial  act  of  Parliament,  the  Court  of  Common  Pleas 
held,  that  the  call  could  not  be  recovered  from  the  transferor,  and 
the  Court  of  Queen's  Bench  held  that  it  could  not  be  recovered 
from  the  transferee  (^);  for  the  transferor  was  not  a  shareholder 
M'hen  the  call  became  payable,  and  the  transferee  was  not  a  share- 
holder when  it  was  made;  and  the  act  in  question  was  so  worded 
as  to  render  those  only  liable  to  be  sued  for  calls  who  were  share- 
holders at  both  those  times.  The  Courts  will  not,  however,  so  con- 
strue an  act  as  to  deprive  the  company  of  all  remedy  for  the  recov- 
ery of  a  call,  if  they  can  possibly  avoid  it;  and  as  the  obligation  to 
pay  is  created  by  the  making  of  a  call,  the  person  who  was  the 
shareholder  when  a  call  was  mside^  is  prima  fcieie  the  person  to  pay 
it,  whatever  he  may  since  have  done  with  his  shares. 

In  The  North  American  Colonial  Association  of  Ireland?;.  Bent- 
NorthAmeri-  ley  (<^),  a  Company  was  incorporated  by  a  special  act, 
Bentiey.  which  provided  for  making  calls  on  shareholders,  and 

enacted  that  if  at  the  time  a]>pointed  for  payment  of  a  call,  the 
holder  failed  to  pay  it,  the  company  might  sue  such  shareholder, 
and  that  it  should  be  sufficient  in  an  action  for  calls,  to  prove  that 
the  defendant  was  a  shareholder  at  the  time  the  call  was  made. 
The  act  also  declared  that  shareholders  who  had  sold  their  shares 
should  remain  liable  for  all  future  calls  until  transfers  had  been 
delivered  to  the  secretary,  and  that  no  shareholder  should  be  enti- 

(m)  R.  V.  Londonderry,    &c.  Rail.  Co.  (o)  4  Man.  &  Gr.  651;  reversed,  but 

13    Q.    B.    998  ;  R.    v.    Wing,   17  ib.  on  purely  technical  grounds,  7  Man.  & 

645.  Gr.  898. 

(n)  See  London  and  Brighton  Rail.  (p)  Aylesbury  Rail.  Co.  v.  Thompson, 

Co.  V.  Fairclough,  2  Man.  &  Gr.  674;  2  Ra.  Ca.  668. 

Mumble  v.  Langston,  7  M.  &  W.  517.  {q)  15  Jur.  187,  Q.  B. 
846 


CHAP.  III.]  I'KKSoXS    LIABLE    TO    I'AY    CALLS.  *63li 

tied  to  transfer  liis  share  until  lie  sluiuld  havt-  paid  all  calls  due 
upon  it.  Ujion  these  somewhat  cunHicting  enactments, 
it  was  held,  that  a  shareliolder  who  had  transferred  *his  *G31J 
shares  after  a  call  had  been  made,  hut  before  it  had  become 
payable,  was  liable  to  be  sued  for  the  call:  and  it  was  considered 
clear  that  the  transferee  could  not  be  sued  for  it,  although  the 
transfer  had  been  delivered  to  the  secretary'  of  the  company  a.-5  con- 
templated by  the  act. 

Again,  in  Watson  v.  Eales  (r),  which  was  the  case  of  a  cost-book 
mining  company,  one  of  tlie  rules  was,  that  no  share  ■^v'atsonr  Eaics. 
should  be  transferred  until  all  calls  upon  it  were  paid;  cost-book 
and  it  was  held  that  a  transferee  of  shares  in  respect  ^"^'"r""'>- 
of  which  calls  were  in  arrear,  was  not  liable  for  such  calls  to  tlie 
company,  and  that  the  company  having  recognized  the  transfer, 
could  not  forfeit  the  shares  for  non-jiayment  of  the  calls. 

In  the  present  state  of  tlie  law,  it  cannot  be  said  that  there  is  any 
general  rule  determinino:  whether  the  transferrer  or  the 

.  /.        1  •     1^  1  1  1  i.  11      Result  of  Uie 

transferee  or  a  share  is  liable  to  tlie  company  lor  calls  cases. 
made,  but  not  paid  before  the  transfer;  for  admitting  the  tendency 
to  be  in  favor  of  holding  the  transferor  liable,  the  statutory  provis- 
ions generally  applicable  to  the  subject,  are  by  no  means  uniform. 
Under  the  Companies  clauses  act,  the  person  liable  is  the  share- 
holder at  the  time  of  making  the  call,  (s) 

11  •   1  Stntutory  en- 

Ihis  also  apiiears  to  be  the  case  with  respect  to  com-  flctmomson 

this  subject. 

panics  governed  by  the  Comjianies  act,  1862,  Table  A.  (f) 

The  right  to  forfeit  shares  for  non-payment  of  calls,  or  for  other 
reasons,  will  be  examined  hereafter;  but  it  may  be  ob-  porfeitureof 
served  here,  that  both  the  Companies  clauses  consoli-  j,o",'!j7,,j'',uei,t 
dation  act,  and  the  Companies    act,    1«G2,  Table  A.,  °'"^^'^- 
provide  that  an  action   for  calls  may  be  maintained,    although  the 
shares  in  resjiect  of  which  they  became  due,  have  been  forfeited 
for  their    non-payment   (w).       Where    this  double   remedy  is  not 
expressly  given,  it  will    not    be   presumed;    and  in    such  a  case 

(>•)  2:^  Beav.  294.  who  is  a  shareholder,  see  ante,  p.  1"»6. 

(s)  8  &  9  Vict.  c.  16,   §§  26,  27,  Bel-  (0  See  25  &  26  Vict.  c.  89,  §  70,  anil 

fa.st,   &c.  Rail.   Co.   v.   Strange,  1   Ex.  Table  A.   No.   4;  but  see,  also,  No.  6, 

7;]9;     Birkenhead,     &c.    Bail.    Co.    r.  which  throws  some  doubt  on  the  point 

Brownrifig,  4  Ex.   42(5;  Wilson  r.  Birk-  as  to  who  is  a  member.      Seoff»/^,    pji. 

enheiul.  Arc.   Rail.   Co.  6  Ex.  626;  R.  r.  170. 178. 

Londonderry,  etc.   Rail.    Co.   13  Q.   B.  (w)  8  &  9  Vict.  c.  16,  §  29;  2:.  it   iC. 

998;  R.  i\   Wing,   17  ib.  646.      As  to  Vict.  c.  89,  Table  A.   No.  21.  Sec  great 

847 


*64:0  CALLS.  [book  III. 

*C)4:0     forfeiture  *\vill  bo  an  answer  to  an  action  (a-),   provided  the 
forfeiture   was  justifiable,    and    legally   declared,  but   not 
otherwise,  (y) 
3.     As  to  the  representatives  of  subscribers  and  shareholders. — 

0  ^  „      .,     In  adverting  to  the  liability  of  the  executors  of  a  de- 

3.    Calls  on  the  f  «' 

reprcsentaayes  ceascd  pcrson  to  pay  calls,  it  is  necessary  to  distinguish 
hoiders"^*^"  ^^^'^  made  before,  from  those  made  after  the  testator's 
Executors.  death.  Calls  made  before  his  death  are  payable  out  of 
liis  estate  {z)\  and  as  to  Companies  governed  by  the  (Companies 
clauses  consolidation  act,  or  the  Companies  act,  1862,  rank  like  or- 
dinary specialty  debts  («).  Calls  made  after  his  death,  are  also 
payable  out  of  his  estate,  if  they  are  made  whilst  the  shares  are 
left  in  his  name,  and  if  he  entered  into  any  contract  whereby  he 
undertook  to  pay  such  calls  as  might  be  made  npon  his  shares  (i). 
In  order  that  this  liability  may  attach  to  the  estate  of  a  deceased 
shareholder,  it  is  not  necessary  that  his  executors  should  become 
shareholders  in  respect  of  his  shares,  or  that  they  should  have  been 
named  in  the  contract  sought  to  be  enforced  against  them,  (c) 
Bv  the  Companies  clauses  consolidation  act  it  is  expressly  de- 
clared,   that   the   executors  of  subscribers  and  share- 

Cal  s  not  pay-  ' 

able  by  exec-      holdcrs  sliall  pay  the  calls   payable  in  respect  of  their 

mors  person-  i     j  1.1  1 

''"y-  testators'  shares  (c/);  but  this  only  means  that  the  exec- 

utors are  to  pay  out  of  their  testators'  assets;  and  unless  they  have 
actually  become  shareholders  themselves,  they  must  be  sued  as  ex- 
ecutors, and  not  as  shareholders,  for  such  calls  as  may  be  sought  to 
be  recovered  from  them  {e).  As  a  general  rule  it  may  be  taken, 
that  executors  are  never  liable  otherwise  than  in  their  representa- 
tive   capacity,    unless    they    actually    become    shareholders.   (/) 

Northern  Rail.  Co.  v.  Kennedy,  4  Ex.  contract  debts,  32  &  33  Vict.  c.  46. 

417;  Inglis  V.  Great  Northern  Rail.  Co.  (6)  Hewardp.  Wheatley,  5  DeG.  M.  & 

1  Macqueen,  112.  G.  628;  Fyler  v.  Fyler,  2  Ra.  Ca.  813; 
(.r)  See  Giles  v.  Hutt,  3  Ex.  18.  Wills  v.  Murray,  4  Ex.  843;  Blount  v. 
{ij)  See  Edinburgh,  &c.   Rail  Co.   v.  Hipkins,  7  Sim.  51. 

Hebblewhite,  6  M.  &  W.  707.  (c)  Ibid,  and  see  Baird's  case,   5  Ch. 

(^1  Fyler  v.  Fyler,  2  Ra.  Ca.  813.  725. 

(o)  As  to  8  &  9  Vict.   c.   16,  see  Cork  {d)  8  &  9  Vict.  c.  16,  §  21. 

and  Bandon  Rail.  Co.  v.   Goode,    13  C.  (e)    Birkenhead,    &c.     Rail.    Co.    v. 

B.  826;  and  as  to  25  &  26  Vict.  c.  89,  Cotesworth,  5  Ex.  226. 

see  §  16.      As  to  other  companies,  see  (/)    Weald    of  Kent  Canal  Co.  v. 

Robinson's  case,  6  DeG.  M.   &  G.  572.  Robinson,  5  Taunt,  800. 
Specialty  debts  now  rank  with  simple 

848 


CIFAP.  III.]  CALLS    PROVABLE    IN   BANKRUFl'CV.  "G-il 

But    if    tliev    do    becoine     sliarclioldcrs    tliey  rn'ess  tiiey  are 

become  *6ul)ject  to  tlie  same  obliirations  as  other     *G41   simrLiioi.iers. 
shareholders,  and  as  between  themselves  and  the  bankruptty. 

compnny  they  arc  personally  liable  to  calls,  whatever  the  state  of 
their  testators'  assets  may  be.  ((/) 

If  a  shareholder  becomes  bankrupt,  calls  made  before  his  bank- 
ruptcy are,  and  always  were,  clearly  provable  ao:ainst  his  estate  ; 
and  under  the  Bankruptcy  act,  18G0  (A),  his  liability  to  future  calls 
is  also  provable.  Therefore,  his  order  of  discharge  is  a  bar  to  all 
calls;  even  although  the  trustee  in  bankruptcy  may  neither  sell 
the  shares  nor  disclaim  them  (i).  The  Bankruptcy  act,  1869,  goes 
much  further  in  this  respect  than  the  previous  statutes. 

ig)    See    Annstrong   v.    Burnet,   20         (h)  32  &  33  Vict.  c.  71,  §  31. 
Boav.  p.  435.     Spence's  case,  17  Beav.         (»)  §  23. 
203. 

"  849 


*642  PARTNERSHIP   PrwOPliRTY.  [bOOK  III. 


*G42  *CHAPTER  IV. 

OF  JOINT  AND  SEPARATE  PROPERTY. 

The  expressions  partnership  property,  partnership  stock,  joint 
Partnership  stock,  and  joint  estate,  are  used  indiscriminately  to  de- 
property.  note  cverytliing  to  which  the  iirm,  or  in  other  word -i 

all  the  partners  composing  it,  can  be  considered  to  be  entitled  ns 
such.  ('^)  The  qualification  ns  such  \&  important;  for  persons  mny 
be  entitled  jointly  or  in  common  to  pro])erty,  and  the  same  pei-sor.s 
may  be  partners,  and  yet  that  property  may  not  be  partners]] ip 
property;  e.g.,  if  several  persons  are  partners  in  trade,  and  land  is 
devised  or  a  legacy  is  bequeathed  to  them  jointly  or  in  common,  it 
will  not  necessarily  become  partnership  property  and  form  part  (»t' 
the  common  stock  in  which  they  are  interested  as  partners,  {h) 
AVhether  it  does  so  or  does  not,  depends  upon  circumstances  whicli 
will  be  examined  hereai'ter. 

It  is  often  a  difficult  matter  to  determine  what  is  to  be  regarded 
Importance  of    as  partnership  property,  and  what  is  to  be  recrarded  as 

distin^'uishing  '  ,       .       ^      ^  ,.  ,  r^^^      ^ 

parintr.ship        the  exclusivc  property  ot  eacli  partner,      ilie  ciuestion, 

proper  y  Irom  i        i         .  i 

thest'parate       howcvcr,  is  of  importaucc  not  onlv  to  the  partners  then - 

property  o)  the  ^  «  i 

partners.  sclvcs,  but  also  to  their  creditors;  for,  as  will  be  seen 

hereafter,  if  a  firm  becomes  bankrupt,  the  property  of  the  firm  and 
the  separate  property  of  each  partner  have  to  be  distinguished  from 
each  other,  it  being  a  rule  to  apply  the  property  of  the  firm,  in  the 
first  place  in  payment  oC  the  creditors  of  the  firm,  and  to  apply  the 
separate  properties  of  the  partners  in  the  first  place  to  the  payment 
of  their  respective  separate  creditors. 

[a]  The  expression  joint  estate  some-  {h)  Morris  v.  Barrett,  3  Y.  &  J.  ?fi4, 

times  has  a  wider  signification,  indud-  and  see  the  judgment  in  Ex  parte  The 

ing  all  property  which,  on   the   bank-  Fife  Banking  Co.  6  Ir.  Eq.  197,  S.  C.  on 

ruptcy  of    the    firm,    is    distributable  appeitl  under  the  name  of  Be  Littles,  10 

amongst  its  creditors.     See  ^w.s-f,  book  ib.  275. 
iv.  c.  2,  Reputed  Ownership. 

850 


CHAP.  IV.]  JOINT    PROrEKTY.  *»j43 

■^^It  is  proposed,  tlieretbre,  to  examine  the  rules  l»y  which     *C4:^. 
to  determine  what  is  the  property  of  tlie  firm,  ;ind  what  the 
separate  property  of  its  members. 

It  is  for  the  partners  to  determine  by  agreement  amongst  them- 
selves what  shall  be  the  Dropertv  of  them  all,  and  what  Question  dctor- 
shall  be  the  exclusive  jn-operty  of  some  one  or  more  of  agreement, 
them.  Moreover,  it  is  competent  for  them  by  agreement  amongst 
themselves  to  convert  what  is  the  joint  property  of  all  into  the  sep- 
arate property  of  some  one  or  more  of  them,  and  vice  versa.  The 
determination,  therefore,  of  the  question,  "What  is,  and  what  is  not 
*the  property  of  the  firm  ?  involves  an  inquiry  into  the  three  fol- 
lowing subjects,  viz  :  — 

Joint  estate. 

Separate  estate. 

Conversion  of  one  into  the  other. 

Each  of  these  will  be  examined  in  order. 


SECTION  I.— OF  JOINT  ESTATE. 

Whatever  at  the  commencement  of  a  partnership  in  thrown  into 
the  common   stock,  and    whatever    has    from    time  to  j  property  of 
time  during  the  continuance  of  the  partnership  been  ''^etirm. 
added  thereto  and  obtained  by  means  theret»f,  whether  directly  by 
purchase  or  circuitously  by  employment  in   trade,  Ijelongs  to  the 
firm,  unless  the  contrary  can  be  shown.  (<?)' 

(c)  See  Crawshay  v.  Collins,  2  Russ.  actions.      Nrwoll   r.  Humphrey,  37  Vt. 

339,  as  to  the  patents;  Nerot  v.  Bum-  265. 

and,  4  Russ.  247,  and  2  Bli.  N.  S.  415;  A  judgment  in  a  suit  by  two  for  a 

Bone  V.  Polhxrd,   24  Beav.  283.    See,  trespass  alleged  to  be  on  firm  property, 

also,  as  to  co-owners  of  mines  not  being  is  fii-m  assets.     Collins  v.  Butler,  14  CaJ. 

co-partners;  Clegg  r.  Ckgg,  3  Giff.  222.  223. 

'  A  partner  in  a  firm  engaged  in  pur-  On  the  termination  of  a  partnership 
chii-sing  live-stock  on  commission  died  formed  to  pl;int  and  sell  oysters,  plant- 
after  certain  commissions  were  partly  ed  oysters  remaining  in  the  beds  after 
earned.  The  surviving  partner  com-  payment  of  all  partnership  debts,  are 
pleted  the  transactions  and  received  the  the  common  property  of  l)oth  partners, 
money :  Held,  that  such  commissions  of  which,  as  in  case  of  any  personal 
should  be  treated  as  partnership  assets,  property  held  in  common,  one  tenant  in 
but  that  the  surviving  partner  was  enti-  common  cannot  dispose  of  the  share  (jf 
fled  to  have  an  allowance  for  his  time  the  other  without  his  authority.  Kutk- 
aud  expenses  in   completing  the   trans-  man  r.  Pecker,  23  N.  J.  Eq.  2':nj, 

851 


*643 


JOINT    PKOPERTY. 


[book  III. 


The  mere  fact  that  the  property  in  question  was  purchased  by 
one   partner  in  his  own  name  is   immaterial,  if  it  was 

Property  paid  J  .  .  x-        •  i 

i.irbythefirm.  pajd  for  ont  ot  tlic  jKirtnership  mouevs ;  tor  m  sucli  a 
case  he  will  be  deemed  to  hold  tlie  property  in  trust  for  the  firm, 
nnless  he  can  show  that  he  holds  it  for  himself  alone.  {(If     Upon 


If  such  tenant  in  common  turn  over 
such  property  to  a  firm  of  which  he  be- 
comes a  member,  such  firm  is  account- 
able to  the  other  tenant  m  common  of  the 
property,  for  the  value  of  his  share  of  the 
property  so  turned  over  and  used  by  the 
new  firm.     Ruckman  v.  Decker,  siii^ra. 
Where  C.  and  B.  formed  a  partner- 
ship for  the  pui-pose  of  making,  selling 
and  letting  chronometers,   C.  contrib- 
uting all  the  capital,   and  B.    giving 
labor  only,  and  receiving  a  salary  and  a 
share  of  the  profits,  and  C.  agreed  to 
put  into  the  stock  of  such  partnership 
certam   chronometers  which  were    his 
property,  upon  a  stipulation  "that they 
should  be  taken  at  a  fair  valuation,  as  a 
stock  in  trade,  so  that  upon  a  sale  of 
them  at  the  usual  market  price,  the 
profit  usual  in  that  branch  of  business 
might  be  made  upon  them,"  but  this 
agreement  never  was  reduced  to  writing 
as  was  intended,  nor  was  a  valuation 
ever  fixed  upon ;  and  after  dissolution  of 
the  firm,  both  partners  remained  in  the 
store  they  had  occupied  as  partners,  and 
C.  let  the  chronometers  in  his  own  name 
and  kept  his  own  accounts  of  them,  and 
there  was  some  evidence  that  it  was  un- 
derstood between  the  parties  that  C.  was 
to  take  the  stock  and  pay  the  debts  : 
Held,  that  after  such  dissolution  the 
chronometers  were  the  property  of  C, 
and  that  his  lessee  of  one  of  them  could 
recover  it  from  B.,  who  had  taken  it 
away  from  him.     Upon  such  an  agree- 
ment the  chronometers  did  not  become 
the  property  of  the  fii"m,  but  continued 
always  the  property  of  C,  the  firm  hav- 
ing possession  to  v.se  them.    Penny  r. 
Black,  9  Bosw.  310. 

One  of  two  partners   cannot   commit 
larceny  or  burglary  as  to  the  property  or 

852 


house  of  the  finn.     Alfele  v.  Wright,  17 
Ohio,  238. 

((7)  See  per  Lord  Eldon  in  Smith  v. 
Smith,  5  Ves.  193;  Robley  v.  Brooke,  7 
Bli.  90;  Mon-is  v.  Barrett,  3  Y.  &  J. 
884. 

^  If  a  person  buys  goods  for  a  firm  of 
which  he  is  a  member,  the  goods  bought 
become  the  property  of  the  firm,  though 
he  does  not  at  the  time  disclose  the 
name  of  his  partner.  Scott  v.  McKm- 
nev,  98  Mass.  344. 

Where  two  members  of  a  fiim  en- 
gaged in  building  a  miU,  bought,  with 
their  own  means,  lumber  for  that  pur- 
pose, and  delivered  it  on  the  ground 
where  the  mill  was  building,  and  the 
other  partner,  who  had  personal  charge 
of  the  work,  took  possession  of  the  lum- 
ber and  applied  it  to  the  partnership 
uses  as  it  was  needed,  with  the  knowl- 
edge of  the  two  former,  and  without  ob- 
jection, these  facts  are  enough  to  prove 
a  conversion  of  all  the  lumber  so  bought 
and  delivered  into  partnership  property. 
Person  r.  Wilson,  25  Minn.  189. 

A  judgment  upon  a  warrant  of  attor- 
ney given  to  one  member  of  a  partner- 
ship to  secure  a  del  t  due  the  partnership, 
will  be  held  by  him,  as  trustee,  for  the 
benefit  of  the  firm;  and  payment  of  the 
judgment  will  satisfy  the  partnership 
debt.  Chapin  v.  Clemitson,  1  Barb.  311. 
Where  one  permits  another  to  buy 
stock  on  their  joint  account,  in  antici- 
pation of  forming  a  partnership,  and 
immediately  afterwards  repudiates  the 
agreement  to  become  a  partner,  he  is 
not  entitled  to  any  of  the  property 
bought,  nor  are  his  individual  creditors. 
Rice  V.  Shuman,  43  Pa.  St.  37. 

As  to  when  real  estate  is  partnership 
property,  see  i)ost,  652,  note. 


CHAP.  IV.] 


PARTNERSUIP   PROPERTY. 


*GU 


tills  priiici})le  it  is  held  that  land  ]Mircha^e(l  in  the  name  of  one 
partner,  but  paid  for  by  the  linn,  is  the  ]n-opei-ty  of  the  linn, 
*altliongh  there  may  be  no  declaration  or  niemoranduin  in  *t'i4-4 
writing  disclosing  tlie  trust,  and  signed  by  the  partner  to 
whom  the  land  has  been  conveyed.  («)'  So,  if  shares  in  a  company 
are  bought  with  partnership  money,  they  will  be  partnership  prop- 
erty, although  they  may  be  standing  in  the  books  of  the  comjmny 
in  the  name  of  one  partner  only,  and  although  it  may  be  contrary 
to  the  company's  deed  of  settlement  Ibr  more  than  one  person  to 
hold  shares  in  it.  {/") 

As  regards  ships  there  was  often  a  difficulty  arising  from  the 
ship  registration  acts.  For  as  it  was  clearl}'  settled  that 
a  ship  belonged,  both  at  law  and  in  equity,  to  the  per- 
son or  persons  who  were  registered  as  her  owners,  and  to  no  one 
else,  it  followed  that  if  a  ship  had  been  bought  with  partnership 
money,  had  been  used  as  partnership  property,  and  had  alwavs 
been  treated  as  such  by  all  the  partners,  j-et  if  she  was  registered 
in  the  name  of  one  partner  only,  there  was  no  method  by  wiiich 
that  one  could  be  prevented  from  effectually  asserting  an  exclusive 
right  to  the  ship,  and  depriving  his  co-partners  of  all  their  interest 
in  lier.  {(/)  The  ]>rovisions  of  the  present  Merchant  shipping  acts 
dilfer,  however,  in  several  material  respects  from  the  enactments 
previously  in  force  ;  and  it  is  a2:)prehended,  that  now,  in  the  case 


ie)  Forstor  v.  Hale,  5  Ves.  r!OS,  and  3 
ib.  696. 

'  Where  it  appeared  that  real  estate 
had  been  used  by  a  partnership  for  a 
long  series  of  j-ears  in  the  manufacture 
of  iron,  and  that  upon  the  death  of  any 
partner,  his  heirs  at  law,  to  whom  the 
land  descended,  came  into  the  partner- 
in  his  place,  and  there  was  no  proof  of 
any  articles  of  partnership :  Held,  that 
the  whole  partnership  estate,  whether 
consisting  of  real  or  personal  property, 
was  to  be  regarded  in  equity  as  a  con- 
solidated fund,  to  be  appropriated  pri- 
marily and  exclusively  to  the  satisfac- 
tion of  partnership  debts.  Goodburn  v. 
Stevens,  5  Gill,  1. 

{/)  Ex  parte  Connell,  3  Deac.  201; 


Ex  parte  Hinds,  3  DeG.  &  S.  613. 

(g)  See  Slater  v.  Willis,  1  Beav.  .3.54; 
Battorsby  v.  Smyth,  3  Madd.  110;  Cam- 
den r.  Anderson,  5  T.  R.  709;  Curtis  r. 
Teny,  6  Ves.  739;  Ex  parte  Yallop,  \h 
Ves.  60;  Ex  parte  Houghton,  17  Ves. 
251 ;  and  as  to  the  old  law  relating  to 
equitable  interests  in  ships,  sec  an  arti- 
cle by  the  author  in  the  Law  Magazine 
for  May,  1862  (vol.  xiv.  p.  70,  N.  S.). 
If  a  ship  was  registered  in  the  name  of 
two  partners,  the  shares  in  which  they 
were  interested  might  have  been  shown. 
See  PjX parte  Jonofi,  4M.  &  S.  450.  As 
to  the  right  of  one  partner  to  sell  or 
mortgage  a  ship  belonging  to  the  finn, 
see  Ex  parte  Howden,  2  M.  D.  Sc  D. 
574. 

853 


*645  JOINT   PROPERTY.  [bOOK  III. 

above  supposed,  the  registered  partner  would  be  deemed  a  trustee 

for  the  firm,  {h) 
645*         *Stroiig  as  is  the  presumption  that  what  is  bought  with 

partnership  money  is  partnership  property,  tlie  presumption 
Cases  where  '^^J  ^^^Y  ^^  rebut  od  ;  6.  g.,  by  showing  that  the  mon- 
lilr'i'y  tL^'finn  Gj  waslout  by  the  firm  to  one  partner,  and  so  was  not 
(1..CS  not  belong  j,^  fact,  partnership  money  wlien  invested  (L)  More- 
over, it  is  to  be  observed  that  property  which  has  been  used  and 
treated  as  partnership  property  cannot  be  presumed  to  belong  to 
one  partner  only,  simply  because  he  paid  for  it  ;  for  the  presump- 
tion in  such  a  case  is  rather  that  the  property  in  question  was  his 
contribution  to  the  common  stock  (J.)  Tliis  sul)ject  will  be  advert- 
ed to  more  at  lengtli  in  the  next  section. 

It  has  been  already  seen  that  one  partner  will  not  be  allowed  to 
Secret  benefits    retain  for   his    own   exclusive    benefit    any    property 

obtained  by  one      -..,■,  -,  •      j    •        i,  i         ^    ^i     i.  \^ 

partner.  which  he  may  have  acquired  m    breacli   ot   that   good, 

faith  which  ought  to  regulate  the  conduct  of  partners  infer  se. 
Whatever  property  has  been  so  acquired,  will  be  treated  as  obtained 
for  the  benefit  of  all  the  partners,  and  as  being  part  of  the  assets  of 
the  firm  ;  and  this  rule  applies  to  property  obtained  by  a  continu- 
ing or  surviving  partner  in  breach  of  the  good  faitli  which  he  is 
bound  to  exercise  towards  a  retired  partner,  and  the  representatives 
of  a  deceased  partner  so  long  as  their  interest  in  the  partnership 
assets  continues  (Jc.) 

At  the  same  time,  if  an  advantage  which  has  been  obtained  by  a 
Money  paid  to  P^J'tuor  is  wliolly  Unconnected  with  the  partnership  af- 
hbfex"/usive°^  fairs,  or  being  connected,  with  them,  has  been  conferred 
iwuetit.  upon  him  with  a  view  to  his  own  personal    benefit,    he 

cannot  be  called  upon  to  account  for  it  to  the  partnership.  For 
example,  where  a  ship,  belonging  to  a  Frenchman  and  two  Ameri- 
cans as  partners,  was  captured  by  a  British  cruiser,  and  compensa- 
tion was  made  to  the  Americans,  but  to  them  only,  the  Frenchman 
being  expressly  excluded,  it  was  held  that,  the  sum  awarded  to   the 

{h)  17  &  18  Vict.  c.  104,  §§37  and  43.  104,  §  18  ;   and  R.  v.  Amaud,  9  Q.  B. 

and  25  &  26  Vict.  c.  63,  §3.    Upon  the  806. 

construction  of  the  former  act,  s?e  Liv-  (/)  As  in  Smith  v.  Smith,  5  Ves.  193. 

erpool  Borough  Bank  v.  Turner,  1  J.  &  See,   also,  Walton  r.  Butler,   29    Beav. 

H.  159,  and  2  DeG.  F.  &  J.  502.     A  428 ;  Ex  j^cirte  Emly  1  Rose  64. 

ship  may  be  registered  in  the  name  of  a  ij)  See  Ex  parte  Hare,   1   Deac.   25, 

company,  though  some  of  its  members  ^-'^''Sii'J.  Cross, 

are  foreigners.     See  17  &   18  Vict.  c.  (A.-)  See  ante,  -p.  572  etseq. 

854 


CHAP.  IV.]  PAinNKK.-iiii'  i'koi'j:;:tv.  *Q4:G 

Americans  l)elonp:ca  to  tliein  jxlone,  and  tl);;t  llie  Frencliman 
liad  no  interest  in  it  {I.)  So,  if  one  partner  is  *the  lessee  of  640^ 
])roperty  to  which  the  lirni  is  only  entitled  so  long  as  the 
Itartnershipcontinnes,  and  on  the  dissolution  of  the  partnership  the 
lease  is  sold  or  renewed,  the  price  of  the  sold  lease,  or  the  renewed 
lease,  as  the  case  may  be,  will  belong,  not  to  the  firm,  but  to  that 
])artner  in  whom  the  lease  is  by  hypothesis  exclusively  vested  {m.) 
As  regards  property  acquired  after  a  dissolution,  but  before  the 
affairs  of  a  dissolved  partnert^hip  have  been  wound  up.   Property  ac- 

^  '-  ^  ■*       quired  after  dis- 

siich  property  is  nut  necessarily  to  be  considered  as  Boiution. 
l)artnership  property,  even  though  the  partner  acquiring  it  has 
continued  to  carry  on  the  business  of  the  dissolved  firm  without 
the  consent  of  his  late  partners.  This  was  decided  in  Nerot  v.  Bur- 
nand  {n.)  In  that  case,  in  effect,  an  hotel-keeper  be-  xemtr.Bur- 
qneathed  his  business  to  his  son  and  daughter.  After  ^'^^'^■ 
the  death  of  tlie  testator,  the  daughter  contined  to  carry  on  the 
business.  She  afterwards  ti-ansferred  it  to  a  new  house  in  Clifibrd 
street,  and  this  house  was  conveyed  to  her  in  fee.  She  continued 
to  carry  on  the  business  tliere  for  some  time,  and  ultimately  she 
married.  During  the  greater  part  of  the  time  which  had  elapsed 
since  the  death  of  the  testator,  his  son  had  been  abroad,  and  on  his 
return  he  insisted  that  he  ought  to  be  considered  as  a  partner  with 
his  sister,  and  that  as  such  he  was  entitled  to  have  the  new  house 
taken  by  her,  and  all  the  stock  in  trade  and  eli'ects  purchased  by  her 
in  order  to  carry  on  the  businees,  treated  as  partnership  property. 
The  Vice-Chancellor  decided  that  the  testator's  son  and  daughter 
had  become  partners,  but  that  the  partnership  between  them  had 
been  dissolved  on  her  marriage.  He  also  held,  that  the  new  house 
and  all  the  goods,  furniture,  plate,  linen,  china,  wines,  stock-in- 
trade,  imi)lements  and  other  effects,  being  in  and  about  the  premis- 
es, formed  a  ])art  of  the  pertnership  property.  Upon  appeal  this 
decision  Mas  alHrmed,  so  far  as  it  related  to  the  existence  and  sub- 
se(iuent  dissolution  of  partnership  ;  but  was  varied  so  far  as  it  re- 
lated to  what  ought  to  be  considered  as  partnership  property. 
Upon  this  head  the  Lord  Chancellor's  judgment  was  as  follows: 

(l)  Campbell  v.   Mullctt,  2    Swanst.  (ni)  See  Burdon   r.  Barkus,   3    Giff. 

551 ;  See  Thompson  v.  1? yan,  2  Swanst.      412,  ati".  on  appeal,  4  De  G,  F.  &  J.   42. 
565,  M. ;  Moffat  v.   Farquharson,  2  Bro-  («)  4  Russ.  247,  and  2  BU.  N.  S.  215. 

C.  C.  338.    See  the  note  on  this  case   in      See,   too,  Payne   v.  Hornby,  25  Beav. 
Belt's  edition  of  Brown's  Kepofts.  280. 

8o5 


*6J:7  JOINT   PROPERTY.  [coOK  III. 

*647  *"  It  appears  to  me  satisfactorily  made  out  from  all  the  circumstances, 
that  the  house  in  Clifford  street  was  bought  with  the  partnership  propi-rty; 
bought,  in  the  first  instance,  partly  with  the  partnership  property,  partly  with 
money  borrowed  by  Miss  Nerot  and  afterwards  repaid  out  of  the  partnership 
etfocts,  and  partly  upon  the  credit  of  the  house  that  belonged  to  the  partnership, 
and  I  think  that  part  of  the  Vice-Chancellor's  decree  by  which  he  directs  the  house 
to  be  sold,  must  be  afHrmed. 

"  There  is  a  part  of  the  decree,  however,  in  which  I  cannot  concur.  The  dissolu- 
tion of  the  partnership  took  place  in  September,  1819.  The  Vice-Chancellor  has 
directed  all  the  property  to  be  sold  which  was  in  the  house  in  Clifford  Street  at  the 
time  when  the  decree  was  pronounced,  several  years  after  the  dissolution  of  the 
partnership,  as  if  all  the  property  which  at  the  time  of  the  decree  existed  in  the 
house  was,  without  enquiiy,  to  be  considered  as  partnership  property.  Lord  Eldon 
doubted  greatly  whether  that  part  of  the  decree  could  be  sustained  ;  and  in  my 
opinion  it  must  be  varied  by  directing  the  Master  to  take  an  account  of  the  particu- 
lars of  the  partnership  property  which  were  in  the  house  in  Clifford  Street  at  the 
time  of  the  dissolution,  and  of  the  value  of  the  property  at  that  time;  and  to  en- 
qake  whether  any  part  of  that  property  still  remains  in  the  house."  (o) 

Tiie  good- will  of  a  partnership,  in  so  far  as  it  has  a  pecuniary 
value,  is  now  settled  to  be  partnership  property,  un- 
Good-wi  .         ^^^^  ^^^^  contrary  can  be  shown.      This  subject,   how- 
ever,   will   be  more  conveniently  discussed  hereafter,  when  treat- 
ing of  partnership  articles.  (^j>)' 

The  question,   What  is  property  of  a  company,  must  as  between 
the  company  and  its  members,  be  determined  upon  the 

Property  of  i./  i.iti  it-l 

company.  principles  above  explamed.      it  has  already  been  seen 

that  what  directors  may  acquire  in  breach  of  good  faith  towards 
the  shareholders  must  be  accounted  for  to  the  company;  and  it  has 
been  decided  tliat  unissued  shares  in  a  company  belong  to  the  com- 
pany, and  that,  although  they  may  be  placed  at  the  disposal  of  the 
directors,  the  directors  must  account  to  the  company  for  whatever 
they  may  receive  in  respect  of  such  shares,  {q)  On  the  other  hand 
the  shares  held  by  a  director  are  his  separate  property,  and  he  is  in 
no  sense  a  trustee  of  them  for  the  company,  {r) 

(o)  See,  also.  Ex  parte  Morley,  8  Ch.  partnership  property;  and  when  one  of 

1026,  where  a  surviving  partner  con-  the  partners  die,  it  does  not  survive  to 

tinued  the  business,   sold  the  old  stock  the  surviving  partner,  but  belongs  to, 

in  trade  and  it  was  held  that  the  new  or  is  to  be  administered  as  part  of,  the 

stock  in  trade  formed  part  of  his   sepa  joint  estate.     Holden    v.   M'Makin,    1 

rate  estate.  Pars.  Sel.  Cas.  270 

ip)  See  infra,  book  iii.  ch.  9,  §  3.  (q)  Ante,  p.  588  et  seq. 

^The  subscription  list  of  a  newspaper  (r)  Gilbert's  case,  5  Ch.  539. 
when  published  by  more  than  on,?,  is 

856 


CHAP.  I  V.J 


P.VK1NERS1IIP    PliOl'EKTY. 


*G4S 


♦SECTION  II.— SEPARATE  ESTATE. 


*64S 


The  j)iv('e(liiig  eni[iiii7  into  what  constitutes  the  property  of  the 
linn,  has  rendered  it  necessary  to  ennui  re  at  length  into  2  Property  01 
what  Constitutes  the  sejiarate  proj)erty  of  its  members,  punucrs. 
A  few  additional  observations,  pointing  out  tlie  danger  of  relying 
too  much  on  circnni stances  which  are  often  regarded  as  decisive, 
may,  however,  I  e  usefully  added. 

It  by  no  means  follows  that  pers(jns  who  are  partners  by  virtue 
of  their  particij)ation  in  profits,  are  entitled  as  sucii  to   That  which 
that  wliich  produces  those  profits.     F(jr  example,  coach   };ersh^,",p}.ofiu 
proprietors  who  horse  a  coach  and  divide  the  profits,   "ue punnef '" 
may  each  make  use  of  horses  which  belong  to  himself  "°'^" 
alone  and  not  to  the  firm  of  proprietors  {s).     So,  where  a  merchant 
employs  a  broker  to  buy  goods  for  him  and   to  sell  them  again    on 
liis  account,  although  it  may  be  agreed   that  the  profits  are  to  be 
divided,  the  goods  themselves,  and   the  money  arising  from  their 
sale,  are  the  property  of  the  merchant,  and  not  the  joint  property 
of  himself  and  the  broker  {t)\  and  it  not  unirequently  haj)pens  that 
dormant  partners  have  no  interest  in    anything   except  the  profits 
accruing  to  the  firm  to  which  they  belong.  (i«)' 


(s)  As  in  Fromont  ?'.  Coupland,  2  Bing. 
170;  Barton  p.  Hanson,  2  Taunt.  49,  and 
see  Wilson  «.  Whitehead,  10  M.  <fe  W. 
503,  as  to  an  autlior's  interest  in  paper 
supplied  for  his  work  to  the  publisher. 

(0  Smith  V.  Watson,  2  B.  &  C.  401; 
Meyer  v.  Sharp,  5  Taunt.  74;  Bumell  v. 
Hunt,  5  Jur.  650,  Q.  B. 

(m)  See  Ex  jjcirfe  Hamper,  17  Ves. 
404,  405;  Ex  2inrte  Chuck,  IMont.  370. 

'  If  partners,  by  tn-angemont  among 
themselves,  own  each  a  separate  part  of 
the  stock  in  trade  on  which  the  partner- 
ship business  is  transacted,  the  stock 
will  nevertheless  be  regarded  as  partner- 
ship property  for  the  payment  of  p;u-t- 
nership  debts,  at  least  as  to  creditors 
who  have  no  notice  that  the  stock  is 
owned  in  that  way.  Elliot  v.  Stevens, 
38  N.  H.  311. 

Articles  of  partnership  for  manufac- 


ture of  can-iages  provided  that  the  entire 
stock  should  be  furnished  by  one  part- 
ner; that  the  other  was  to  have  no  intin-- 
est  or  ownership  in  the  capital  stock, 
but  should  give  Iris  personal  attention  ex- 
clusively to  the  business ;  and  that  the  net 
profits  and  losses  should  be  equally  di- 
vided: Held,  that  stock  and  tools  of 
the  factor}'  manufactured  by  the  part- 
nership or  purcha.sed  by  it  in  the  course 
of  its  business,  was  not  the  sole  property 
of  the  partner  furnishing  the  capital,  but 
was  joint  property.  Snyder  r.  Lmis- 
ford.QW.  Va.  223. 

Plaintiffs  and  defendant  were  en- 
gaged in  canying  on  business  as  part- 
ners, the  articles  of  co-partnership  pro- 
viding that  the  capital  contributed  Ijy  the 
plaintiffs  should  belong  to  them  resjx>(  - 
tively  and  exclusively.  The  piaintilfs 
purchasetl  a  lathe,  and  other  machiuerv, 

857 


*G49 


8EIJARATE    rr.OPEKTY. 


[nooiv  ir. 


Again,  it  by  no  means  follows  that  projierty  used  by  all  the  part- 
Propcrtj' used  ^'^^^  ^^^  partnership  ])urposes,  is  partnership  property. 
JuV,"i^'^'fny^'P  For  example,  the  house  and  land  in  and  upon  which 
partnership  ^^^^  paiTnersliip  business  is  carried  on,  often  belongs  to 
property.  ^j-^g  ^^|-  ^]jg  partners  only,  either  subject  to  a  lease  to  the 

firm,  or  ^vithout  any  lease  at  all  (v).  So  it  sometimes  happens, 
*649  though  less  ^frequently,  that  office  furniture  {x),  and  even 
utensils  in  trade  (y),  are  tlie  separate  property  of  one  of  the 
partners,  subject  to  the  right  of  the  others,  to  use  them  as  long  as  the 
partnership  continues.  If,  however,  a  partner  brings  such  property 
into  the  common  stock  as  part  of  his  capital  it  becomes  partnership 
property,  and  any  increase  in  its  value  will  belong  to  the  firm,  (s) 

It  does  not  even  necessarily  follow  that  property  bought  with  the 
Property  mouey  of  the  firm   is  the  j)roperty  of  the   firm.     For 

theTnoneyof     ^^  Sometimes  hap[tens  that  property,  although  paid  for 
theium.  by'the  firm,  has  been,  in  fact,  bought  for  one  partner 

exclusively,  and  that  he  has  become  debtor  to  the  firm  for  the  pur- 
chase money,  (a) 

It  is  obvious,  therefore,  that  the  only  true  method  of  determin- 
Agreementof     ing  as  between  the  partners  themselves  what  belono^s 

the  parthers  i        r.  i         i  • 

the  true  test.       to  the  firm,  and   what  not,  is  to  ascertain   what  agree- 


which  vi'ere  put  in  the  shop  in  the  custody 
of  the  defendant,  who  was  to  cany  on 
the  business,  and  one-half  the  cost  of 
which  machmery  was,  by  one  of  the 
plamtifls,  credited  to  each  of  them  upon 
the  books  of  the  firm :  Held,  that,  by 
the  credit  of  the  cost  of  the  machinery 
to  the  plamtiffs,  the  machinery  becams 
the  property  of  the  finn,  and  that,  the 
same  having  been  removed  by  the  de- 
fendant, the  plaintiffs  could  not  main- 
tain trover  therefor.  Eobinson  v.  Gil- 
fillian,  15  Hun,  267. 

An  entry  in  the  partnership  books  by 
one  of  the  partners  in  the  business  of  a 
saw- mill,  charging  himself  wth  a  boat 
which  he  had  built  at  the  mill,  may  be 
introduced  by  him  as  evidence  inter  alia 
to  prove  the  boat  to  be  his  individual 
property,     Reno  v.  Crane,  2  Rlackf.  217. 

{v)  See  Bm-don  v.  Barkus,  3  Giff.  412, 
aff.  on  appeal,  4  DeG.  F.  &  J.  42,  as  to 
a  lease  of  a  coal  mine;  Ex  par  te  Mur- 
858 


ton,  1  M.  D.  &  D.  252;  Balmain  r. 
Shore,  9  Ves.  500;  Rowley  v.  Adams,  7 
Beav.  548;  Doe  v.  Miles,  1  Stark,  181, 
and  4  Camp.  373.  If  there  is  no  lease 
and  the  firm  is  dissolved,  the  owner  can 
eject  his  late  partners  without  notice  to 
quit.  Doe  v.  Blifck,  8  C.  &  P.  464; 
BenhamtJ.  Gray,  5  C.  B.  138  (an  action 
of  trespass).  As  to  an  injunction  in  such 
cases,  see  Elliot  v.  Brown,  8  Swanst. 
489,  n. ;  Hawkins  v.  Hawkins,  4  Jur.  N. 
S.  1044,  V.  C.  Stuart. 

{x)  Ex  parte  Owen,  4  DeG.  &  Sm. 
351.  See  Ex  p>arte  Hare,  1  Deac.  16  ; 
Exp)arte  Murton,  1  M.  D.  &  D.  252. 

(//)  Ex  2Mrte  Smith,  3  Madd.  63. 

{z)  Robinson  r.  Ashton,  20  Eq.  25. 

{a)  See  Smith  v.  Smith,  5  Ves.  193  ; 
Walton  V.  Butler,  29  Beav.  428;  Ex 
parte  Enily,  1  Rose,  64.  Compare  the 
case  of  the  Bank  of  England,  3  DeG. 
F.  &  J.  645,  noticed  infra,  p.  649. 


CHAP.  IV.]  PARTNERSHIP   PROPERTY.  *65(> 

meiit  has  been  come  to  upon  the  subject.  If  tliere  is  no  exjn'ess 
agreement,  attentiun  must  be  jiaid  to  the  source  whence  the  prop- 
erty was  obtained,  the  purpose  for  which  it  was  acquired,  and  the 
mode  in  which  it  has  been  dealt  with.  The  following  cases,  in  which 
there  was  very  little  evidence  to  show  what  agreement  had  been 
Hiade,  may  be  usefully  referred  to  on  this  subject. 

In  Ex  parte  Owen  (6)  one  Bowers,  who  was  a  grocer,  provision 
dealer,  atid  wine  merchant,  and  who  possessed  stock  in  ExparteOwen. 
trade  and  household  furniture  at  his  phice  of  business,   stock  in  trade 
took  two  partners,  without  any  agreement  except  that  aud lumiture. 
they  were   to   participate    in    the   profits   of    the   concern.     They 
brought  in  no  capital  and  paid  no  premium,  and  no  deed  or  agree- 
ment was  executed.     Bowers  bought  with  his  own  money,  but  in 
the  name  of  the  tirm,  new  stock  required  for  the  business.     Upon 
the  bankruptcy  of   the  firm,  the  question  arose  to  whom 
*the   stock  in  trade  and   furniture  belonged.     The  Court,     *650 
coming  to  the  best  conclusion  it  could  from  such  materials 
as  were  before  it,  held   that  there  was  an  agreement  between  the 
three,  expressed  or  implied,  that  all  the  stock  in  trade  should  be- 
come the  property  of  the  three,  subject  to  an  account,  in  which  the 
partnership  would  be  debited  in  favor  of  Bowers  for  the  value  of 
the  articles  which  belonged  to  him  or  for  which  he  i)aid.     But  the 
Court  thought  there  was  not  the  same  ground  for  such  an  inference 
as  to  the  household  furniture,  and  that  therefore  was  held  to  have, 
continued  and  to  remain  the  separate  estate  of  Bowers. 

In  Parker  v.  Hills  (c),  wliich  went  to  the  House  of  Lords,  the 
question  was,  whether  a  lease  of  certain  saltworks  be-  Parker «.  huis. 
lonjj;ino;  to  Parker  had,  on  his  entering  into  partnership  Lease  origin- 

•^      "  C5  1  I     j^uy  belonging 

with  Hills,  become  partnership  property  or  not,  Tlie  to oue  partner, 
documentary  and  other  evidence  was  such  as  to  render  the  question 
extremely  difficult  to  determine,  and  there  was  considerable  ditier- 
ence  of  opinion  upon  it.  Ultimately,  however,  the  House  of  Lords, 
agreeing  with  L.  J.  Turner,  and  disagreeing  with  I*.  J.  Knight 
Bruce,  and  V.-C.  "Wood,  decided  that  the  lease  had  become  part  of 
the  property  of  the  firm. 

In  re  Streatlicld,  Lawrence  &  Company  (</),  two  partners  bought 

{h)  4  DcG.   &  Sm.   351.    See,   al,-?o,      7  ib.  833. 
Pilling  V.  PiUing,  3  DeG.  J.  &  S.  162.  {d)  Bank  of  England  case,  3  DeG.  F. 

(f)  5  Jur.  N.  S.  809,  and  on  appeal,      k  J.  G-45. 

859 


*651  SEPARATE  PROPEKTY.  [bOOK  III. 

an  estate  with  partnership  monev.     The  land  was  con- 

Streatneld.  ^  t-ii        '   •    ^-         •  ^      \ 

Lawrence&co.  yevecl  to  theiu  in  nnuiviaea  moieties  to  uses  to  bar 
Houses  built      dower,  and  each  partner  built  a  house  on  the  land  with 

on  partuership  .        ,.  ,  i  ^    .       ^  -        •       t  •  •       . 

property.  monej  ot  the  firm,  but  charged  to  him  m  his  private 

account.  An  account  was  opened  in  the  partnership  books,  and  in 
this  account  the  purchased  estate  was  debited  with  all  moneys  of 
the  partnership  expended  in  the  purchase.  At  the  time  of  the 
purciiase  the  land  was  in  lease,  but  the  tenant  surrendered  to  the 
partners  those  portions  which  they  wanted,  they  reducing  his  rent. 
The  rents,  viz.,  both  that  paid  by  the  tenant  for  what  he  held,  and 
that  paid  to  him  for  what  he  gave  up,  were  treated  in  the  books  of 
the  firm  as  paid  to  and  by  it.  Tliere  was  evidence  to  show  that  the 
partners   intended  to  come  to  some  arrangement  respecting   the 

division  of  the  estate,   but  they   became   bankrupt   before 
'^"651     doino-  so.     It  w^as  held  that  both  *the  land  and  the  houses 

on  it  were  the  joint  property  of  the  firm,  and  not  the  sep- 
arate properties  of  the  partners. 

In  Collins  v.  Jackson  (e),  two  persons  were  in  partnership  as  so- 
cciiinsv.  licitors,  and  one  of  them  held  several   appointments 

Jackson.  '  _  ^  ■■■       ^ 

Appointments,  frequently  held  by  a  gentleman  of  that  profession  ;  he 
was  clerk  to  poor  law  guardians,  snperintendant  registrar  of  birtlis, 
marriages,  and  deaths,  treasurer  of  a  turnpike  trust,  steward  of  a 
manor,  treasurer  of  a  charity,-  and  receiver  of  tithes.  The  question 
arose  whether  the  profits  of  these  offices  belonged  to  the  partnership 
or  not.  There  was  no  written  agreement  specifically  applying  to 
these  offices,  but  there  was  a  memorandum  relating  to  some  others  re- 
served \>j  the  father  of  one  of  the  partners  when  he  retired  from  busi- 
ness, and  the  Master  of  the  Kolls  held  that  all  the  offices  in  question 
were  to  be  treated  as  held  on  behalf  of  both  partners,  and  not  for  the 
exclusive  benefit  of  the  partner  who  actually  filled  the  offices.  (/")' 

(e)  31  Beav.  645.  separate  books  were  kept,   the  money 

(/)  See,  also,  Smith  v.  Mules,  9  Ha.  went  into  the  partnership  funds,  and  all 

556  ;  and  Ambler  v.  Bolton,  14  Eq.  427,  payments  on  account  of  the  post-office 

as  to  the  mode  of  dealinpf  with  such  of-  were  made  out  of  the  funds  of  the  fii-m : 

fices  on  a  dissolution.  Held,  that  the  profits  of  the  post  office 

1  One  of  two  partners  entered  into  an  belonged  to  the  firm,   especially  as  the 

agreement  with  a  neighboring  postmas-  partners  had  made  two  settlements  be- 

ter,  by  which  the  office  was  to  be  kept  tween  themselves,  without  any  separate 

at  the  store  of  the  firm,  and  the  con-  claim  to  those  profits  having  been  set 

tracting  partner  was  appointed  deputy;  up  by  the  partner  who  contracted  for 

but  the  business  was  transacted  by  the  the  business.      Caldwell    v.    Leiber,   7 

clerks  of  the  store  indiscriminately,  no  Paige,  483. 

860 


CHAP.  IV.] 


rARTNKKSIIlP   PROPERTY. 


*Go2 


Tlic  cases,  however,  wliicli  present  most  difficulty,  arc  tliose  in 
which  co-owners  are  jDartners  in  the  profits  derived  ^^^,';^^*^,^J^g''<'' 
from  their  common  property,  (g)  Sn])pose,  for  exam-  vt'^is. 
])le,  that  two  or  more  joint  tenants,  or  tenants  in  common,  of  a 
farm  or  a  mine,  wovk  tlieir  common  projjcrty  togetlier  as  partners, 
contributinoj  to  the  expenses  and  sharing  all  profits  and  losses 
equally,  there  will  certainly  he  a  partnership  ;  and  yet,  uidess  there 
is  something  more  in  the  case,  it  seems  that  the  land  will  not  be 
partnership  propert}',  but  will  belong  to  the  ])ai-tners  as  co-owners, 
just  as  if  they  M-ere  not  partners  at  all  (//):  and  the  result  may  even 
be  the  same  if  they  purchase  out  of  tlicir  profits  other  lands  for  the 
purpose  of  more  conveniently  developing  their  business,  (i) 

In  Morris  v.  Barrett  [A')  lands  were  deviled  to  i.nn.i  nrquircd 

two  ])ersons  as   *joint   tenants.     Thev   farmed     *652   furmediu 

,  If  11  common. 

those  lands  together  for  twenty  years,  and  kept  Momsv 

their  money  in  one  common  stock  to  which  each  had  uurreii. 
access,  but  they  never  came  to  any  account  with  each  other.  Out 
of  their  common  stock  they  bought  other  lands,  which  were  con- 
veyed to  one  of  them  only,  but  were  formed  by  both,  like  the  fir.-t 
lands.  It  was  held  that  the  devised  fjirms  were  not  partnership 
property,  but  that  the  purchased  farms  were.' 


ig)  As  to  the  distinction  between  co- 
ownership  and  partnersliip,  see  ante,  p. 
58  et  seq. 

{h)  See  Crawshay  v.  Maule,  1  Swanst. 
523 ;  and  Roberts  v.  Eberhardt,  Kay, 
159.  See,  also,  Williams  v.  Williams, 
2  Ch.  294,  where  the  partnei-ship  had 
expix'cd,  but  an  agi-eement  to  divide 
tlie  properly  was  held  to  have  been 
come  to. 

(/)  atewArd  V.  Blakcway,  4  Ch.  G03, 
and  6  Eq.  479,  a  case  of  a  faiiu  and 
quarry.  But  compare  Morris  t>.  Bar- 
rett, Phillips  V.  Phillips,  and  Wat«rer 
V.  Waterer,  cited  below. 

{k)  3  Y.  &  J.  384.  Compare  Water- 
er V.  Waterer,  infra,  p.  653. 

'  Whether  real  estate  shall  be  consid- 
ered tis  partnership  property  depends 
largely  upon  the  intention  of  the  part- 
ners; see  Ludlow  v.  Cooper,  4  Ohio  St. 
1;  Smith'w.  Jackson,  2Edw.  28;  Wheat- 
ly  V.  Calhoun,  12  Leigh,  264. 


Where  real  estate  is  conveyed  to  a 
firm  or  to  the  co-partuers,  in  their  indi- 
vidual names,  for  the  use  and  benefit  of 
the  finn,  or  in  payment  of  debts  due  to 
the  finn,  in  the  absence  of  any  agree- 
ment or  understanding  to  the  contnury, 
the  grantees  become  at  law  tenants  in 
common  of  the  land;  and  upon  the 
death  of  either,  the  legal  title  to  his 
undivided  share  descends  to  his  heirs-at- 
law.  Buchan  v.  Sumner,  2  Bai-b.  Ch. 
165;  Caldwell  v.  Palmer,  56  Ala.  405; 
Wood  V.  Montgomery,  60  Ala.  500;  An- 
derson V.  Tompkins,  1  Brock.  456;  Wil- 
ley  r.  Carter,  4  La.  Ann.  56;  Arnold  v. 
Stevenson,  2  Nev.  234;  Donaldson  r. 
Bank  of  Cape  Fear,  1  Dev.  Eq.  103; 
P^nsign  I'.  Briggs,  6  Gray,  329;  Gal- 
braithr.  Gedge.  16  B.  Mon.  631;  De- 
vine  V.  Mitchum,  4  id.  488;  Coles  r. 
Coles,  15  John.  159.  See,  also,  Thomp- 
son r.  Bowman.  6  Wall.  316;  Blake  r. 
Nutler,  19  Me.  16.  See  post,  664,  note. 
861 


^652 


PAETNERSHIP    I'KOPERTr. 


[book  III. 


In  Brown  v.  Oakshot  (?)  a  brewer  devised  his  real  estates  to  tnis- 
joint  tenants  tccs  for  a  term  of  500  years,  upon  trust,  to  pay  certain 
partlierein  annuities,  and  to  divide  the  surplus  rents  between  his 
^^^  ^"  sons,  and  he  devised   the  same  estates  subject  to  this 

The  sons  carried  on 


Brown  v. 
Oakshot. 


term  to  his  st^ns  as  joint  tenants. 


So,  where  land  is  purchased  by  part- 
ners with  partnership  funds,  but  not  for 
the  use  and  convenience  of  the  partner- 
ship business,  or  ui  the  legitimate  line 
of  their  partnership  business,  they  be- 
come invested  with  the  title  as  tenants 
in  common,  and  their  respective  inter- 
ests therein  are  several.  Price  v.  Hicks, 
14Fla.  565;  Russell ».  Miller,  2G  Mich.  1. 

But  where  land  is  purchased  with 
partnership  funds  and  conveyed  to  the 
partners  by  name,  although  in  law 
they  are  considered  as  tenants  in  com- 
mon, and  no  notice  is  taken  of  the  equi- 
table relations  arising  out  of  the  part- 
nership, yet  in  the  absence  of  an  ex- 
press agreement,  or  of  circumstances 
showing  an  intent  that  such  estate  shall 
be  held  for  their  separate  use,  in  equity 
the  partnership  property  will  be  devoted 
to  partnership  pui-poses,  and  a  trust  is 
created  for  the  security  of  the  partner- 
ship debts.  If  the  partnership  becomes 
insolvent,  the  property  is  primarily  lia- 
ble to  the  payment  of  the  partnership 
debts,  to  the  postponement  of  the  cred- 
itors of  the  several  partners.  Ross  v. 
Henderson,  77  N.  C.  170;  Robertson  v. 
Baker,  11  Fla.  192.  See,  also,  infra,  in 
this  note. 

But  where  a  deed  of  lands  was  made 
to  A,  B  and  C,  "doing  business  as  A, 
B  &  Co.,  their  heirs  and  assigns,"  it 
was  held  that  the  grantees  took  the 
legal  estate  in  joint  tenancy,  and  a 
judgment  confessed  by  all  of  them  in 
their  individual  names  with  the  same 
words,  "doing  business,  etc.,"  added 
thereto,  is  a  lien  upon  the  land,  and  will 
bind  it  in  the  hands  of  subsequent  pur- 
chasers from  th3  firm.     Laaffer  v.  Ca- 


vett,  87  Pa.  St.  479. 

The  appparance  of  real  estate  on  part- 
nership books  to  the  extent  necessary  to 
carry  on  the  business  of  the  firm,  is  not 
inconsistent  with  the  partners'  title  to 
the  real  estate  as  tenants  in  common. 
Grobb's  Appeal,  66  Pa.  St.  117. 

Although  the  proposition  that  when 
a  partnership  ceases  the  partners  be- 
come tenants  in  common  of  the  partner- 
ship property  then  undisposed  of,  is 
generally  true,  yet  it  is  not  universally 
true.  So  long  as  partnership  debts  re- 
main unpaid,  partnership  property  con- 
tinues such,  for  the  purpose  of  being 
applied  to  the  payment  of  such  debts. 
Rice  V.  McMartin,  39  Conn.  573. 

Partners  may  by  contract  stipulate 
that  the  ownership  of  property  may  re- 
main in  one,  while  the  firm  shall  have 
only  the  use  of  the  same,  as  between 
themselves,  or  any  other  regulation  in 
regard  to  ownership  of  the  property 
used,  not  prohibited  by  law.  Taft  v. 
Schwamb,  80  111.  289. 

While  there  may  be  partnerships  in' 
the  business  of  millmg,  mining  or  fann- 
ing, unless  the  intent  of  the  joint  own- 
ers to  throw  their  real  estate  into  the 
fund  as  partnership  stock  is  distinctly 
manifested,  or  unless  the  real  propci-ty 
is  bought  out  of  the  social  funds  for 
paiinership  purposes,  it  must  still  retain 
its  character  of  realty.  Wheatly  v.  Cal- 
houn, 12  Leigh,  264. 

Where  land  purchased  with  partner- 
ship funds  is  convej'ed  to  the « partners 
by  a  deed  which  would  ordinarily  make 
them  tenants  in  common  thereof,  it  will 
be  deemed  in  equity  converted  into  per- 
sonal property,  and   may  be  adminis- 


(0  24  Beav.  254. 
862 


CHAP.  IV.] 


PARTNERSHIP   PROPERTY. 


*G52 


tlieir  father's  business  in  partnership  to^^'ther,  and   used   tlie  real 
estate  devised  to  them  for  the  purposes  of  the  business;  but  it  M^a.^ 


tered  upon  as  s;ifh,  in  winding  up  the 
affairs  of  tho  concern,  unless  from  the 
books,  or  other  sources,  it  appears  tliat 
business  profits  were  thus  invested  to 
pay  a  dividend  to  the  partners.  The 
intention  of  the  partners  in  making  the 
purchase,  as  shown  by  the  evidence  in 
the  case,  should  govern  the  construction 
of  the  conveyance.  CoUunib  v.  Ki-ad, 
24  N.  Y.  505. 

A  mere  agri.'eiuent  to  use  real  property 
for  partnership  purposes,  or  as  partner- 
ship property,  is  not  sufficient  to  convert 
it  into  partnership  stock,  in  the  absence 
of  any  evidence  of  such  intention.  The 
mere  fact  that  property  held  by  the  firm 
as  tenants  in  common,  is  used  m  and  for 
the  partnership  business,  or  a  mere 
agreement  to  use  it  for  partnership  pur- 
poses, is  not  of  itself  sufficient  to  convert 
it  into  partnership  stock.  There  must 
be  some  evidence  of  further  agreement  to 
make  it  partnership  property.  Alexan- 
der V.  Kimbro,  49  Miss.  529;  Thenot  v. 
Michel  28  La.  Ann.  107.  See,  however, 
Osbom  V.  McBride,  16  Bank.  Reg.  22,  as 
to  the  presumption  upon  the  question. 

Thus,  the  )nere  fact  that  partners 
carry  on  partnership  business  on  a  lot  of 
land  belonging  to  the  members  of  the 
partnership,  docs  not  necessarily  im- 
press it  with  the  chai'acter  of  partner- 
ship property,  unless  they  have  by 
agreement,  or  otherwise,  purposely  im- 
pressed upon  it  that  character.  Ware 
V.  Owens,  42  Ala.  212;  Pecot  v.  Arme- 
liii,21  La.  Ann.G67. 

An  oral  agreem  -nt  of  two  persons  to 
sell  lands  of  each,  and  employ  the  pro- 
ceeds as  capital  for  going  into  business 
as  partners  is  valid;  and  a  feny  and 
franchise  purchased  by  one,  with  tho 
proceeds,  is  partnership  property.  Knott 
V.  Knott,  6  Greg.  142. 

Real  estat*?  acquired  with  patnership 
funds,  for  parLnershi]?  purposes,  must  bs 


considered  as  partnership  property,  and 
liable  to  all  the  incidents  attimding  that 
description  of  property.  Sigoumey  r. 
Munn,  7  Conn.  11;  Matlock  r.  Matloik, 
5  Ind.  403;  Abbott's  Appeal,  50  Penn. 
St.  2:54 ;  Hoxie  V,  Carr,  1  Sumn.  IT-i; 
Pugh  V.  Carrie,  5  Ala.  446;  Lancast^T 
Bank  v.  Myley,  13  Penn.  St.  544;  Brook.' 
V.  Washington,  8  Graft.  248.  See,  how- 
ever. Smith  V.  Jackson,  2  Edw.  28. 

A  partnership  "  for  the  purchase  of 
lands"  does  not,  however,  necessarily 
contemplate  sales  of  land  so  a,s  to  make 
the  land  stock  in  trade,  but  it  passses  to 
the  heir  as  real  estate,  and  not  to  the 
administrator.  Dilworth  r.  Mayfield,  -36 
Miss.  40. 

Two  persons  took  a  lease  of  a  coal 
mine  as  tenants  in  common.  Afb.'r- 
wards  they  associated  themselves  in  the 
business  of  coal  mining,  shipping  and 
selling,  as  partners,  the  business  to  be 
carried  on  from  the  proceeds  of  the  de- 
mised premises,  for  the  whole  period  of 
the  lease:  Hehi,  that  the  leasehold  be- 
came partnership  property.  Patterson 
V.  Silliman,  2>  Pa.  St.  304.  See,  also, 
Morton  V.  Ostrom.  .33  Barb.  256. 

Where  partners  purchased  a  leasehold 
estate  with  pai'tnership  prop^ty,  gave  a 
deed  of  tmst  upon  it,  and  the  trustee, 
after  the  death  of  one  of  the  partners, 
sold  the  estate  under  the  power  in  the 
deed,  a  surplus  remaining:  Held,  that 
the  surplus  was  to  be  considered  as  part- 
nership property,  upon  which  th:>  sur- 
riving  partner  was  entitled  to  alni:riis- 
ter.     Carlisle  r.  Mulhern,  10  Mo.  "6. 

Real  property,  an  umlivided  half  in- 
terest which  wa.s  bought  and  paid  for 
by  each  of  two  partu'n-s.  who  with  pirt- 
nership  funds  completed,  repaired,  im- 
proved and  protected  it.  and  who  v?:)\ 
it  for  partnership  purposes,  b-'co.n  s 
thereby  pai'tnei-ship  p;-opor;y.  Robcits 
V.  :,JcC.uty,  9  Ind.  IG. 


-652 


PARTNERSHIP   PROPERTY. 


|_I!Of)K 


nevertheless  held  that  the  reversion  in  fee  continued  to  be  vested  in 
them  jointly,  and  not  in  common,  as  would  have  been  the  case  liad 
it  become  partnership  property. 


Two  persons  who  were  partners  in 
the  business  of  fishing  and  selling  fish, 
bargained  for  a  Ijlock  of  land,  gave 
their  note  to  the  defendant  for  the  price, 
and  took  the  defendant's  bond  for  a 
deed  in  payment  of  the  note,  and  paid 
one  year's  interest  before  the  note  fell 
due.  One  of  the  partners  havmg  died, 
the  other,  clahning  to  act  as  surviving 
partner,  assigned  the  bond  and  the  land 
to  the  plaintiff  two  years  after  the  note 
feU  due,  no  administration  being  had, 
and  it  being  a  disputed  question 
whether  the  land  was  purchased  for 
partnership  purposes.  In  a  suit  by  the 
assignee  for  specific  performance :  Held, 
that  the  question  of  fact,  whether  the 
land  was  purchased  for  partnership  pur- 
poses, could  not  be  ultimately  settled 
so  as  to  bind  the  heirs  of  the  deceased 
partner,  in  a  suit  where  neither  the 
heirs  nor  the  representatives  of  the  de- 
ceased partner  were  made  parties;  and 
that  the  defendant  should  not  be  re- 
quired to  convey  to  the  assignee  of  the 
sui-vivor  unless  he  has  reasonable 
grounds  of  certainty  on  that  question. 
Knott  I'.  Stevens,  3  Oreg.  269. 

Real  estate  purchased  for,  and  appro- 
piiated  to  or  intended  to  be  used  for 
partnership  purposes,  and  paid  for  out 
of  partnership  funds,  is  partnership 
property,  although  the  legal  title  is  ta- 
ken in  the  individual  names  of  the  part- 
ners, or  in  the  name  of  one  of  the  part- 
ners, or  in  the  name  of  a  third  person, 
equity  will  hold  the  party  holding  the 
legal  title,  or  his  heirs  in  case  of  his 
death,  as  trustee  for  the  firm.  Fair- 
child  V.  Pairchild,  64  N.  Y.  471;  S.  C. 
5  Hun,  407;  Faulds  r. Yates,  57  111.  416; 
Little  V.  Snedcor,  52  Ala.  167;  Hewitt 
Rankin,  41  Iowa,  35;  Smith  v.  Tarle- 
ton,  2  Barb.  Ch.  336;  Drewry  v.  Mont- 
gomery, 28  Ark.  256;  Johnson  v.  Clark, 

864 


18  Kan.  157;  Hogle  v.  Lowe,  12  Nev. 
286;  Boyers?;.  Elliott,  7  Humph.  204; 
McGuire  v,  Ramsey,  9  Ark.  518;  Indi- 
ana, etc.  Co.  V.  Bates,  14  Ind.  8;  Fowl- 
er V.  BaiUey,  14  Wis.  125;  Owens  v. 
Collins,  23  Ala.  837;  Lacy  v.  Hall,  37 
Penn.  St.  360;  Erwin's  Appeal,  39  id. 
535;  Jai-vis  v.  Brooks,  27  N.  H.  37;  Cil- 
ley  V.  Huse,  40  id.  358;  Fall  River 
Whahng  Co.  v.  Borden,  10  Cush.  458; 
Dupuy  V.  Leavenworth,  17  Cal.  262; 
Price  V.  Hicks,  14  Fla.  565;  Uhler  v. 
Semple,  20  N.  J.  Eq.  288;  Abbott's  Ap- 
peal, 50  Penn.  St.  234;  Fowler  v.  Bail- 
ley,  14  Wis.  125;  Lime  Rock  Bank  «. 
Phetteplace,  8  R.  I.  56;  Lancaster  Bank 
V.  Myerley,  13  Penn.  St.  544;  Hiscock  r. 
Phelps,  49  N.  Y.  97;  King  v.  Weeks, 
70  N.  C.  372;  Owens  v.  Collins,  23  Ala. 
837;  Dewey  v.  Dewey,  35  Vt.  555; 
Chamberlain  v.  Chamberlain,  44  N.  Y. 
Sup'r  Ct.  116;  Matlack  v.  James,  13  N. 
J.  Eq.  126;  Smith  r.  Tarleton,  2  Barb. 
Ch.  336;  Delmonico  v.  GuUlaume,  2 
Sandf.  Ch.  366;  Cox  v.  McBumey,  2 
Sandf.  561 ;  Buchan  v.  Sumner,  2  Barb. 
Ch.  165;  WMtney  v.  Cotton,  53  Miss. 
689;  ButFum  v.  Buffum,  49  Me.  108. 
See,  also,  Rommelsburg  v.  Mitchell,  29 
Ohio  St.  22;  Holmes  v.  Moon,  infra; 
Doming  v.  Colt,  3  Sandf.  284;  Bird  v. 
Morrison,  12  Wis.  138;  Devenney  v. 
Mahoney,  23  N.  J.  Eq.  247;  McGuire  v. 
Ramsey,  9  Ark.  518. 

C.  bargained  for  a  grist-mill  and  ap- 
purtenances, paid  $1,000  down,  and  took 
a  bond  for  a  deed;  made  a  verbal  con- 
tract to  sell  it  to  D.  and  received  $1,300 
of  him  in  part  pajonent;  D.  took  the 
possession,  laid  out  a  considerable  sum 
in  repairs  and  improvements,  and  car- 
ried on  the  business  a  short  time,  when 
he  and  C.  made  a  verbal  contract  of  co- 
partnership in  the  grist-mill  business, 
and  earned  it  on  together  at  this  grist- 


CIIAl'.  IV.] 


PAKTNERSMIP    rROrKKTV. 


^652 


In   Phillips  V.  Pliillips  (m)   piiMic-lionses  were  devitiecl   to   two 

persons  who  CcirriL'd  on  ahrewcry  in  jKirtnership,  and  it  Pnhiic-i.ousc-s 

•I  ,  .  devised  to  purt- 

was  held  that  such  houses  did  not  become  partnership  nersina 

■*  '■  brewery. 

proi)erty,  thou^di  used  for  tlie  purposes  of  the  partner-  p,,i,jipsj, 

sliip.     In  the  same  case  some  mort^a^^c  debts  secured  i'hiiiii.3. 


mill  for  two  years,  neither  of  the  parties 
claiuiiijjf  rent;  the  grrist-mill  was  taxed 
to  the  company,  and  one  year's  taxes 
were  paid  out  of  the  company's  funds, 
and  payments  were  made  on  C.'s  notes 
named  in  the  bond  for  a  deed  which  he 
held,  by  g'iving-  credit  to  the  parties  to 
whom  payments  were  made  on  the  com- 
pany's books.  A  dam  tax  of  !?7.5  was 
paid  in  the  same  manner.  At  the  end 
of  the  two  years,  C.  gave  D.  notice  that 
he  was  going  to  dissolve  the  co-partner- 
ship; D.  proposed  that  it  should  be  mu- 
tual, and  that  they  should  bid  for  choice 
of  the  mill  prop':'rty.  C.  does  not  deny 
that  he  told  D.  that  he  would  shoitly  say 
what  he  would  give  or  take,  but  ;he  did 
not  do  this;  j'et  afew  days  aftm-wurds  he 
took  a  deed  of  the  mill  property  to  him- 
self, discharged  the  bond,  excluded  his 
co-partner,  mortgaged  the  mill  property 
to  secure  some  partnership  debts,  and 
some  of  his  own,  and  the  balance  of  the 
purchase  money  remaining  due,  and 
brought  this  bill  in  equity  to  close  the 
partnership  affairs. 

The  bill  and  answer  both  admit  the 
existence  of  the  partnership.  It  is  satis- 
factoiily  proved  that  the  verbal  contract 
for  the  sale  of  the  mill  from  C.  to  D.  was 
abandoned  by  mutual  consent  when  th"y 
went  into  pirtnershiji,  and  that  the  un- 
derstanding between  them  was  that  the 
purchase  of  the  mill  property  should  be 
completed  on  partnership  aocmmt,  the 
sums  previously  paid  and  expended  by 


the  partners  severally  toward  the  pur- 
cha.se  or  in  the  improvement  of  the  mill 
property,  to  be  regarded  as  so  much 
contriliuted  by  them  rcspsctively  to  the 
partnership  funds:  Held,  that  there  is 
nothing  in  the  statute  of  frauds  to  pre- 
vent partnership  equities  trom  attaching 
to  the  grist-mill  property,  and  that  it 
should  stand  charged,  as  between  th!?se 
parties,  for  the  payment  of  pai-tnership 
debts,  and  any  balance  that  may  be 
found  due  to  either  of  the  partners  upon 
the  final  adjustment  of  the  partnership 
accounts;  the  h'gal  title  not  to  be  dis- 
turbed except  as  may  be  uecessaiy  for 
these  purposes.  Collins  v.  Decker,  70 
Me.  23. 

■\Vhere  real  and  personal  property  is 
held  in  trust  by  one  partner  for  the  ben- 
efit of  the  fiiTu,  and  upon  an  agreement 
that  he  \vill  not  dispose  of  it  without  the 
consent  of  the  others,  he  cannot  be  com-' 
pelled  to  convey  to  one  of  the  other 
partners  his  share  in  the  property,  until, 
such  partner  shall  have  first  paid  to  him 
his  share  of  indebtedness  for  advances 
made.  Cheeseman  v.  Sturges,  6  Bosw. 
520. 

Where  partners  own  each  in  several- 
ty the  real  estate  where  the  business  is 
carried  on,  and  buildings  have  been 
erected  and  improvem?nts  made  thereon 
by  the  firm,  the  lands,  on  a  dissohition- 
will  be  treated  as  partnership  assets. 
Smith  r.  Danvers,  5  Sandf.  ^W^. 

Where  B.  owning  a  saw-mill  proper- 


(«()  As  stated  in  Bisset  on  Partner- 
ship, p.  50.  The  report  in  1  M.  &  K. 
649,  is  silent  as  to  the  proper^/  devised. 
Mr.  Bisset  considers  the  decision  as  an 
aufchoi-ity  on  the  point  of  conversion. 
Bat  if,  a?  he  represents,  the  Coart  cam? 


to  the  conclusion  that  th  ?  d-vised  prop- 
erty was  not  in  fiict  partnei-ship  proper- 
ty, the  question  of  conversion  wo»dd  not 
arise.  Compare  Waterer  v.  Waterer, 
15  Eq.  402  ir/ra. 


ec^ 


^652 


PAKTNERSniP  PROPERTY. 


[book  III. 


on  pnblic-liouses  were  bequeatlied  to  the  two  partners,  and  tliey  af- 


ty,  formed  a  partnership  with  F.  in  the 
lumber  busniess,  agreeing'  by  parol  that 
the  mill  estate  should  constitute  part  of 
the  jarlnership  fund,  and  F.  paid  a  part 
of  the  consideration  in  cash,  the  rest  to 
be  paid  out  of  the  profits  of  the  business: 
Held,  that  the  title  of  B.  did  not  pass 
to  the  firm,  although  F.  went  into  pos- 
session -with  B.  and  improvements  were 
made  upon  the  property  out  of  the  firm 
funds.  McCormick's  appeal,  57  Pa.  St. 
54. 

M.  and  C.  entered  into  partnership,  M. 
contributing  real  estate  at  an  estimated 
value,  which  was  carried  into  the  firm 
stock  account  to  his  credit,  he  reserving 
the  right  on  dissolution  not  to  be  bound 
by  the  estimated  value  and  to  withcbaw 
the  property.  During  the  partnership 
the  buildings  were  burned  and  rebuilt 
by  the  firm  funds:  Held,  that  the  real 
estate  was,  m  equity,  partnership  prop- 
erty with  the  legal  title  in  M.  ;  that  his 
reservation  was  a  provision  to  correct 
the  valuation;  that  M.  withdrawing 
it  on  dissolution,  would  take  it  at  its 
then  value;  and  that  the  property  with 
its  accretions  belonged  to  the  firm,  to  be 
accounted  for  as  firm  assets.  Clark's 
appeal,  72  Pa.  St.  142. 

Where  one  of  a  firm  of  four  brothers 
purchased,  in  his  own  name,  a  lot,  and 
leased  it  to  the  firm,  and  the  firm  erect- 
ed its  oil  refinery  thereon  :  Held,  that 
his  three  brothers  could  not  in  an  equi- 
ty proceeding,  afterwards  claim  that  the 
lot  should  be  treated  as  firm  property, 
although  he  had  acted  in  bad  faith  in 
procuring  the  conveyance  to  himself 
rather  than  to  the  firm, — his  act  having 
been  long  acquiesced  in  by  the  three 
others  without  an  investigation  of  the 
false  and  flimsy  reason  he  had  assigned 
therefor.  Slemmer's  appeal,  58  Pa, 
St.  168. 

There  is,  however,  no  presumption 
that  a  leasehold  standing  in  the  name 
of  one  of  several  co-partners,    and  used 

866 


by  the  firm  for  their  business,  consti- 
tutes partnership  assets.  The  pre- 
sumption is  otherwise  ;  its  mere  use  for 
partnership  purposes  does  not  operate 
to  divest  or  affect  the  legal  title. 
Chamberlain  v.  Chamberlain,  44  N.  Y. 
Supr.  Ct.  (12  Jones  <t  sp.)  116. 

Where,  however,  all  the  members  of 
a  partnership  join  in  a  deed  of  land,  the 
presumption  is,  in  the  absence  of  proof, 
that  the  consideration  money  goes  to  the 
use  of  the  firm.  Lincoln  v.  White,  30 
Me.  291. 

A  partnership,  as  such,  cannot  hold 
the  legal  title  to  real  estate.  But  where 
a  deed  was  made  to  Jarrett,  Moon  & 
Co.,  it  not  appearing  whether  the  firm 
was  composed  of  Jan-ett  &  Moon  and 
others,  or  Jarrett  Moon  (one  person) 
and  others:  Held,  that  in  the  former 
case  the  legal  title  vested  in  Jarrett  and 
Moon,  and  in  the  latter  in  Jarrett  Moon, 
in  trust,  for  the  partnership ;  the  un- 
certainty arising  from  the  omission  of 
the  Christian  names  of  grantees  might 
be  removed  by  parol  proof.  Holmes  v. 
Moon,  7  Heisk.  506.  See,  also,  Tidd  r. 
Rives,  2N.  W.  Rep.  (¥.  S.)  497. 

A  conveyance  of  real  estate  to  "  J.  L. 
S.  &  Co."  vests  the  legal  title  in  J.  L. 
S.  mdividually,  clothed,  however,  with 
a  trust  for  the  benefit  of  the  partner- 
ship. Moreau  v.  Satlarans,  3  Sneed, 
595. 

Where  one  partner  invested  a  portion 
of  the  partnership  funds  in  lands  for  his 
own  use,  it  was  held  that  this  created  a 
resulting  trust,  and  that  the  other  part- 
ners might  follow  it  and  claim  their 
portion  of  the  specific  property.  King 
V.  Hamilton,  16  111.  190.  See,  also, 
Edgar  v.  Donnally,  2  Munf.  387. 

If  one  partner  purchase  land  to  his 
own  use  with  money  taken  out  of  the 
joint  fund,  the  lands  have  been  held  not 
to  be  joint  stock.  Goodwin  r.  Richard- 
son, 11  Mass.  469;  Pitts  v.  Waugh,  4 
id.  424. 


CHAP.  IV.] 


PARTXIiUSIIIP    PROPEUTY. 


*652 


terwards  pnrcliased  the  equities  of  redemption,  and  paid  for  them 


In  Louisiana  real  estate  owned  by 
commercial  partners  does  not  enter  into 
their  commercial  assets.  As  regards 
that  species  of  proportj'  they  are  joint 
owners.  Gudbeau  v.  Melancon,  28  La. 
Ann.  627. 

Under  the  laws  of  Louisiana  prohib- 
iting a  commercial  partnor.ship  from 
owning  immovable  property,  if  immov- 
able property  is  purchased  with  partner- 
ship funds  by  one  of  the  partners  in  his 
own  name,  and  without  the  consent  of 
his  co-partnors,  the  propeiiy  itself  be- 
longs to  the  partner  purchasing,  but  its 
value  at  the  time  of  the  pm-chase  be- 
longs to  the  partnership.  No  decree  of 
a  court  could  be  rendered  to  vest  the 
title  of  property  so  purchased  in  the 
partnership,  for  the  partnership  is  in- 
capable of  acquiring  title.  McKee  v. 
Griffin,  2:3  La.  Ann.  417. 

Where  the  title  to  land  belonging  to 
a  partnership  is  vested  in  one  of  the 
partners,  the  fact  that  it  is  partnership 
property  may  be  established  by  parol. 
Zook  V.  Clemens,  41  Iowa,  95;  Sherwood 
V.  St.  Paul,  &c.  R.  R..  Co.  21  Minn. 
127;  Bird  v.  Morrison,  12  Wis.  138; 
Fairchild  v.  Fairchild,  64  N.  Y.  471 ;  In 
re  Farmer,  18  Bank  Reg.  207;  Block  v. 
Seipt,  17  Weekly  Notes  of  Cases,  565. 
Thompson r.  Egbert,  3  Thomp.&C. 474; 
S.  C.  1  Hun,  484.  See,  also.  Little  v. 
Snedcor,  52  Ala.  167;  Hewitt  r.  Kankin, 
41  Iowa,  35;  Drewrey  v.  Montgomery, 
28  Ark.  256;  FaU  River  Whaling  Co.  v. 
Borden,  10  Cush.  458;  Hauff  r.  Howard, 
3  Jones'  Eq.  440;  Collins  v.  Decker,  70 
Me.  23. 

As  to  strangers,  however,  it  is  held  in 
Pennsylvania  that  partners'  agreements 
to  make  real  estate  common  stock  must 
be  in  writing,  and  ought  to  be  on  rec- 
ord. It  IS  not  competent  to  show  by 
parol  that  real  estate  conveyed  to  two  as 
tenants  in  common,  is  partnership  prop- 
erty. Lefevre's  appeal,  69  Pa.  St.  122. 
See,  also,  Ebbert's  appeal,  70  Pa.   St. 


79;  Jones'  appeal,  id.  169;  and  Hale  v. 
Henric,  2  Watts,  143;  Ridgway's  ap- 
peal, 15  Penn.  St.  177;  Otis  v.  Sill,  8 
Barb.  102. 

Where  there  is  a  conveyance  to  one 
partner  by  a  deed  absolute  on  its  face, 
and  it  is  attempted  to  be  shown  by  parol 
that  it  was  in  fact  a  conveyance  to  him 
for  the  use  of  himself  and  his  co-partner 
as  tenants  in  common,  it  is  competent  to 
rebut  this  e\'idence  by  showing  by  parol 
evidence  that  it  was  owned  by  them  ax 
partnership  property.  Black's  appeal, 
89  Pa.  St.  201. 

Improvements  upon  land  owned  by 
one  partner,  or  by  several  partners  as 
tenants  in  common,  made  with  partner- 
ship funds,  are  partnership  property. 
Lane  v.  Tyler,  49  Me.  252;  Kendall  r. 
Rider,  35  Barb.  100;  Hiscock  v.  Phelpv. 
44  N.  Y.  97.  See,  also,  Deveney  r. 
Mahoney,  23  N.  J.  Eq.  247. 

Where  real  estate  is  purchased  by  one 
of  two  partners,  and  paid  for  out  of  hi^ 
individual  fun<ls,  and  improvements 
are  made  thereon  with  the  partnership 
funds,  between  the  time  of  the  giving 
of  a  judgment  by  one  of  the  partners 
as  a  security  for  future  responsibilities, 
and  the  incurring  of  such  responsil)ili- 
ties  by  the  judgment  creditor,  the  equi- 
table interest  of  the  other  co-partner  to 
be  reimbursed  his  share  of  the  partner- 
ship funds  ajiplied  to  the  making  of 
such  improvements  is  prior,  in  point  of 
time,  to  the  lien  of  the  judgment,  upon 
the  principle  that  an  incumbrance  which 
intervenes  between  a  judgment  and  fur- 
ther advances  takes  priority  over  the 
latter.     Averill  r.  Loucks.  0  Barb.  19. 

Employing  partnoi-ship  funds  in  mak- 
ing piTmancnt  impi-ovenients  upon  real 
property  owned  l>y  the  partners,  and 
ai)propriated  to  the  partnership  business, 
is  not  necessarily  a  fraud  upon  the  cred- 
itors of  the  firm,  if  no  intent  to  defraud 
is  sho\vn.  Park"r  r.  Bowles,  57  N.  H 
491. 

8G7 


-652 


PARTNERSHIP   PROPERTY. 


[book  hi. 


out  of  the  funds  of  the  partnership,  but  it  was  held  that  the  proper- 


Where  real  estate  is  owned  in  undi- 
vided interests  by  the  individuals  who 
compose  a  partnership  which  has  only 
the  use  of  it,  trade  fixtures  set  up  by  the 
partners  do  not  become  realty,  and 
when  their  occupation  ceases  they  may 
remove  them.  They  are  not  covered  by 
mortgages  on  the  premises,  if  their 
owners  do  not  plamly  mean  them  to  be 
so.  Eobertson  v.  Corsett,  89  Mich. 
777. 

In  equity  partnership  real  estate  is 
treated  as  mere  personalty,  and  is  gov- 
erned by  the  rules  and  general  doctrines 
applicable  to  that  species  of  property. 
See  Arnold  v.  Wainwriglit,  6  Minn. 
358;  Davis  v.  Christian,  15  Gratt.  11; 
Mauck  V.  Mauck,  54  111.  281;  Scruggs  v. 
Blair,  44  Miss.  406;  Nicoll  v.  Ogden,  29 
111.  323;  Hill  v.  Beach,  12  N.  J.  Eq.  31; 
Ludlow  V.  Cooper,  4  Ohio  St.  1 ;  Moder- 
well  V.  Mullison,  21  Penn.  St.  257;  Day 
V.  Perkins,  2  Sandf.  Ch.  359  (a  lease- 
hold); Andrews  v.  Brown,  21  Ala.  437; 
Black  V.  Black,  15  Geo.  445;  Whitney 
V.  Cotton,  53  Miss.  689;  Galbraith  v. 
Gedge,  16  B.  Mon.  631;  Divine  v.  Mit- 
chum,  4  id.  488;  Coles  v.  Coles,  15 
Johns.  159;  Piatt  v.  Oliver,  3  McLean, 
27.  See,  also,  Morgan  v.  Olney,  53  Ind. 
6;  Rammelsberg  v.  Mitchell,  29  Ohio 
St.  22;  Foster  v.  Barnes,  81  Penn.  St. 
377;  West  V.  Hickory  Mining  Ass  n,  80 
id.  38.  See,  however,  Ferguson  v.  Hass, 
Phill.  Eq.  113. 

But  this  rule  grows  out  of  the  peculiar 
nature  of  the  partnership  relation,  and 
is  adopted  for  the  purpose  of  doing  jus- 
tice between  partners,  or  between  them 
and  others  having  dealings  with  them, 
and  for  the  pui-pose  of  properly  adjust- 
ing the  relations  betv,'een  them,  or  be- 
tween them  and  others  having  dealings 
with  or  relations  to  the  partnership.  It 
is  not  an  arbitrary  rule,  by  which  a' 
court  of  equity  transmutes  real  estate 
into  personal  property  when  it  is  once 
owned  and  possessed  by  d  partnership, 
868 


and  causes  it  to  take  that  character  out- 
side of  and  independent  of  the  exigen- 
cies of  the  partnership.  Black  v.  Black, 
15  Ga.  445. 

Although  a  court  of  equity  considers 
and  treats  real  property,  purchased  with 
the  partnership  funds,  and  held  for  the 
purposes  of  the  finn,  as  constituting 
part  of  the  stock  of  the  partnership,  it 
leaves  the  legal  title  undisturbed,  except 
so  far  as  may  be  necessary  to  protect 
the  equitable  rights  of  the  respective 
partners.  Lang  v.  Waring,  25  Ala. 
625. 

The  real  estate  of  a  partnership  is 
held  as  personalty  for  the  purposes  of 
the  partnership,  but  where  not  needed 
for  such  purposes  it  descends  as  other 
real  estate  to  the  heir.  Williamson  v. 
Fontain,  7  J.  Baxt.  (Tenn.)  212.  See, 
also,  McGrath  v.  Sinclair,  55  Miss.  89  ; 
Yeatman  v.  Woods,  6  Yerg.  20;  Gaines 
V.  CaCTon,  1  Humph.  514;  Piper  v. 
Smith,  1  Head,  93;  Summey  v.  Patton, 
1  Wins.  (N.  C.)  Eq.  (No.  II.)  52.  See, 
however,  McAllister  v.  Montgomeiy,  3 
Hayw.  (Tenn.)  94. 

The  widow  of  a  deceased  partner  can- 
not, therefore,  treat  the  partnership  real 
estate  as  personal  property,  but  it  goes 
to  the  heir.  Williamson  v.  Fontain, 
supra. 

Where  the  legal  title  to  lands  pur- 
chased and  held  for  partnership  uses  is 
in  the  partners  individually,  they  are 
nevei-theless  subject  to  an  implied  trust 
that  they  shall  be  applied  to  the  pay- 
ment of  the  partnership  debts;  and  the 
widow  of  a  deceased  partner  is  not  en- 
titled to  dower  therein  until  the  tmst  is 
fully  executed.  Bopp  v.  Fox,  63  III. 
540;  Price  v.  Hicks,  14  Fla.  565;  Uhler 
V.  Semple,  20  N.  J.  Eq.  288;  Campbell 
V.  Campbell,  30  id.  415;  Howard  v. 
Priest,  5  Mete.  582  ;  Simpson  v.  Leech, 
86  111.  286  ;  Stroud  v.  Stroud,  Phill.  L. 
525;  Robertshaw  v.  Hanway,  52  Mass- 
713.     See,  also,  Hudson  v.  Neil,  41  Ind. 


CHAP,  IV.] 


PARTNEKSniP  PROPERTY. 


*6o2 


tj  thus  acquired  did  not  form  part  of  the  partnership  property,  the 


505;  Cook  V.  Watson,  30  N.  J.  Eq.  345. 

The  rijjht  to  a  liomestead  exemption 
stands  on  no  higher  ground.  Robert- 
shaww.  Hanway,  supra;  Terry  r.  Beny, 
13  Nev.  514;  Commercial  &  S.  Biuik  v. 
Corbett.  5  Sawy.  54:3. 

Partnersliip  real  estate  can,  moreover, 
only  be  conveyed  as  real  estate  by  those 
holding  the  legal  title.  Davis  v.  Chris- 
tian. loGratt.  11. 

Neither  pai-tner  can  alone  convey 
more  than  his  undivided  interest  therein. 
Anderson  v.  Tompkins,  1  Brock.  456; 
Willey  r.  Cai-ter,  4  La.  Ann.  56;  Arnold 
V.  Stevenson,  2  Nev.  234;  Donaldson  v. 
Bank  of  Cape  Feai*,  1  Dev.  Eq.  103. 
See,  also,  Weld  v.  Peters,  1  La.  Ann. 
432. 

A  mortgage  executed  by  an  individual 
member  of  a  firm,  upon  land  the  legal 
title  to  vi'hich  is  vested  in  him,  but 
which  is  in  fact  owiied  and  used  by  the 
firm  as  partnei-ship  property,  is  "  real 
estate  secuii^y  "  within  the  clause  in  a 
will  directing  such  security  to  be  taken 
for  money  loaned.  Miller  v.  Procter,  20 
Ohio  St.  442. 

However,  land  purchased  by  several 
for  the  purpose  of  sale  for  profits  only, 
and  not  for  permanent  use,  will  be  re- 
garded in  equity  as  personal  property 
among  the  partners  in  the  speculation, 
and  one  of  them,  it  is  held,  may  release 
his  interest  in  the  same  orally.  Morrill 
V.  Colehour,  82  111.  618. 

And  where  land  is  partnership  stock, 
it  never  becomes  personalty,  even  dur- 
ing the  continuance  of  the  firm,  so  as 
to  give  one  partner  power  to  dispose  of 
the  firm  interest  in  it.  Foster's  appeal, 
74  Pa.  St.  391. 

Real  propei-ty  purchased  with  part- 
nership funds  for  partnership  purpos;^s, 
aiid  which  rcmtiins  after  paying  the 
debts  of  the  firm,  and  adjusting  the 
equitable  claims  of  the  ditierent  mem- 
bers of  the  fii-m.  a.s  between  themselves, 
is  considered  and  treated  as  real  estate. 


Buckley  v.  Buckley,  11  Barb.  43; 
Sci-uggs  V.  Blair,  44  Miss.  456.  See, 
however,  Thayer  v.  Lane,  Walk.  Ch. 
200. 

And  in  the  settlement  of  the  estate  of 
a  deceased  co-partner,  any  real  estate  of 
the  partnership  remaining  after  the  ful- 
fillment of  all  partnership  obligations, 
is  to  be  treated  as  realty.  Wilcox  r. 
Wilcox.  13  Allen,  252. 

Real  estate  owned  and  used  by  a  part- 
nership may  be  deemed  pei'sonalty,  not 
only  for  puii^oses  of  the  liiirtner-shipbut 
for  distriljution  also,  when  the  inten- 
tion of  the  partners  that  it  should  be  so 
treated  appears.  In  the  absence  of 
their  agreement,  express  or  implied  to 
this  effect,  it  should  only  be  so  regarded 
for  the  pm-poses  of  the  partnei-ship,  and 
after  these  are  answered,  the  surplus 
should  be  held  to  be  real  estate  for  all 
other  purposes.  Lowe  v.  Lowe,  13 
Bush,  688.  See  also  Scroggs  r.  Blair, 
44  Miss.  406.  Compare  Bank  of  Louis- 
vUle  v.  Hale,  8  Bush,  672 ;  Cornwall  v. 
Cornwall,  6  id.  369. 

When  land,  held  as  personalty  stock, 
and  therefore  deemed  personalty,  is  sold 
by  the  firm,  the  land  becomes  land 
again,  in  the  hands  of  the  purcha.ser, 
and  the  proceeds  personalty,  but  only  to 
the  extent  of  accomplishing  the  purpos- 
es of  the  conversion,  namely,  the  equity 
of  the  partners  to  have  the  joint  debts 
and  their  own  advances  paid  before  any 
part  goes  to  the  other  partnei-s  or  their 
separate  creditors.  The  time  of  re-con- 
version is  the  moment  the  partnership 
is  wound  up,  either  by  decree,  judg- 
ment or  agreement,  and  it  is  determin- 
ed to  be  no  longer  partnership  stock  nor 
rf(iuired  for  its  purposes.  Foster's  ap- 
peal 74  Pa.  St.  391. 

In  a  court  of  equitj',  real  estate  be- 
longing to  a  firm,  purcha.sed  witli  the 
partnersliip  funds  and  treated  as  part- 
nership property,  is  considered  as  per- 
sonal property  to  this  extent  at  least, 
869 


^652 


PARTNERSHIP    PROPERTY. 


[book  III. 


equities  of  redemption  following 

that  it  is  liable  to  pay  tli^  debts  of  the 
firm,  and  the  surviving  partner  has  a 
claim  on  it  for  that  purpose,  which  is 
superior  to  the  title  of  the  widow  and 
heirs-at-law  of  the  deceased  partner. 
Andrews  v.  Brown,  21  Ala.  437. 

A  sui-viving  partner  is  entitled  to  use 
the  real  estate  of  the  partnership  as  firm 
assets  so  far  as  it  is  needed  to  settle  the  af- 
fairs of  the  firm,  and  decedent's  heirs  hold 
the  leg-al  estate  only  as  trustees  for  the 
equitable  purposes  of  the  firm.  Merritt 
t>.  Dickey,  38  Mich.  41;  Dupuy  v.  Leav- 
enworth, 17  Cal.  2G2.  See,  also,  Mat- 
thews r.  Hunter,  67  Mo.  293. 

As  to  what  circumstances  will  justify 
the  exercise  of  the  power  of  a  court  of 
equity  to  authorize  a  surviving  partner 
to  sell  at  private  sale  realty  owned  by 
an  insolvent  firm,  see  Mauck  v.  Mauck, 
54  111.  281. 

Where  real  estate  is  purchased  with 
partnership  funds,  the  title  taken  in  the 
partnership  name,  and  the  property 
held  for  partnersliip  purposes,  and  on 
the  death  of  one  of  the  partners,  the 
firm  being  insolvent,  the  surviving 
partner  conveys  the  lands,  with  all 
the  other  partnership  property,  to  an 
assignee,  in  compromise  and  settlement 
of  the  claims  of  creditors,  who  assent 
to  it,  the  a-isignee  may  maintain  a  bill 
in  equity  against  the  heirs  of  the  de- 
ceased partner,  to  compel  a  divestiture 
of  the  legal  title,  and  have  the  lands 
applied  to  the  payment  of  the  partner- 
ship debts.  Murjiiiy  v.  Abrams,  50  Ala. 
293. 

An  administrator  cannot  be  held  liable 
for  not  receiving  and  accounting  for 
funds  arising  from  the  sale  of  his  intes- 
tate's partnership  interest  in  real  estate, 
when  the  whole  property  was  needed  to 
satisfy  the  debts  of  the  firm,  and  the 
sale  was  made  to  the  surviving  partner 
in  order  to  transfer  to  him  the  legal  title, 
to  be  used  in  settling  the  business .  Mer- 
ritt v.  Dickey,  38  Mich.  41. 

870 


the  mortgage  debts. 


But  in  this 


If  rents  and  pi-ofits  accrue  from  the 
real  partnership  assets  while  in  the 
hands  of  a  surviving  member  of  a  firm, 
such  rents  and  profits  are  personal  prop- 
erty, and  any  surplus  would  go  to  the 
personal  representative  of  the  deceased 
partner.  The  heir  would  only  be  enti- 
tled to  the  realty  or  its  surplus,  if  sold, 
as  it  stood  id,  the  death  of  his  ancestor.  , 
Griffey  v.  Northcutt,  5  Heisk.  746. 

Where  land  is  held  by  a  firm  by  deed 
expressing  that  it  is  partnership  stock, 
an  incumbrance  against  a  member  of 
the  firm  is  not  a  lien  upon  any  interest 
in  it,  so  as  to  prevent  the  firm  convey- 
ing'to  a  purchaser  clear  of  the  incum- 
brance.   Meily  v.  Wood,  71  Pa.  St.  488. 

In  such  case,  the  land  is  personal 
property  to  be  applied  according  to  the 
equities  between  the  partners,  in  pay- 
ment of  the  partnership  debts  in  the 
first  instance;  so  that  an  execution  by  a 
separate  creditor  would  sell,  not  an  in- 
terest in  realty,  but  the  balance  due  his 
debtor,  with  right  by  bill  in  equity  to 
compel  a  settlement.  Meily  v.  Wood, 
supra. 

Partnership  real  estate  must  be  first 
applied  to  the  satisfaction  of  the  part- 
nership debts.  Matlock  v.  Matlock,  5 
Ind.  403;  Winslow  ?).  Chiffelle,  1  Harp. 
Ch.  25;  Hunter  t;.  Martm,  2  Rich.  541; 
Overholt's  Appeal,  12  Penn.  St.  222; 
Marvm  v.  Trumbull,  Wright,  386;  Bry- 
ant V.  Hunter,  6  Bush,  75;  Cornwall  v. 
Cornwall,  id.  369;  National  Bank  of 
Metropolis  v.  Sprague,  20  N.  J.  Eq.  13; 
Uhler  V.  Semple,  id.  288. 

The  rule  is  the  same  though  the  title 
stands  in  an  individual  partner  or  in 
several  partners  as  tenants  in  common. 
Lime  Rock  Bank  v.  Phetteplace,  8  R.  I. 
56;  Watlock  v.  James,  13  N.  J.  Eq.  126; 
Jarvis  v.  Brooks,  27  N.  H.  37;  Cilley  v. 
Huse,  40  id.  358;  Gordon  v.  Kennedy, 
36  Iowa,  167;  Fall  River  Whalmg  Co. 
V.  Borden,  10  Cush.  458. 

The  rule  is  the  same  in  the  case  of 


CIIAl'.  IV.] 


PARTNERSHIP    PROPERTY. 


*652 


very  case  it  was  lield  that  otlier  public-houses  purchased  by  the 


improvements  upon  such  realty.  His- 
cock  V.  Phelpf ,  49  N.  Y.  97.  See,  also, 
Deveney  v.  Malioncy,  23  N.  J.  Eq.  247. 

A  partnership  at  its  dissolution  was 
much  in  debt,  and  the  estate  of  a  de- 
ceased partner  was  insolvent:  Held, 
that  the  fact  that  a  piece  of  land  which 
was  owned  in  common  by  the  partners 
was  presumptively  a  part  of  the  firm  as- 
sets, was  sufficient  ground  to  grant  an 
injunction  in  favor  of  the  surviving 
partner,  forbidding  the  administrator  of 
the  deceased  partner  from  proceeding 
to  sell  such  land  to  pay  the  separate 
debts  of  his  intestate,  under  a  license 
from  the  county  court.  Williams  v. 
Moore,  Phill.  Eq.  211. 

A,  B  and  C  were  partners  in  the 
lumber  business.  •  A  deed  granting 
them  a  quarter  section  of  land  recited 
that  an  undivided  half  was  granted  to 
A,  an  undivided  quarter  to  B,  and  an 
\mdivided  quarter  to  C,  adding,  "  this 
being  the  proportional  undivided  inter- 
est of  each  of  the  above  partners  in  the 
lumber  lirm  and  land  of  Milo  A.  Skin- 
ner &  Co."  A  mortgaged  his  interest 
to  secure  money  loaned  him  personally  : 
Held,  that  such  recital  in  the  deed  was 
not  notice  to  the  mortgagee  that  such 
land  was,  in  fact,  partnership  property, 
and  primarily  liable  for  partnership 
debts.  Van  Slyck  v.  Skiimer,  1  N.  W. 
Rep.  N.  S.  971. 

A  and  B  were  tenants  in  common  of 
a  saw-mill  with  the  land  and  appurten- 
ances conveyed  to  them  by  separate 
deeds,  each  owning  an  undivided  half, 
and  each  furnishing  the  purchase-money 
for  the  share  conveyed  to  him.  They 
subsequently  formed  a  co-partnership, 
and  entered  into  a  parol  agreement  to 
consider  the  real  estate  partnership 
property,  using  it  in  their  partnership 
business:  Hehl,  that  it  was  not  liable 
in  equity  to  the  payment  of  the  partner- 
ship debts,  as  against  tlie  separate  cred- 
itors of  the  co-partners,  who  had  given 


credit  and  taken  security  thereon  from 
them  upon  the  strength  of  their  owning 
the  property  a.s  tenants  in  connnon. 
Parker  v.  Bowles,  57  N.  H.  491. 

Upon  the  sale  of  real  estate  of  one  of 
two  partners,  and  the  appropriation  of 
the  proceeds  to  the  payment  of  a  judg- 
ment against  both,  a  subsequent  judg- 
ment creditor  of  that  partner  whose 
separate  estate  was  sold,  is  not  entitled 
to  be  substituted  as  plaintiff  in  the  judg- 
ment to  which  the  money  was  appro- 
priated, so  as  to  enable  him  to  proceed 
against  the  other  partner  unless  it  shall 
be  made  to  appear  that  he  whose  sepa- 
rate property  was  sold  was,  at  the  time, 
a  creditor  partner  of  the  firm.  Sterling 
V.  Brightbill,  5  Watts,  229. 

No  partner  or  proportion  of  partners 
can  si'U  or  transfer  the  real  estate  of  the 
firm  outright  for  money,  or  by  way  of 
mortgage,  as  to  assignees  in  trust  for 
debts,  without  the  consent  and  authori- 
ty of  the  other  partners.  A  conveyance 
made  by  one  partner,  purporting  to  con- 
vey lands  belonging  to  the  tinn,  passes 
only  the  grantor's  undivided  interest. 
Goddard  v.  Kenner,  57  Ind.  532.  See, 
also,  Jackson  r.  Stanford,  19  Ga.  14  ; 
Layton  r.  Hastings,  2  HaiT.  147;  Jones 
t'.  Neale,  2  Patt.  &  H.  339. 

It  has  been  held,  however,  that  if  one 
partner  make  an  assignment  of  the  real 
estate  belonging  to  the  firm,  the  legal 
title  will  be  held  by  the  firm  in  trust  for 
the  assignee.  Baldwin  i\  Richardson, 
33  Tex.  16. 

A  surviving  partner  cannot  alone  con- 
vey real  estate.'  belonging  to  the  firm. 
Galbraith  v.  Gedge,  16  B.  Mon.  031. 

Where  the  surviving  partner  of  a  firm 
which  had  been  engaged  in  gambling, 
and  had  parcha-sed  and  used  a  house  for 
gamliling  purposes,  sought  to  impeach 
the  title  by  which  a  grantee  of  his  part- 
ner held  it.  on  the  ground  that  it  was 
used  for  unlawful  purposes  he  was  held 
to  be  estopped  by  his  privity  to  the 
871 


^652 


PARTNEKSIIIP    PKOPERTY. 


[rook 


in. 


partners  out  of  the  partiicioliip  funds,  auJ  used  for  the  purpj333  of 


gi-antor.     Watson  v.  Fletcher,  7  Gratt.  1. 

Two  partners  holding  unequal  inter- 
ests, having  foreclosed  a  mortgage  upon 
real  estate  taken  to  indemnify  the  part- 
nership against  a  certain  securit3'ship, 
bid  in  the  property,  and  the  land  was 
conveyed  to  them  jointly,  without  desig- 
nating their  respective  interests:  Held, 
that  each  took  a  moiety  of  the  legal  ti- 
tle, but  that  in  equity  they  would  hold 
according  to  their  respective  interests; 
and  that  a  conveyance  by  the  executor 
of  the  partner  holding  the  greater  inter- 
est "of  all  the  right,  title,  and  interest 
which  the  testator  had  at  the  time  of 
his  decease,"  would  pass  to  the  grantee 
the  legal  title  to  one-half  the  land,  and 
the  equitable  titla  to  the  additional  in- 
terest held  by  the  testator;  and  that 
one  holding  under  this  grantee,  without 
notice  of  the  non-payment  of  the  pur- 
chase-money of  the  equitable  interest, 
would  hold  it  discharged  of  the  ven- 
dor's lien.  Putnam  v.  Dobbins,  38  III. 
394. 

A  bond  fide  purchaser  of  real  estate 
from  a  member  of  a  co-pamership,  for 
a  valuable  consideration  and  without 
notice  of  the  partnership  character  of 
the  property,  purchasing  only  to  the  ex- 
tent of  the  grantor's  legal  title,  will 
take  the  title  freed  from  the  equitable 
claims  of  others,  partners  or  creditors 
of  the  firm.  Dupuy  j:.  Leavenworth,  17 
Cal.  262. 

When,  however,  the  legal  title  to 
real  estate  belonging  to  a  partnership  is 
vested  in  one  of  its  members,  the  lien 
acquired  by  a  judgment  against  him  in- 
dividually, in  favor  of  a  creditor  of  the 
company,  is  subject  to  the  equities  al- 
ready existing  over  the  property;  and  a 
judgment  against  the  company  itself 
would  not  operate  as  an  efficient  lien  on 
the  land.  Coster  v.  Bank  of  Georgia, 
24  Ala.  37. 

Where  S.,  one  of  two  partners,  exe- 
cuted a  release  deed  of  land  to  himself, 
872 


and  M.,  the  other  partner,  for  a  nominal 
consideration,  "received  of  S.  and  M., 
merchants  m  trade  under  the  finn  of  S. 
&  Co."  "to  be  held  by  them  in  such 
proportions  as  is  agreed  on  between 
them;  "  it  was  held  that  the  record  of 
this  deed,  the  singularities  of  which 
were  calculated  to  awaken  attention, 
conveyed  constructive  notice  to  an  in- 
cumbrancer under  M.,  that  the  land 
was  partnership  property.  Sigoumey  v. 
Munn,  7  Conn.  324. 

Where  one  partner  holds  the  legal 
title  to  the  undivided  half  of  certain 
real  estate  the  whole  of  which  is,  in 
equity,  partnership  property,  the  con- 
veyance by  him  of  his  undivided  half  to 
a  creditor  of  the  firm,  in  payment  of  a 
partnership  debt,  vfcts  in  the  grantee  a 
good  title  thereto,  notwithstanding  the 
finn  is  insolvent,  and  the  other  partner  is 
ignorant  of  the  conveyance.  Van  Bront 
V.  Applegate,  4-4  N.  Y.  544. 

So,  a  conveyance  by  one  partner,  of 
real  estate  owned  by  the  partnership,  in 
trust  to  secure  a  creditor  of  the  partner- 
ship, passes  a  good  title  both  at  law 
and  in  equity,  to  an  undivided  moiety 
of  such  estate;  and  such  creditor  is  en- 
titled to  priority  over  all  other  creditors 
of  the  finn.  But  when  such  property  is 
conveyed  by  one  partner  in  trust  to  se- 
cure his  individual  creditors,  the  prop- 
erty remains  subject  to  the  payment  of 
the  partnership  debts.  Jones  v.  Neale, 
2  Patt.  &  H.  339. 

A  person  who  loans  the  entire  capital 
to  an  individual  paiiner  for  the  pui-pose 
of  commencing  business,  acquires  an 
equity  equal  to  that  of  the  creditors  of 
the  partnership;  and  if  the  money  is 
used  in  purchasing  lands,  which  are 
afterwards  mortgaged  to  the  lender  by 
the  individual  partner  to  secure  the  loan, 
the  fonner  will  acquire  an  equity  supe- 
rior to  that  of  the  creditors  of  the  part- 
nership, but  subject  to  the  lien  of  the 
other  partner,  if  he  'ourchases  with  no 


CHAP.  IV.] 


rAi-T>*:RSIIIP    PROnCRTY. 


*652 


its  trade,  did  form  partnership  projierty  to  all  intents  and  pur- 
poses, (n) 


tice  of  his  equitable  title  to  an  undivided 
half.     Reeves  v.  Ayers,  ;38  111.  418. 

In  Snyder  v.  Lunsford,  9  W.  Va.  223, 
however,  it  was  held  that  a  deed  of 
lands  owned  and  used  by  a  partnership, 
made  by  one  partner  only,  who,  how- 
ever, wa-s  sole  owner  of  the  capital  stock, 
to  a  person  from  whom  he  had  bon'ow- 
ed  the  money  which  he  had  contributed 
as  capital,  was  null  and  void,  as  against 
creditors  of  the  firm.  Snyder  v.  Luns- 
ford, 9  W.  Va.  22;!. 

A  conveyance,  by  one  memljer  of  a 
solvent  firm,  of  his  undivided  interest  in 
the  real  estate  of  the  partnership,  to  a 
stranger,  whether  made  upon  a  sale, 
or  by  way  of  payment  of  his  individual 
debt,  is  valid  as  against  the  co-partners  ; 
and  they  camiot  maintain  an  action  to 
have  it  set  aside,  on  the  ground  that  it 
was  made  without  their  consent,  and 
impairs  the  credit  of  the  firm.  Tread- 
well  V.  Williams,  9  Bosw.  649. 

If  creditors  do  not  object,  the  pur- 
chaser takes  a  good  title,  and  it  does 
not  lie  with  the  other  members  of  the 
firm  to  object;  or,  at  least,  to  enable 
them  to  do  so  they  must  show  that  the 
partnership  debts  exceed  the  assets,  and 
that  there  is  need  of  the  property  in 
question  to  provide  for  the  deficiency 
and  equalize  the  interests  of  the  part- 
ners.   Treadwell  v.  Williams,  supra. 

If  land  devoted  to  the  uses  of  a  part- 
nership business  is  owned  by  the  part- 
ners, each  holding  the  legal  title  to  an 
undivided  share,  a  mortgage,  by  one,  of 
his  intex-est  is  valid,  and  takes  prece- 
dence over  the  title  of  a  purchaser  at  a 
sale  on  an  execution  on  behalf  of  part- 
nership creditors,  unless  the  purchaser 
can  show  that  the  land  had,  in  fact, 
been  made  partnership  property,  and 
that  the  mortgagee  had  notice  of  this 
before  lending.    Johnson  v.  Clai-k,  18 


Kan.  157. 

The  patent  for  certain  land  wap  is- 
sued to  S.  &  R.,  who  composed  a  finn. 
S.  executed  a  power  of  attorney  to  V.  to 
sell  and  convey  any  propei-ty  belonging 
to  the  firm.  Within  tiiree  months 
thereivfter,  V.,  as  attorney  for  S.  A:  R., 
personally  executed  a  conveyance  of  the 
land  as  partnership  property.  Forty- 
five  years  elapsed  without  complaint  on 
the  part  of  S.,  or  any  one  representing 
him.  In  an  action  of  ejectment  against 
a  third  party  by  one  claiming  under  this 
conveyance,  it  was  held  that  the  ac- 
quiescence of  S.  in  the  treament  of  the 
land  as  partnership  property  would  be 
presumed.  Wilkerson  v.  Allen,  67  Mo. 
502. 

A  lease  by  one  paiiner  of  partnership 
real  estate  in  his  own  name  inures  to 
the  benefit  of  the  firm.  Modei-well  v. 
MuUison,  21  Penn.  St.  2-37. 

It  is  competent,  however,  for  partners 
to  agree  among  themselves  that  certain 
real  estate  owned  by  the  partnership 
shall  be  leased,  and  that  each  shall  be  en- 
titled to  his  proportion  of  the  rent,  shall 
collect,  and  may  discharge  it.  A  pai-ty 
renting  with  knowledge  of  the  agree- 
ment, conti-acts  with  each  to  pay  him 
his  proportion  of  the  rent,  and  he  may 
sue  for  it  in  his  own  name.  And  one 
partner  may  be  a  witness  for  another  in 
such  suit.  McDougald  v.  Banks,  13 
Ga.  4.51. 

If  one  partner  occupy  alone  a  house 
belonging  to  the  co-partnei-ship,  he  will 
be  liable  to  the  firm  for  rent  on  accoimt 
of  it,  although  there  was  no  special 
agi'eement  to  that  etfect,  and  no  chiu-ge 
was  made  ag-ainst  him  on  the  books  of 
the  firm  during  his  lifetime.  Holden  v. 
Peace,  4  Ired.  Eq.  223.  See,  also, 
Stoughton  V.  Lynch,  2  John.  Ch.  209. 

(/.)  1  M.  &  K.  649. 

873 


*653  SEI'ARATE    PKOPERTY.  [bOOK  III. 

Devises  of  a  On  the  otlier  liand,  in  Jackson  v.  Jackson  {o), 

ilnd'n"u?e  *653  a  testator  had  *devised  to  liis  two  sons  jointly, 
['Kit on.''''''  his  tradin.i?  business  and  hinds  used  by  hini  for 

Jackson «.  ^^^^  purpose  of  Carrying  it  on.  The  sons  took  the  busi- 
nesr'and  carried  it  on  in  partnership;  and  it  was  held  that  the  landg 
formed  part  of  the  partnership  property,  and  did  not  belong  to  the 
sons  as  mere  joint  tenants.  In  this  case,  not  only  was  there  some 
evidence  to  show  that  the  sons  considered  the  land  as  part  of  their 
property  as  partners,  but  there  was  also  this  peculiarity,  that  a 
trading  business  was  left  to  them,  and  that  the  land  was  accessory 
to  tha^ trade;  so  that  it  was  very  difficult,  as  observed  by  the  Lord 
Chancellor,  to  sever  the  profits  from  the  land  and  to  hold  the  de- 
visees to  be  partners  as  to  the  former,  but  not  as  to  the  latter. 

Upon  this  last  ground  it  was  held  in  Crawshay  v.  Maule  (p),  that 
Devisees  of  mincs  deviscd  to  several  persons  for  the  express  purpose 
"''"^''  of  beino-  worked  by  them  in  partnership,  and  which 

Crawshay  i;.  »        ,  -,.1  ^  i  •  „..*.„ 

Maule.  ^ere  worked  accordingly,  were  partnership  propeity. 

In  AVaterer  v.  Waterer  {q),  a  nurseryman  who  carried  on  busi- 
Devise  of  nur-  ncss  witli  his  SOUS,  although  not  in  partnership,  left  his 
sery grounds.  j.gsjj^iai.y  estate,  including  the  good-will  of  his  busi- 
waterer.  ■  ^ess,  to  his  sons  in  common;  they,  after  his  death, 
carried  on  the  business  in  partnership,  and  bought  more  land  for 
the  purposes  of  the  business,  and  paid  for  it  out  of  his  estate;  then 
one  son  died,  and  the  others  bought  his  share  and  paid  for  it  out 
of  money  raised  by  mortgage  of  the  nursery  ground,  and  out  of 
their  father's  estate.  On  the  death  of  one  of  the  surviving  sons 
intestate,  it  was  held  that  all  tlie  land  thus  acquired  had  become 
partnership  property,  and  that  the  share  of  such  son  was  to  be 
treated  as  personal  and  not  as  real  estate. 

By  a  slight  extension  of  the  same  principle,  if  several  persons  take  a 
Land  acquired  lease  of  a  colHcry,  in  order  to  work  the  colliery  as  part- 
poses  oiTade.  ners,  and  they  do  so  work  it,  the  lease  will  be  partnership 
property,  (r)  So,  if  co-owners  of  land  form  a  partnership,  and  the 
land  is  merely  accessory  to  their  trade,  and  is  treated  as  part  of  the 
common  stock  of  the  firm,  the  land  will  be  partnership  property,  (s) 

(0)  9  Ves.  591,  and  7  ib.  535.     Com-  and   1   R.   &  M.   45.      See   Bentley  v. 

pare  this  with  Brown  v.  Oakshot,  24  Bates,  4  Y.  &  C.  Ex.  182. 

Beav.  254,  noticed  ante,  p.  652.  (•'')  Essex  v.    Essex,   20    Beav.  442. 

(p)  1  Swanst.  495.  Compare  Steward  v.  Blakiway,  4  Ch. 

(<;;)  Waterer  v.  Waterer,  15  Eq.  402.  603,  and  6  Eq.  479. 

(r)  Faraday  v.  Wightwick,  Taml.  250, 

874 


CHAP.  IV.] 


rAKTNEUSIIIP   riiOrEKTV. 


'GoA 


*Upon  the  wliole,  therefore,  it  seems  that  land  acquired,     ^Goi 
whether  gratuitously  or  not,  for  the  purpose  of  carrying  on 
a  partnership  business,  and  used  for  that  |)urpose,  is  to  Result  of  fort- 
be  considered  as  ])ro])erty  of  the  i)artner6hij)  ;  but  that   s«''>gca.s^ 
land  which  is  not  so  ac(juired,  but  which,  bekuigiiig  to  several  per- 
sons jointly  or  in  common,  is  employed  by  them  for  their  common 
profit,  does  not   become  partnership   property  unless  there  is  some 
evidence  to  show    that  it   has  been  treated    by  them  as   ancillary 
to  the  partnership  business,  and  as  part  of  the  common  stock  of 
the  firm,  [t) 


SECTION  III.— CONVERSION  OF  JOINT  ESTATE  INTO  SEPARATE 
ESTATE,  AND  VICE  VERSA. 

It  is  competent  for  partners  by  agreement  amongst  themselves 

to  convert   that  which  was   partnership   property  into  3.  Afrrptincut 

.1  .  ,.  .      1 .     .  ,       ,  .  suflicioiu  to 

tne  separate  property  oi  an  iiidivKlual  partner,  or  vice  aitor  tii.' owu- 

-    /    \i         A       1       1  ,.     ,  ,  ershipof 

versa,  (ii)      And   the  nature  oi  the  property    may  be  property. 


{t)  See  Steward  v.  Blakeway,  4  Ch. 
603,  and  6  Eq.  479,  and  cases  ante,  p. 
652. 

{u)  Ex  parte  ^vi&in,  6  Ves.  119;  Ex 
2)arte  Williams,  11  ib.  3;  Ex  parte  Fell, 
10  ib.  348;  Ex  parte  Rowlandson,  1 
Rose,  416. 

»See  Bullitt  r.  M.  E.  Church,  26  Penn. 
St.  108;  Hickson  v.  McFaddin,  1  Swan, 
258;  Sa^re  r.  Chollar,  ,21  Barb.  596;  Di- 
mon  V.  Hazzard,  32  N.  Y.  65;  Crosby  v. 
Nichols,  3  Bosw.  450;  Evans  v.  Hawley, 
35  Iowa,  83;  City  of  Maquota  v.  Willey, 
35  Iowa,  323;  Whitworth  v.  Benbow, 
66  Ind.  194;  Upson  v.  Arnold,  19  Ga. 
190. 

Whore  partners  have  agreed  to  dis- 
solve their  co-partnei-ship.  and  have  di- 
vided the  partnership  property  acx'oi'd- 
ing  to  their  separate  interests,  the  por- 
tion allotted  to  each  becomes  his  separ- 
ate property,  and  neither  of  them,  un- 
less he  can  establish  that  fraud  was 
committed  in    procuring  the  division, 


has,  by  reason  of  his  liability  for  the 
partnership  debts,  or  his  payment  of 
them,  any  lien  upon  the  others'  por- 
tions. He  has  no  remedy,  thei-etore,  in 
equity.  Holmes  v.  Hawes,  8  Ired.  Eq. 
21;  Whitworth  v.  Benbow,  supra. 

Two  partners,  on  settlement  with  a 
creditor  of  their  firm,  after  dissolution, 
gave  their  separate  bonds  to  the  cred- 
itor, each  for  one-half  the  debt,  and 
agreed  that  the  amount  which  might 
be  recovered  on  a  certain  chose  in  action 
in  the  hands  of  the  creditor,  which  be- 
longed to  the  firm,  should  be  ap])lied  to 
the  payment  of  the  bonds :  Held,  that 
the  joint  interest  of  the  partnere  in  the 
chose  in  action  Wiis  severed  by  agree- 
ment, and  that  one  partner  afterwards 
had  a  right  to  direct  his  ^half  to  be  ap- 
plied to  the  payment  of  his  bond,  and 
that  the  creditor  hail  a  right  so  to  ap- 
ply it.     Rowand  r.  Eraser,  1  Rich.  325. 

Debts  due  to  a  finu  may  be  assigned 
to  either  of  the  paitners,   and   a  note 

875 


*65-l 


rARTXEKSIIIP    PROPERTY. 


[book  III. 


thus  altered  by  any  a<^reeinent  to  that  effect;  for  neither  a  deed  nor 
even  a  \vritin<^  is  absolutely  necessary  (vj);  but  so  long  as  the  agree- 
ment is  dependent  on  an  unpertbrraed  condition,  so  long  will  the 
ownership  of  the  property  remain  unchanged,  (x) 


given  to  the  assignee  for  the  amount 
due  by  a  debtor  to  the  firm,  extinguishes 
the  debt  to  the  partnersliip.  Lamkin  v. 
PhiUips,  9  Port.  98. 

A  note  in  favor  of  a  partner,  but  en- 
tered many  months  before  his  death  on 
the  partnership  books  to  the  credit  of 
the  maker,  a  debtor  and  customer  of 
the  firm,  will  be  treated  as  a  partnership 
asset.  GilUsse  v.  Gibson,  6  La.  Ann, 
125. 

Where  a  note  indorsed  in  blank  by  a 
co-partnership  remains  after  dissolution 
of  the  same,  in  the  hands  of  a  partner, 
who  transfers  it  in  payment  of  his  indi- 
vidual debt,  in  default  of  showing  to 
the  contraiy  it  will  be  presumed  to  be 
his  individual  property.  Fletcher  v.  An- 
derson, 11  Iowa,  228. 

Where  a  member  of  a  partnership  al- 
lows his  private  property  to  be  mingled 
with  that  of  the  firm,  and  to  be  sold 
with  their  property  as  part  thereof,  the 
purchaser  will  be  liable  for  the  price 
only  to  the  firm.  White  Mountain 
Bank  v.  West,  46  Me.  15. 

Where  a  co-partnership,  to  which  a 
lien  has  accrued  for  work  done  and 
money  expended  upon  machinery,  is 
dissolved,  and  the  interest  in  the  lien 
assigned  to  one  partner,  the  lien  is  not 
lost,  but  may  be  enforced  by  such  part- 
ner in  the  firm  name.  Busfield  v. 
Wheeler,  14  Allen,  139. 

Where  one  of  the  partners  buys  a 
horse  with  his  private  funds,  under  an 
agreement  to  allow  his  co-partner  to 
elect  to  take  him  at  the  cost  price,  and 
for  some  days  the  horse  is  kep4;  and 
used  vrith  the  horses  of  the  partnership, 
until  the  partner,  in  the  exercise  of  his 
election,  sells  him,  such  sale  is  not  a 
partnership  transaction.     Hatch  v.  I  os- 

876 


ter,  27  Vt.  515. 

In  June,  1871,  A,  B  and  C  bought 
in  partnership  and  on  speculation  cer- 
tain realty  ;  A  and  B  to  furnish  the 
capital  needed  ;  C  to  manage  the  spec- 
ulation and  to  sell  the  land,  receiving  as 
his  compensation  one-third  of  the  net 
profits  and  bearing  one-third  of  the  loss. 
The  title  to  the  land  was  taken  by  A 
and  B. 

In  June,  1872,  C  agreed  to  take  a 
portion  of  the  land  as  his  share  of  the 
profits,  and  gave  to  A  and  B  his  re- 
ceipt for  such  share,  specifying  the 
amount,  and  describing  it  as  received  by 
an  agreement  from  A  and  B  to  convey 
such  portion  to  him  subject  to  the  con- 
ditions of  the  contract  of  partnership. 
A  and  B  gave  to  C  an  agreement  to 
convey  on  demand  to  C  or  his  legal 
representatives  the  portion  of  land  fixed 
upon  :  Held,  that  by  this  agreement 
the  portion  of  land  specified  was  taken 
out  of  the  partnership  account ;  and 
that  A  and  B  held  the  receipt  of  C  as 
representing  so  much  money  subject  to 
the  partnership  account  and  the  equities 
of  the  co-partners.  Beckwith  v.  Man- 
ton,  12  R.  I.  442. 

{v)  See  Pilling  v.  Pilling,  3  DeG.  J. 
&  Sm.  162;  Ex  parte  Williams,  11  Ves. 
3;  Ex  parte  Clarkson,  4  D.  &  C.  56,  ])er 
Sir  G.  Rose;  Ex  parte  Owen,  4  DeG.  & 
Sm.  351.  None  of  these  cases,  how- 
ever, turned  on  the  effect  of  an  unwrit- 
ten agreement  relating  to  land.  See, 
as  to  a  transfer  by  a  partner  of  his 
shares  in  the  partnership  property  when 
it  consists  wholly  or  in  part  of  land,  post, 
ch.  5,  §  5. 

{x)  Ex  parte  Wheeler,  Buck.  25;  Ex 
parte  Cooper,  1  M.  D.  &  D.  358  ;  Haw- 
kins V.  Hawkins,  4  Jur.  N.  S.  1044. 


CIIAr.  IV.]       COXVEKSION   OF    JOINT    INTO    SEPARATE    PROPERTY.         *655 


Moreover,  as  the  ordinary  creditors  of  an  individual  liave  no  lien 
on  his  property,  and  cannot  prevent  him  from  disposing'   Creditors  not 

i       A         -^  '  '  I-       !•  entUed  to  be 

of  it  as  he  pleases,  so  the  ordinary  creditors  oi  a  nrm  consulted, 
have  no  lien  on  the  property  of  tlie  firm  so  as  to  be  able  to  prevent 
it    from    ])ai-ting    with    that   ])roperty    to    whomsoever   it 
^chooses.'     Accordingly  it  has  frequently   been  held,  that     *655 
agreements  come  to  between  partners  converting  the  prop- 
erty of  the  lirni  into  the  separate  estate  of  one  or  more  of  its  mem- 


'  See  Wilcox  r.  K.-llocrg,  11  Ohio,  094; 
White  V.  Parish,  20  Tex.  6^8  ;  Gwin  v. 
Selby,  5  Ohio  St.  96  ;  Sigler  r.  Knox  Co. 
Bank,  8  Ohio  St.  511  ;  Potts  v.  Black- 
well,  4  .Jones  Eq.  58;  Fif-kl  r.  Chapman, 
15  Abb.  Pr.  4:}4  ;  Kol)b  v.  Mudo-c,  14 
Gray,  5;M ;  Allen  v.  Centre  Valley  Co. 
21  Conn.  130  ;  Case  v.  Beauregard,  1 
Woods,  127  ;  Schmidlapp  v.  Currie,  55 
Miss.  597  ;  Pfirrnian  v.  Koch,  1  Cincin- 
nati, 460  ;  Reeves  r.  Aj-ers,  38  111.  419  ; 
Reese  v.  Bradford,  13  Ala.  837  ;  Mayer 
r.  Clark,  40  id.  259  ;  State  v.  Thomas,  7 
Mo.  App.  205  ;  Shackh'ford  r.  Shackle- 
ford,  32  Gratt.  481.  See.  also,  Rankin 
V.  Jones,  2  Jones  Eq.  1(59  ;  Miller  r. 
Price,  20  Wis.  117;  Weaver  r.  Ashcroft, 
50  Tex.  428  ;  Locke  v.  Lewis,  124  Mass. 
1  ;  Ca^e  V.  Beaur.-gard,  99  U.  S.  119. 

A  partner  who  ha.s  purchased  and  be- 
come sole  owner  of  goods  which  were 
before  partnership  property,  is  entitled 
to  exemption  in  the  goods  though  at 
the  time  the  debt  sued  for  was  con- 
tracted they  were  partnership  property; 
State  V.  Thomas,  7  Mo.  App.  205. 

The  rights  of  joint  creditors  and  of 
those  of  an  individual  member,  are  veiy 
different  as  respects  the  partnership  as- 
sets. Thejomt  creditors  have  a  primary 
claim  to  satisfaction  out  of  the  part- 
nership effects.  The  claim  does  not 
amount  to  a  lien,  but  in  a  controversy 
between  joint  and  separate  crei.Utors  to 
satisfaction  out  of  the  co-partnership' 
property,  the  former  will  be  preferred. 
Williams  v.  Gage,  49  Miss.  777.  See 
post,  105-1,  note. 

Creditors  have,  however,  a  quasi  lien 


upon  partnership  effects,  which  may  be 
enforced  in  a  court  of  equity  as  a  deriv- 
ative subordinate  right  through  the  lien 
and  equity  of  the  partners.  Guji;on  v. 
Flack,  7  Md.  "398;  Black  r.  Bu.sh,  7  B. 
Mon.  210;  O'Bannon  r.  Miller,  4  Bush, 
25;  Bank  of  Kentucky  r.  Horndon,  1 
Bush.  359.  See,  also,  Tillinghasfc  v. 
Champlin,  4  R.  I.  173;  Shackleford  v. 
Shackleford,  32  Gratt.  481.  See  post, 
66G,  note;  1054,  note. 

The  rule  that  the  creditors  of  a  firm 
have  no  equitaVile  lien  upon  the  co-pai-t- 
nership  property,  but  can  only  work  out 
such  a  lien  through  the  equities  of  the 
co-partners,  applicable  whilst  the  co- 
partners are  administering  their  own 
funds,  has  no  application  to  the  case  of 
a  co-partnership  dissolved  by  the  death 
of  one  of  the  co-partners,  especially  if 
the  surviving  partner  be  insolvent,  or 
where,  though  living,  one  or  both  the 
co-partners  have  become  insolvent  or 
banknipt,  so  that  their  property  is  in 
the  hands  of  asi^ignees  for  distribution. 
TiUinghast  v.  Champlin,  4  R.  I.  173. 

Where  one  partner  buys  out  the 
whole,  agreeing  to  pay  all  the  debts, 
the  fu-m  creditors  have  a  lien  on  the 
property  superior  to  any  claims  of  tliat 
partner's  privat^i  creditors.  Conroy  r. 
Woods,  13  Cid.  G2G. 

Where  a  partner  gives  a  mortgage 
upon  his  separate  property,  to  secure  a 
partnership  debt,  he  thereby  becomes  a 
surety  for  the  firm,  and  is  entitled  to 
the  rights  and  privileges  of  that  char- 
acter; and  his  separate  creditors  succeed 
to  his  rights  and    privileges   as    such 

877 


*655  CONVERSION    OF   JOINT    INTO    SEPARATE    PROPERTY.       [boOK  III, 

bers,  and  vice  versa,  are,  unless  fraudulent,  binding  not  onlj  as  be- 
tween the  partners  themselves,  but  also  on  their  joint  and  on  their 


surety,  and  have  a  right  to  insist  that 
the  partnership  property  be  first  applied 
towards  the  payment  of  the  debt,  se- 
cured by  such  partner,  before  resort  is 
had,  for  that  purpose,  to  the  separate 
estate  of  the  surety;  and  if  the  separate 
estate  of  the  surety  is  first  applied  in 
payment  of  such  debt,  his  separate  cred- 
itors will  be  entitled  to  be  subrogated  to 
the  rights  of  the  creditor  as  against  the 
partnership  fund.  Averill  v.  Loucks,  6 
Barb.  470. 

One  of  three  partners  retired,  sell- 
ing his  interest  to  the  others,  taking 
their  note  in  part  payment,  and  they 
assumed  the  partnership  debts.  They 
continued  the  business  awhile  as  pai-t- 
ners,  and  then  failed,  and  made  a  gen- 
eral assignment  in  trust  for  their  cred- 
itors, preferring  this  note,  and  providing 
for  the  payment,  /jro  rata,  of  the  debts 
of  both  the  old  and  new  firms:  Held, 
that  it  being  shown  that  the  sale  was  in 
good  faith,  the  creditors  of  the  old  firm 
had  no  equity  against  the  partnership 
property  of  the  old  firm  in  the  hands  of 
the  new  firm  or  their  assignee,  superior 
to  that  of  the  creditors  of  the  new  firm. 
Smith  V.  Howard,  20  How.  Pr.  121. 

Where,  upon  the  dissolution  of  a  part- 
nership, an  agreement  is  made,  within 
the  knowledge  of  its  creditors,  that  the 
acting  partner  shall  take  the  effects  and 
pay  all  the  debts  of  the  ftnn,  a  creditor 
cannot,  with  a  good  conscience,  take  a 
lien  on  the  joint  effects  for  new  ad- 
vances made  by  him  to  the  acting  part- 
ner on  the  latter's  individual  account, 
so  as  thus  to  render  the  retiring  partner 
liable,  the  joint  effects  having  been  ex- 
hausted, for  the  old  joint  debts.  Mc- 
Clean  v.  Miller,  2  Cranch  C.  Ct.  620. 

To  authorize  any  person  to  demand 
the  aid  of  the  Supreme  Court  in  direct- 
ing the  application  of  partnership  jjrop- 
erty,  he  must  have  a  lien,  either  legal  or 

878 


equitable,  upon  it,  or  must  be  in  a  situ- 
ation to  assert  such  a  lien.  Greenwood 
V.  Brodhead,  8  Barb.  593. 

Partnership  creditors  merely  as  such, 
have  no  lien,  on  the  partnership  prop- 
erty before  obtaining  judgment  and 
execution;  but  can  only  be  subrogated 
to  the  lien  of  the  partners,  and  are 
therefore  without  remedy  where  sueli 
lien  has  been  waived  by  them.  Case  r. 
Beauregard,  1  Woods,  127;  McGregor 
V.  Ellis,  2  Disney  (Ohio),  286. 

A.  and  B.  dissolved  partnership.  A. 
took  the  stock  of  goods  and  agreed  to 
pay  their  cost  value  to  B.  B.  took  the 
book  accounts,  notes,  etc.,  and  assumed 
to  pay  the  debts  of  the  firm.  T.  became 
the  surety  for  B.,  whereupon  the  latter 
assigned  him  in  trust  the  indebtedness 
for  stock  due  from  A.  and  other  prop- 
erty. .Joint  judgments  were  recovered 
against  all  three  of  the  parties  by  credi- 
tors of  the  firm.  T.  paid  off  the  judg- 
ments, and  the  property  assigned  by  B. 
failing  to  reimburse  him,  he  filed  a  bill 
against  A.  and  others,  praying  to  be 
subrogated  to  rights  of  the  creditors  of 
the  firm,  and  to  enforce  his  claim  as- 
signed by  B. :  Held,  1.  That  the  judg- 
ments having  been  rendered  against  T. 
as  well  as  other  parties,  and  the  debts 
paid  by  him  being  firm  debts,  which  he 
became  liable  for  as  the  surety  nomi- 
nally of  B.,  who  represented  the  late 
firm,  and  which  A.  was  also  pre-emi- 
nently liable  to  pay,  he  ought  to  stand 
as  surety  to  the  firm  and  be  entitled  to 
be  subrogated  to  all  the  rights  of  the 
creditors  thereof.  2.  That  he  was  a 
creditor  at  large  of  A.  by  reason  of  the 
assignment,  and  as  such  was  entitled  to 
file  a  bill  to  impeach  a  fraudulent  con- 
veyance of  land  in  which  A.  was  inter- 
ested. Highland  v.  Highland,  5  W. 
Va.  63. 

One  who  has  purchased  of  one  of  a 


CHAP.  IV.]       CONVKRSroN    OF    JOINT    INTO    SICI'AKATK    rROPKIiTV.  '^Oo.'i 


respective  several  creditors;  and  tliat,  in  the  event  of  bankruptcy, 
the  trustees  must  frive  eil'ect  to  such  agreements.  (?/)' 


firm  property  subject  to  partnership 
debts,  and  has  agreed  in  writintr  to  as- 
sume and  pay  such  debts,  as  part  of  the 
purchiuse  price,  thereby  recognizes  the 
equitable  lien  of  the  partnership  credi- 
tors, and  it  is  not  neccssaiy  that  such 
creditors  should  put  their  claims  in 
judgment  before  filing  a  bill  to  compel 
such  payment.  Olson  v.  Morrison,  29 
Mich.  395. 

Where  one  partner  retires  from  a 
firm,  selling  out  his  interest  in  the  as- 
sets to  the  remaining  partners,  who 
continue  the  business,  and  stipulate 
that  they  will  pay  the  debts,  having 
sufficient  assets  for  that  purpose,  if  they 
fail  to  do  so,  the  finn  creditors  will  have 
no  lien  on  such  property,  as  tlx*  retiring 
partner  may  have  withdrawn  from  the 
assets  at  the  time  of  his  retirement. 
HoUis  V.  Staley,  59  Tenn.  167. 

Notes  given  by  one  member  of  a  firm, 
who  assumes  the  liabilities,  and  receives 
a  transfer  of  the  efiects  of  the  firm,  to 
his  co-partners,  on  a  dissolution,  cannot 
be  subjected,  in  the  hands  of  their  as- 
signee, to  the  partnership  debts.  Bel- 
knap r.  Cram,  11  Ohio,  411. 

A  creditor  of  a  partnership  cannot, 
unless  he  has  recovered  judgment  for 
his  debt,  file  a  bill  to  restrain  the  part- 
ners from  applying  the  partnership 
property  to  their  separate  debts,  and 
for  the  appointment  of  a  receiver. 
Clement  v.  Foster,  3  Ired.  L.  218. 

Whon,  upon  some  disngreement  be- 
tween partners,  their  differences  were 
submitted  to  arbitratoi-s,  who  awarded 
that  all  the  goods  and  other  assets  of 
the  firm  should  pass  to  one  of  the  part- 
ners who  should  pay  all  the  partnership 
debts,  and  thereupon    such  goods   and 


a.ssots  were  all  attached  by  private  cred- 
itors of  such  partner,  and  subsequently 
by  the  creditors  of  the  firm  :  Held,  that 
fche  creditors  of  the  firm  were  entitled  to 
be  prefeiTcd,  even  if  the  award  had  been 
executed  by  a  transfer  in  accordance 
with  it.  Tenney  v.  Johnson.  43  N.  H. 
144. 

'•^  Upon  the  dissolution  of  a  partner- 
ship, the  firm  property  maj',  for  a  val- 
uable consideration,  be  sold  and  trans- 
ferred to  one  of  the  partners ;  and  when 
thus  disposed  of  it  is  not  followed  by  nor 
subject  to  the  claims  of  partnership  credi- 
tors, as  a  fund  out  of  which  they  are  to 
be  first  satisfied.  This  nile  prevails  even 
though  the  partner  so  acquiring  the 
property  assumes  to  pay  the  partnership 
debts.  City  of  Maquoketa  v.  Willey.  35 
Iowa,  323.  See,  also,  Baker's  appeal, 
21  Penn.  St.  77. 

A  and  B  being  the  only  co-partners  in 
one  company,  and  being  likewise  part- 
ners with  other  pei-sons  in  two  other 
companies,  A  made  a  deed-poll  to  B  of  all 
the  grantor's  interest  in  certain  real  es- 
tate and  in  the  personal  property  of  the 
three  companies,  the  deed  being  nomi- 
nally for  a  pecuniary  consideration,  and 
containing  a  covenant  that  the  grantee 
would  idemnify  the  grantor  against  ail 
the  debts  due  from  the  three  companies. 
The  deed  was  accepted  by  the  grantee, 
but  was  not  executed  by  him  :  Ilelil. 
that,  as  the  grantee  would  be  liable  in 
assumpsit  as  upon  an  implied  promise 
to  pay  the  creditors  and  inilonniify  the 
grantor,  this  was  a  valid  consideration 
for  the  deed  as  against  partnership 
creditors  of  A  and  B.  Guild  r.  Leonard, 
18  Pick,  511. 
A  conveyance  by  one  partner  of  his 


(y)  See  Ex  parte  Ruffin,  and  the  other 
cases  cited  in  the  last  two  notes,  :uid 
Campbell  v.  Mullett,   2  Swanst.   575; 


Ex  parte  Clarkson,  4  D  &  Ch.  5C;  Ex 
parte  Peake,  1  Madd.  358. 

879 


Ho5 


CONVERSION    OF    JOINT    INTO    SEPxVKATE    TEOPERTY.       [bOOK  III. 


A  conversion  of  joint  into  separate  property,  or  vice  versa,  most 
frequently  takes  place  when  a  firm  and  one  of  its  partners  carrv 
on  distinct  trades;  or  when  a  change  occurs  in  a  firm  by  the  re- 
tirement of  some  or  one  of  its  members,  or  by  the  introduction  of 
a  new  partner. 


interest  in  real  estate  belonging  to  the 
firm,  to  his  co-partners,  in  consideration 
of  moneys  by  them  advanced  beyond 
their  share  in  payment  of  the  firm  debts, 
is  valid  against,  and  not  liable  to,  the 
claims  of  individual  creditors  of  the  part- 
ner executing  the  conveyance.  Evans  v. 
Hawley,  o5  Iowa,  83. 

A  voluntary  conveyance  by  a  partner 
of  his  individual  real  estate  at  a  time 
when  the  partnership  property  is  suffi- 
cient to  pay  the  partnership  debts  is 
valid.     Hardy  tJ.  Mitchell,  67  Ind.  485. 

Where,  upon  dissolution,  one  of  two 
partners  takes  the  property  and  the  right 
to  use  the  firm  name  in  continuing  the 
business,  and  agrees  to  pay  the  debts, 
the  facts  of  liis  continuing  in  the  busi- 
ness under  the  same  style  and  in  the 
same  manner  as  before,  and  employing 
the  rethmg  partner  as  a  salesman  at 
a  rate  agreed  upon,  will  not,  of  them- 
selves, warrant  the  inference  that  the 
transfer  from  the  retiring  partner  was 
fraudulent  as  against  his  creditors,  or 
subject  the  property  to  liabiUty  to  levy 
by  his  individual  creditor  who  became 
such  after  the  dissolution  Hamill  v. 
Willett,  6  Bosw.  533. 

So,  during  the  existence  of  a  partner- 
ship, which  is  neither  bankrupt  nor 
contemplating  bankruptcy,  one  of  the 
members  of  the  firm  may  with  the  con- 
sent of  the  other  partner  or  partners, 
upon  a  bund  fide  consideration  with  no 
benefit  reser-ved,  assign  and  transfer  the 
assets  of  iha  partnership  in  payment  of 
his  individual  debt,  if  no  lien  has 
attach^'d  to  such  assets,  and  such  trans- 
fer is  good  against  the  firm  creditors. 
Schmidlapp  v.  Currie,  55  Miss.  597; 
Reeves  v.  Ayers,  88  111.  418. 
880 


A  transfer  by  one  partner  of  an  inter- 
est in,  or  a  lien  given  by  him  upon  the 
corpus  of  the  partnership  property  to 
pay  an  individual  debt,  although  made 
with  the  consent  of  the  other  partners, 
is  fraudulent  and  void  as  to  the  creditors 
of  the  firm,  unless  the  firm  was  at  the 
time  solvent  and  sufficient  property  re- 
mained to  pay  the  partnership  debts. 
Menagh  v.  Whitwell,  52  N.  Y.  146. 

Members  of  an  insolvent  partnership 
cannot  by  mutual  consent,  divide  the 
partnership  funds  between  themselves, 
so  as  to  enable  each  member  to  apply 
the  part  allotted  to  him,  in  a  preferred 
payment  of  his  separate  debts,  leaving 
the  joint  debts  unsatisfied;  and  a  trans- 
fer of  such  partnership  property  to  an 
individual  creditor,  in  payment  of  an 
antecedent  debt,  v/ith  a  knowledge  on 
the  part  of  the  creditor  of  such  design, 
will  not  enable  him  to  hold  it  discharged 
from  the  equitable  Hen  of  the  partner- 
ship creditors.  Burtus  v.  Tisdall,  4  Barb, 
571.     See,  2^os;t,  1054,  note. 

A  distribution  by  partners  among 
themselves  of  part  of  their  stock  in  trade, 
if  made  with  the  assent  of  crechtors,  is 
not  fraudulent.  Wilkinson  v.  Yale,  6 
McLean,  16. 

Where  a  retiring  partner  bond  fide 
assigns  all  his  interest  in  the  stock  and 
effects  to  the  remaming  partner,  whether 
the  partnership  be  general  or  limited, 
the  same  thereby  becomes  separate  prop- 
erty, and  v/ill  be  distributable  accord- 
ingly, notwithstanding  the  subsequent 
insolvency  of  the  remaining  partner. 
Upson  a.  Arnold,  19  Ga.  190.^ 

But  where  partners  are  in  fact  insol- 
vent, they  should  be  considered  in  equity 
as  holding  the  partJiership  effects,  in 


CHAP.  IV.J       CONVKRSION    OF   JOINT   INTO    SErARATE    PKOl'ERTY.         *055 

"When  a  firm  and  one  of  its  members  carry  on  distinct  trades, 
]n'o])erty  passinf^  in  tlie  ordinary  way  of  business  from   Deaiin^sbe- 
the  partner  to  the  firm,  ceases   to  be  his  and  becomes   prtrmU'and 
tlie  property  of  the  partnersliij),  and   vice  w-r.wi,  just  ^''^'^'^i^- 
as  if  he  were  a  stranoer  to  the  firm.     Tliis  was  settled  in  the  ijreat 


trust,  for  the  benefit  of  the  firm  credit- 
ors, and  cannot,  by  a  transfer  of  the  in- 
terest of  one  to  the  other,  defeat  this 
trust.     Re  Cook,  3  Biss.  122. 

The  division,  by  partners,  of  the  part- 
nership assets  between  themselves,  and 
the  transfer  of  such  assets  by  the  intli- 
vidual  partners,  in  payment  of  their  pri- 
vate debts,  when  the  partnership  is  in- 
solvent, has  been  held,  in  point  of  law  a 
fraud  upon  the  partnership  crechtors. 
Ransom  v.  Van  Deventer,  41  Barb.  307. 

R.,  J.  and  G.  form  a  partnership  for  the 
manufacture  of  tobacco,  and  in  their 
iirtieles  of  co-partnership  they  say,  it 
is  understood  that  G.  shall  contribute  for 
the  purposes  of  the  business  such  an 
amount  of  capital  as  he  may  be  able  to 
command,  which,  when  contributed,  is 
to  be  placed  to  his  credit  on  the  books 
of  the  concern,  to  be  used  only  in  con- 
ducting the  business,  and  to  bear  inter- 
est at  six  ^jerc*'/!/.^;^/- «»«»»(,  *  *  * 
and  in  order  to  protect  G.  against  any 
losses  that  may  arise  from  the  business 
hereby  pledge  and  assign  to  hiin  all  the 
present  and  future  interest  in  the  stock, 
machinery  and  claims  of  the  concern. 
G.  put  in  14,200,  the  others  put  in 
nothing.  The  business  proved  unprofit- 
able, the  fimi  failed,  and  the  partner- 
ship wa.s  dissolved.  About  the  com- 
mencement of  the  partnership  they 
bought  machineiy,  etc.,  giving  the  notes 
of  the  firm,  and  a  deed  of  trust  upon 
the  machinery,  etc.,  to  secure  them, 
and  on  their  failure  the  trustees  sold, 
and  after  satisfying  the  trust  there  was 
a  balance  left.  On  a  contest  between 
the  creditors  of  the  partnei-ship  and  G. : 
Held,  1,  Tliat  the  property  never  hav- 
ing passed  to  the  septu-ate  pos>ae«sioa  of 


G.,  but  remaining  in  the  possession  of 
the  partnership,  the  unrecorded  execu- 
tory agreement  aforesaid  was  fraudulent 
as  to  creditors  of  the  firm  without  no- 
tice. 2.  About  the  time  the  firm  failed, 
to  secure  G.  for  his  advances,  they  made 
a  note  payable  to  their  own  order  for 
$4,500,  secured  by  deed  of  trust  on  the 
machinery,  etc.,  but  the  note  was  not 
indorsed  or  delivered  to  G.  The  note 
not  having  been  endorsed  or  delivered 
to  him  by  the  other,  though  he  took 
possession  of  it  after  the  dissolution,  G. 
is  not  entitled  to  it.  It  creates  no  lia- 
bility without  nf*gotiation,  and  neither 
G.  nor  any  of  his  partners  could  after- 
wards negotiate  it,  and  consequently 
the  deed  mnde  to  secure  it  is  a  nuUity. 
Grasswett  v.  Connolly,  27  Grat.  19. 

In  Atkins  r.  Saxton,  77  N.  Y.  195,  it 
was  held  that  a  division  of  co-partner- 
ship property  between  the  partners  in 
proportion  to  their  interests,  for  the 
purpose  of  protecting  the  property  from 
seizure  by  the  individual  creditors  of  one 
of  the  partners,  is  not  unlaAvful,  and 
cannot  be  avoided  as  a  fraud  upon  the 
individual  creditors.  By  such  a  transac- 
tion the  other  partners  do  not  acquire 
any  of  the  property  of  the  debtor,  but 
only  separate  their  o\\'n  from  his,  so  that 
their  portion  shall  not  be  interfered  with 
for  his  debts. 

"Where  one  of  the  partnei-s,  by  a  mort- 
gage deed,  conveys  to  the  other  partner- 
ship effects,  to  secure  debts  alleged  to 
be  due  from  the  one  to  the  other,  which 
deed  and  effects  are  assigned  to  hond 
Jide  creditors  of  the  mortgagee,  to  se- 
cure debts  due  from  him  to  such  credit- 
ors, such  conveyance  was  held  to  be 
valid  against  creditors  of  the  firm  who 

«  881 


^QOJ  CONVERSION    OF    JOIXT    INTO    SKIWRATE    rKOPERTY.       [bOOK  III. 


case  of  Bolton  v.  ruller  (s),  in  which  there  were  two  bankini;- 
firms  one  carryinj^  on  business  at  Liverjiool  and  one  in  Lonchm. 
j^^^to^j^  All  the  partners  in  the  latter  linn  were  partners  in  tl  c 

I'uiKr.  former.     Some  bills  of  exchange  came  in  the  ordinary 

conrse  of  business  into  the  hands  of  the  Liverpool  firm,  to  be  placed 


had  no  lien.      Potts  v.   Blackwell,    3 
Jones  Eq.  449. 

After  a  levy  of  executions  on  partner- 
ship property  to  satisfy  a  separate  debt 
of  one  partner,  the  partners  cannot  dis- 
solve the  partnership,  make  a  settlement 
of  their  joint  effects,  m  which  the  debtor 
partner  is  paid  over,  for  his  share,  an 
amount  in  property  (other  than  that 
levied  on)  greater  than  the  amount  of 
the  executions,  and  thereby  defeat  the 
levies  so  made.  Thompson  v.  Tinnm, 
25  Tex.  (Supp.)  56.  See,  also,  Warren 
V.  Wallis,  42  Tex.  472. 

A  release  from  one  partner  to  another 
of  his  mtorest  in  the  parinership  effects, 
taken  with  full  knowledge  of,  and  sub- 
ject to  all  the  equities  between  the  par- 
ties, is  not  such  a  sale  as  would  deprive 
the  vendor  of  his  right  of  action  for 
goods  which  he  alleged  such  partners  as 
a  firm  had  fraudulently  obtamed  from 
him.  Ward  v.  Woodbum,  27  Barb, 
346. 

If  either  partner  has  contracted  a  debt 
in  his  own  name,  in  which,  as  between 
themselves,  the  other  partner  should 
share,  that  Uability  is  a  sufficient  con- 
sideration as  against  joint  creditors  for  a 
transfer  of  firm  property,  while  free 
from  the  operation  of  insolvent  laws,  for 
•  the  payment  of  that  debt.  Marks  v. 
Hill,  15  Gratt.  400. 

A  docket  entrj-  at  the  instance  of  a 
partner,  assigning  a  firm  claim  without 
consideration,  is  void  as  against  credi- 
tors of  the  firm.  Updegraff  v.  Rowland 
52  Pa.  St.  317. 

xVn  appropriation  of  partnership  prop- 
erty for  th3  benefit  of  private  creditors 
ofln^A-lvrnts,  makes  void  an  assignment 


for    creditors.    Kanauth  v.  Bassett,  '"4 
Barb.  31. 

In  an  assignment  of  all  the  debtov's 
goods,  chatties,  &c.,  executed  by  part- 
ners, a  provision  for  the  payment  cf 
the  private  and  individual  debts  of  th  • 
assignors  out  of  the  residue  remaini)i:r 
after  the  payment  of  the  partnersh-ji 
debts  offers  no  evidence  of  an  intention 
to  hinder,  delay  or  defraud  creditors. 
Turner  v.  Jaycox,  40  Barb.  164. 

Where  two  partners  in  a  firm  purchase 
the  interest  of  a  third  partner,  and  form 
a  new  firm,  and  subsequently  make  an 
assignment  for  the  benefit  of  credit- 
ors, providing  for  the  payment  of  debts 
due  from  the  new  firm,  or  the  old  firm, 
"  or  either  of  the  members"  of  the  two 
firms,  such  assignment  is  invalid,  as  to 
creditors  of  the  old  firm.  Lester  v.  Pol- 
lock, 3.  Robt.  N.  Y.  691. 

A  sale  of  partnership  stock  for  the  pur- 
pose of  paying  the  indivitlual  debt  of  a 
partner,  is  void  as  against  creditors  of  the 
firm,  although  the  money  for  wliich  such 
debt  was  contracted  has  l)een  used  as 
part  of  the  capital  of  the  fli-m.  Person 
V.  Monroe,  21  N.  H.  462. 

One  partner  may  assign  his  interest 
in  the  partnership  accounts  and  proper- 
ty to  his  separate  creditor,  and  the  as- 
signment wiU  be  good  against  the  cred- 
itors of  the  firm  afterwards  attaching. 
Wilson  V.  Bowden,  8  Rich.  9  ;  Norris  r. 
Vernon,  id.  13. 

A  creditor  in  embarrassed  circum- 
stances, finding  the  firm  of  which  he  is  a 
member  about  to  fail,  may  at  fair  prices 
make  a  valid  transfer  of  his  private 
property  to  his  private  creditoi-s  in  pay- 
ment of  honest  private  d^bts,  in  prefer- 


(.-)  1  Bos.  &  P.  530. 


8S2 


CIIAI'.  IV.]       CONVERSION    OF    JOINT    INTO    SEPARATE    PROPERTY.  *(mO 

to  tlic  general  account  of  its  customers.  These  bills  were  remitted 
1)}'  the  Liver] loul  firm  to  the  London  firm,  to  be  i)laced  to  the  credit 
of  tlie  former  in  the  general  acconnt  between  the  two  houses.  Both 
houses  afterwards  becoming  baidvrui>t,  it  M-as  held  that  the  bills 
were  the  property  of  the  London  firm  and  not  of  the  Liverpool 
firm,  or  of  its  customers.  Lord  C.  J.  Eyre,  in  delivering  judgment, 
adverted  to  the  qne&tioii  now  under  consideration  iu  the  following 
terms: — 


"  7'liore  can  be  no  doubt  that  as  between  themselves  a  partnership  may  have 
transactions  with  an  indivitlnal  partner  or  with  two  or  more  of  the  partners  hav. 
ing  their  separate  estate  engaged  in  some  joint  concern  in  which  the  general 


ence  to  those  of  the  firm;  provided  also 
there  is  nothing  to  impeach  the  good 
faith  of  the  gi-antees.  Auburn,  etc- 
Bank  V.  Fitch,  48  Barb.  344. 

AVhere  a  partner  gave  a  mortgage  on 
his  separate  property,  creating  thereby 
a  preference  in  favor  of  a  partnership 
creditor  :  Held,  that  the  mortgage  was 
not  thereby  void  and  fraudulent  as 
agiiinst  the  seiarate  creditors  of  the 
mortgagor;  though,  on  complaint  made 
in  then-  behalf  as  a  class,  the  mortgage 
might  be  declared  void  as  to  such  credi- 
tors.   Stewart  v.  Slater,  6  Duer,  83. 

"Where  goods  have  been  purchased  in 
the  name  and  on  the  credit  of  one  co- 
partnership firm,  and  turned  over  to 
another  co-pai-tnership  firm  composed 
of  some  of  the  same  individuals,  with- 
out any  bona  fide  or  valuable  considera- 
tion being  paid  therefor  :  Held,  that  a 
court  of  equity  will  aid  the  judgment 
creditors  of  the  co-partners  making  such 
ti-ansfer,  to  follow  the  goods  into  the 
hands  of  the  transferees,  and  require 
them  to  account  for  such  goods,  or  the 
proceeds  of  the  sale  thereof,  and  apply 
the  same  in  satisfiiction  of  their  judg- 
ment.    Dennis  v.  Ray,  9  Ga.  449. 

A  transfer  by  a  partnership,  of  the 
partnership  propei-ty,  to  a  coi-poration 
formed  by  the  pai-tners  for  the  purpose, 
in  payment  for  which  the  partners  take 
the  stock  of  the  coi-poration  in  their  in- 


dividual names,  is  not  per  se  fraudulent 
as  to  the  creditors  of  the  partnership. 
Pei-sse  &  Brooks  Paper-works  v.  Willett, 
19  Abb.  Pr.  416. 

Where  one  of  two  partners,  with  the 
consent  of  the  other,  sells  and  conveys 
one  half  of  the  effects  of  the  firm  to  a 
thkd  person,  and  the  other  partner  af- 
terwards sells  and  conveys  the  other 
half  to  the  same  person,  such  sales  and 
conveyances  are  not  priiua  facie  void, 
as  against  the  creditors  of  the  firm,  but 
axe  pri)ii((  facie  valid  against  all  the 
world,  and  can  be  ?et  aside  only  by  the 
creditors  of  the  firm,  upon  their  proving 
the  ti-ansactions  to  be  fraudulent  a-s 
against  them.  Kimball  v.  Thompson, 
13  Mete.  283. 

Where  one  partner  absconds,  and  the 
other  disposes  of  a  part,  and  is  disposing 
of  the  whole  pai-tnership  effects,  it  will 
be  presumed  that  they  intend  to  delay 
and  hinder  then-  creditors,  so  as  to  form 
good  ground  for  attachment  against  the 
partnership  property.  Sellew  v.  Chris- 
field,  1  Handy,  Ohio,  86. 

Though  a  creditor  might  object  to  a 
transfer  of  partnership  chosvfi  iu  action 
from  the  debtor  firm  to  their  succl  ssoi-s, 
yet  a  debtor  to  the  firm  cannot  object 
that  the  old  finn  had  no  power  to  dis- 
pose of  its  property  without  fu-st  settling 
its  affairs.    Pease  v.  Rush,  2  Minn.  107 

883 


*656  PARTNERSHIP  PROPERTY.  [bOOK  III. 

*()56  partnorsliip  is  not  intei-ested;  and  that  they  may  by  *their  acts  con- 
vert the  joint  property  of  the  general  partnership  into  the  separate  prop- 
erty of  an  individual  partner,  or  into  the  joint  property  of  two  or  more  partners,  or 
i  converso.  And  their  transactions  in  this  respect  will,  generally  speaking,  bind 
ihird  persons,  and  third  persons  may  take  advantage  of  them  in  the  same  manner 
as  if  the  partnership  were  transacting  business  with  strangers:  for  instance,  sup- 
pose the  general  partnership  to  have  sold  a  bale  of  goods  to  the  particular  partner- 
ship, a  creditor  of  the  particular  partnership  might  take  those  goods  in  execution 
for  the  separate  debt  of  that  particular  partnership." 

Where  a  change  occurs  in  a  firm  by  the  retirement  of  one  or 
Change  of  prop-  more  of  its  members,  nothing  is  more  common  than 

erty  on  change    „         ,  i  -  i  •  i 

in  firm.  for  the  partners  to  agree  that  tliose  who  continue  the 

business  shall  take  the  property  of  the  old  firm  and  pay  its  debts, 
or  that  part  of  the  property  of  the  old  firm  shall  become  the  prop- 
erty of  those  by  whom  its  business  is  to  be  continued,  whilst  the 
rest  of  the  property  shall  be  otherwise  dealt  with.  So,  again,  w^lien 
a  partnership  is  first  formed,  or  when  a  new  partner  is  taken  into 
an  existing  firm,  or  when  two  firms  amalgamate  into  one,  some 
agreement  is  generally  come  to  by  which  what  was  before  the 
property  of  some  one  or  more  only  of  the  members  of  the  firm,  be- 
comes the  joint  property  of  all  such  members.  All  such  agree- 
ments, if  hofid  Jide,  and  not  fraudulent  against  creditors,  are  valid, 
and  have  the  efiect  of  altering  the  equitable  ownership  in  the  prop- 
erty affected  by  them.' 

In  £^x  parte  Ruflin  (a),  which  is  the  leading  case  on  this  sub- 
Ex  arte  J®^^'  Thomas  Cooper,  a  brewer,  took  James  Cooper  into 
Ruffin.  partnership.  That  partnership  was  afterwards  dis- 
solved by  articles,  by  which  the  buildings,  premises,  stock  in  trade, 
debts,  and  effects  were  assigned  to  James  by  Thomas,  who  retired. 
James  afterwards  became  bankrupt,  and  some  of  the  partnership 
debts  being  unpaid,  an  attempt  was  made  to  have  what  had  been 
the  property  of  the  partnership  applied  in  liquidation  of  those 
debts.  But  it  was  held  that  such  property  was  no  longer  the  joint 
property  of  the  two  partners,  but  had  been  converted  into  the  sepa- 
rate property  of  James. 

1  See  ante,  655,  note  (2).  Clarkson,  4  D.  &  Ch.  56;  Ex  parte  Gur- 

(a)  6Ves.  119.     See,  too.  Ex  parte  ney,  2  DeG.  M.  &  G.    541;   Ex  i)arte 

Walker,  4  DeG.  F.  &  J.  509,  Ex  j}arfe  Peake,  1  Madd.  346;  Ex  parte  Fell,  10 

Sprague,  4  DeG.  M.  &  G.  866;  Ex  parte  Ves.  348. 

884 


CHAP.  IV.]       CONVERSION    OF   JOINT   INTO    SEPARATE    PROPERTY.  *657 

*l!^x  parte  ^YiWiiims  {b),  was  a  similar  case,  only  that  on     *G57 

Ex  pa 
Willi 


tlie  dissolution  no  assignment  was  made.     There  was  ^    ^ 
not  even  any  written  agreement  showing  the  terms  on  ^^"1"^™^ 


which  the  dissolution  took  place.  But  it  was  sworn  that  the  partner 
who  continued  the  business  was  to  take  all  the  stock  and  effects  of 
the  old  firm ;  and  it  was  held  that  they  had  become  his  separate 
property,  and  could  not  be  considered  as  the  joint  property  of  the 
dissolved  partnership. 

These  decisions  have  always  been  regarded  as  settling  the  law 
upon  the  subject  of  conversion  of  partnership  property,  and  have 
been  constantly  followed.  They  were  not,  it  will  be  observed,  de- 
cided with  reference  to  the  doctrine  of  reputed  ownership,  but  with 
reference  only  to  the  real  agreement  come  to  between  the  partners. 
They  apply  as  much  to  cases  of  a  change  of  interest  on  death  as  on 
retirement,  (c) 

The  case  of  Ex  parte  Owen  ((f),  which  has  been  already  referred 
to  {e\  shows  that  similar  principles  must  be  applied  in   j^^p^^ 
order  to  determine  what,  on  the  formation  of  a  partner-  ^^■*^'^- 
ship,  has  been  converted  from  separate  into  joint  estate.  (/") 

In  order,  however,  that  an  agreement  may  have  the  effect  of  con- 
vertinff  ioint  into  seiiarate  estate,   or  vice  versd,  the  Agreement 
agreement  must  be   executed,  and  not  be   executory  exetutcd. 
merely.'     In  £x  parte  AVheeler  (^),  a  retiring  partner  and  a  con- 

{b)  11  Ves.  3.      Compare  Ex  parte  j>aie  Ex  j)a)-fe  Gih^on,  2  Mont.  &  Ayr. 

Cooper,  1  M.  D.  &  D.  358,  4;  Ex  pat-te  Sprague,  4  DeG.  M.  &  G. 

(c)  See  Re  Simpson,  9  Ch.  572  ;  and  866;  Hawkins  v.  Hawkins,  4  Jur.  N.  S. 
eompare  Ex  parte  Morley,  8  Ch.    1026.  1044. 

Both  these  tmTied  on  the  construction  of  'Under    articles  of  partnership    be- 

the  partnership  articles  combined  in  the  tween  A  and  B,  providing  that  cither 

last  case  with  the  will   of  the   deceased  party    could   dissolve    the    partnership 

partner.     The  will  and  the  articles  to-  upon  sixty  days'  notice    In  writing,  B 

gether  prevented  a  convertion.  gave  notice,  and  after  the  time  limited, 

(d)  4  DeG.  &  Sm.  351.  the  parties  agreed  upon  terms  of  disso- 

(e)  Ante,  p.  649.  lution  and  a  division  of  the  property. 
(/)  See,   too,  Ex  parte  Barrow,  2  By  this  agreement  B  was  indebted  to  A. 

Rose,  252  ;  and  Belcher  r.   Sikes,   8  B.  which  indebtedness  was  to  be  secured  to 

&  C.  185,  for  a  case  where  separate  es-  A  by  mortgage.     The  agreement  was 

tate  was  made  joint  by  a  deed  of  disso-  to  be  reduced  to  ^^Titing  and  signed  by 

lution  not  clearly  expressed.  both  parties.     B,  however,    refused  to 

{g )  Buck.   25,      See,  too,  Ex  parte  sign  the  agreement  when  written,  or  to 

Cooper,  1  M.  D.  (t  D.  358;  andtheca.se  give  the  mortgage.     The  property  which 

of  the  Bank  of  England,  3  DeG.   F,   &  was  to  belong  to  each  was  put  in  sepa- 

J,  645,  noticed  ante  p.  650;  and  com-  rate  drawers  in  a  safe,  and  each  pai-tner 

885 


*C58  TARTNEKSIIIP   PKOrEKTY.  [lU)OK  III. 

tinuing  partner  entered  into  an  agreement  in  writing,  by  wln'cli 
the  retiring  partner  assigned  the  stock,  good-will,  lease,  furniture, 
fixtures,  books,  and  debts  of  the  firn),  to  tl;e  continuing  ])artner, 
and  the  latter  agreed  to  pay  certain  debts  of  the  partnership  for 
which  his  father,  he  said  would  be  security.  The  father, 
*658  *however,  refused  to  give  any  security,  and  this  further  act 
was  necessary  to  be  done  in  order  to  complete  the  transfer  oi 
the  property.  The  continuing  partner  having  become  bankrujDt, 
the  court  held  that  the  property  of  the  old  iinn  had  not  been  con- 
verted into  the  separate  estate  of  the  continuing  partner,  the  agree- 
ment being  still  executory  when  the  bankruptcy  occurred. 

Moreover,  an  agreement  which  can  be  successfully  impeached  for 
Effect  of  fraud,  will  not  affect  the  property  to  which   it  may  re- 

fraud.  ]ate  (A);  and  it  must  not  be  forgotten,  that  in  the  event 

of  bankruptcy,  the  trustee,  as  representing  the  creditors,  may  be 
able  to  impeach  as  fraudulent  against  them,  agreements  by  which 
the  bankrupt  himself  would  have  been  bound  (■/).  In  a  case  where 
both  the  partnership  and  the  individual  partners  were  insolvent,  an 
agreement  by  one  of  them  transferring  his  interest  to  the  others, 
and  thereby  converting  what  was  joint  estate  into  the  separate  es- 
tate of  the  transferee,  was  held  invalid;  for,  although  no  fraud  may 
have  been  intended,  the  necessary  effect  of  the  arrangement  was  to 
delay  and  defeat  the  joint  creditors  ( j).  The  firm  became  bankrupt 
shortly  after  the  assignment  was  made. 

had  a  key  of  the  drawer  in  which  his  the  plaintiff  a  separate,  exclusive  prop- 
part  was  put:  Held,  that  the  agree-  erty  in  the  subject  of  the  suit.  Kon- 
ment  was  not  obligatory  on  A,  and  ingsburg  v.  Launitz,  1  E.  D.  Smith,  215. 
had  no  efficacy  to  divide  the  partnership  Until  a  partnership  concern  is  closed 
property.  Fitzgerald  v.  Christt,  20  N,  by  a  final  account,  the  joint  interest  m 
J.  Eq.  90.  the  whole  property  remains;  and  if  one 
With  a  view  to  a  dissolution,  two  partner  takes  out  what  he  deems  his 
partners  agreed  to  divide  their  stock,  share,  and  the  residue  is  afterwards  lost, 
and  that  the  machineiy  which  belonged  he  will  be  compelled  to  account  with 
to  them  should  be  given  to  the  party  the  other  partners  for  their  shares  of 
who  would  give  the  most  for  it.  They  the  amount  dra^vn  out  by  him.  AUison 
accordingly  separated  the  stock  into  v.  Davidson,  2  Dev.  Eq.  79. 
"  two  piles, "  but  no  deh very  was  made,  {h)  Ex  parte  Rowlandson,  1  Rose, 
and  before  the  arrangement  was  com-  416. 

pleted  the  parties  quarreled,   and   the  (i)  See  jRe  Kemptner,  8  Eq.  286;  An- 

settlement  was  interrupted.     One  of  the  derson  r.  Maltby,  2  Ves.  J.  244;  Billiter 

parties  caused  a  demand  to  be  made  for  v.  Young,  6  E.  &  B.  40. 

half   of    the    property:      Held,    that  {j  )  Ex  parte  Mayou,  11  Jur.  N.   S. 

enough  had  not  been  done  to  vest  in  433,  L.  C.    Ex  parte  "Walker,  4  DeG. 

886     • 


ClIAl'.  IV.J       CONVEKSION    OF   JOINT    IXTO    SV.IWll.Vn-.    ri:OPKUTY.         ■*G59 


Tn.^coured   creditors   of    companies,    wlietlier   limited    or    un- 
11  mi  ted,  have   no  lien  on  their  assets  (k);  and  cannot  conversion  by 
])revent  a  sale  or  other  disjjosition  thereof  (Z),  and  it  ^•^"^i"'"*^*- 
is  clearly  competent  for  all  companies  to  divide  profits  amongst 
their  shareholders,  and  to  that  extent  to  convert  what  was  joint  es- 
tate into  the  separate  estates  of  the  members.     But  it  must  be  borne 
in  mind  that  any  division  of  the  property  of  a  company  amongst 
its  members  wliich   ifi  not  warranted  by  the  constitution  of  the 
company,  can  be  imper.ched  by  the  company  itself  (771);  and 
■^^fnrther,  that  any  division  of  the  assets  of  a  company  which     *659 
would  not  leave  enough  to  pay  the  creditors  of  the  company, 
would  ^Wma/ciCid  be  a  fraud  upon  them  ;  and  even  if  not  a  fraud 
upon  them  would  probably  be  ult/a  vires,  (^i) 


F.  &  J.  509.  See,  also,  Luff  v.  Homer, 
3  Fos.  &  Fin.  480,  which  seems  to  have 
been  a  clear  case  of  fraud  upon  a  cred- 
itor. 

(k)  But  see,  as  to  cost-book  compa- 
nies, 32  &  33  Vict.  c.  19,  §S  24,  86. 

(1)  Mills  V.  Northern  Kail,  of  Buenos 
Ayres  Co.  5  Ch.  021. 

(m)  See  Society  of  Practical  Knowl- 
edge V.  Abbott,  2  Beav.  559,  ante,   pp. 


591,  592. 

(«)  See,  as  to  this.  Stringer's  case,  4 
Ch.  475  ;  Cardiff  Coal  Co.  v.  Norton,  2 
Eq.  558,  affirmed  by  Lord  Chemlsford, 
2  Ch.  405.  The  decision  in  this  case 
was  probably  right  under  the  peculiar 
cu'cumstances  affectiug  the  real  plain- 
tiff, but  some  of  the  principles  laid  down 
in  the  ca^e  deserve  serious  reconsidera- 
tion. 

887 


•o60  SHAKES.  [book  III. 


660*  CHAPTER  Y. 

OF  SHARES  IN  PARTNERSHIPS  AND  COMPANIES. 

In  the  present  chapter  it  is  proposed  to  determine  the  nature  of 
sub'ectof  res-  shares  in  general,  to  point  out  the  respects  in  which 
ent  chapter.  shares  in  companies  resemble  and  differ  from  shares  in 
partnerships;  and  to  investigate  the  doctrines  relating  to  the  sale, 
surrender  and  forfeiture  of  shares. 

The  arrangement  of  the  present  chapter  is  as  follows  : — 

§  1.  Of  the  nature  of  a  share,  and  the  rules  which  govern  its  dev- 
olution in  case  of  death. 

§  2.  Of  the  amount  of  each  partner's  share. 

§  3.  Of  the  lien  which  each  partner  has  on  the  joint  proper- 
ty and  on  the  shares  of  his  co-partners. 

§  4.  Of  the  mode  in  which  a  share  is  taken  in  execution  for  the 
separate  debts  of  its  owner. 

§  5.  Of  the  transfer  of  shares. 

§  6.  Of  sales  of  shares  and  questions  arising  thereon. 

§  7.  Of  the  relinquishment  of  shares  and  the  right  to  retire. 

§  8.  Of  the  forfeiture  of  shares  and  the  right  to  expel. 


SECTION  I.— OF  THE  NATURE  OF  A  SHARE,   AND  THE  RULES  WHICH 
GOVERN  ITS  DEVOLUTION  IN  CASE  OF  DEATH. 

In  the  absence  of  a  special  agreement  to  that  effect,  all  the  mem- 
Natureofa  bers  of  an  ordinary  partnership  are  interested  in  the 
share  m  a  firm,  -yyi^ole  of  the  partnership  property  ;  but  it  is  not  quite 
clear  whether  they  are  interested  therein  as  tenants  in  common,  or 
as  joint  tenants  without  benefit  of  survivorship,  if  indeed  there  is 
an}^  difference  between  the  two.  It  follows  from  this  community 
of  interest,  that  no  partner  lias  a  right  to  take  any  portion  of 


CHAP,  v.] 


GENERAL  NATURE  OF  SHARES. 


*661 


*tlic  partnership  propert}',  and  to  say  tliat  it  is  his  exclusive-     *GG1 
]y.  {a)     ISO  partner  has  any  such  right, either  durin^^  the  ex- 
istence of  tlie  partnership  or  after  it  has  been  dissolved.' 

Wliat  is  meant  by  the  share  of  a  partner  is  his  proportion  of  the 
partnership  assets  after  they  have  been  all  realized  and    ^^         .  ^ 

^  ■'  •'  Share  a  right 

converted  into  money,  and  ail  the  debts  and  liabilities   ^™oney. 
have  been  paid  and  discharged,  {by    This  it  is,  and  this  only,  which 


(a)  Lingren  r.  Simpson,  1  Sim.  &  Stu. 
600;  Cockle  v.  Whiting-,  Taml.  55;  and 
see  the  cases  cited  in  the  next  note. 

'  Each  partner  has  a  joint  interest,  but 
not  a  separate  interest,  in  any  particular 
property  of  the  partnership,  and  each 
has  a  moiety,  or  the  same  species  of  in- 
terest, in  the  stock-in-trade,  whether 
each  contributes  exactly  in  the  same 
proportion  or  not ;  but  their  several  de- 
grees of  mterest  must  be  regulated  ac- 
cording to  the  stipulated  proportions 
and  the  different  conditions  of  the  part- 
nership. Neitlier  partner  has  any  ex- 
clusive right  to  any  part  of  the  joint  ef- 
fects, for  any  sum  due  to  him,  until  a 
balance  of  account  be  struck.  Taft  v. 
Schwamb,  80  111.  2^9. 

If  one  partner  sells  his  interest  in  spe- 
cific property  of  the  firm,  the  other  may 
retain  possession  of  it  for  the  purpose  of 
settling  the  business  of  the  partnership. 
Chase  v.  Scott,  33  Iowa,  809. 

Any  appropriation  of  the  partnership 
property  by  one  partner  in  payment  of 
his  individual  debts,  without  the  con- 
sent of  his  co-partners,  is  a  violation  of 
his  duty,  and  a  fraud  upon  them.  Fil- 
ley  V.  Phelps,  18  Conn.  294.  See  this 
subject  considered  ante. 

Whatever  may  be  the  condition  of  the 
partnership  accounts  or  of  the  firm  as  to 
solvency,  each  partner  has  a  property  in 
the  partnership  assets  co-equal  to  his 
share  in  the  firm,  and  retains  such  in- 
terest until  it  is  divested,  by  due  process 
of  law,  running  against  him,  or  by  some 
voluntary  act  of  his  co-partners,  done 
within  scope  of  the  partnership.  Berry 
V.  Kelly,  4  Robt.  106. 


(b)  See  Doddington  v.  Hallet,  1  Ves. 
498-9;  Croft  v.  Pike,  3  P.  W.  180;  West 
r.  Skip,  1  Ves.  S.  342;  Taylor  r.  Fields, 
4  Ves.  396;  Crawshay  r.  Collins,  15  Ves. 
229;  Featherstonhaugh  v.  Fen  wick,  17 
Ves.  298;  Darby  v.  Darby,  3  Drew.  503. 

*  Smith  V.  Evans,  37  Ind.  526;  Carter 
V.  Bradley,  58  III.  101;  HUl  r.  Beach,  12 
N.  J.  Eq.  31;  Douglas  v.  Winslow,  20 
Me.  80;  Peny  v.  Holloway,  6  La.  Ann. 
2G5;  Schalck  v.  HaiTnon,  6  Minn.  265; 
Simpson  v.  Leach,  86  111.  286;  Filley  r. 
Phelps,  18 Conn.  294;  Staats  v.  Bristow, 
73  N.  Y.  264;  In  re  Corb'tt,  5  Sawyer, 
206;  Hall  V.  Clagett,  48  Md.  225;  Conk- 
ling  r.  Washington  University,*  2  Md. 
Ch.  497;  Matlock  v.  Matlock,'  15  Ind. 
404;  Menagh  v.  Whitwell,  52  N.  Y. 
146;  Mayer  v.  Garber,  6  N.  W.  Rep.  63. 

Real  estate  forms  no  exception  to  the 
will  stated  in  the  text,  but  stands  upon 
the  same  footing  as  personalty,  no  mat- 
ter in  whom  the  legal  title  may  be 
vested.  Simpson  v.  Leech,  86  III.  286. 
See  ante  652,  note. 

Only  the  individual  partner's  share  of 
the  surplus  remaining  after  the  payment 
of  claims  against  the  partnership,  is 
liable  for  his  individual  debts.  FiUey  r. 
Phelps,  18  Conn.  294.  See,  post,  689. 
note. 

As  long  as  the  debts  of  a  partnership 
are  outstanding,  it  is  irregular  to  under- 
take to  distribute  any  assets  thereof 
amongst  the  partners.  HaU  v.  Clagett, 
supra. 

Either  pai-tner  may  mortgage  his  in- 
terest in  the  partnership  property,  and 
the  mortgagee  may  sell  the  same  on 
foreclosui-e,  and  the  other  partners  can. 

889 


*e62  SHARES.  [eook  iir. 

on  the  deatli  of  a  partner  passes  to  his  representatives,  or  to  a  lega- 
tee of  his  share  {c)\  which  nnder  tiie  old  law  was  considered  as  lo7ia 
notaUlia  ((/);  whicli  on  his  bankruptcy  passes  to  his  trustee  (<?); 
and  which  the  shcrilf  can  dispose  of  under  a>'./«,  issued  at  the  suit 
of  a  separate  creditor  (/),'  or  under  an  extent  at  the  suit  of  the 
Crown,  {g)  It  is,  however,  to  be  observed  that  the  Crown  never 
holds  jointly  or  in  common  with  its  subjects.  (A)  Consequently, 
if  a  partner  is  outlawed,  vx-hereby  his  interest  in  the  partnership  is 
forfeited,  the  other  partners  lose  their  interests  also;  the  Crown 
first  taking  the  share  of  the  delinquent  partner,  and  then  by  its 
prerogative  excluding  the  other  partners  with  whom  it  would  other- 
wise be  a  tenant  in  common.  It  need  hardly  be  said  that  this  pre- 
rogative is  not  enforced  in  modern  times.  (^)  It  has  never  been,  and 
probably  never  will  be,  held  that  the  forfeiture  of  a  share  in  a  com- 
pany entitles  the  Crown  to  the  whole  property  of  that  company. 

Speaking  generally,  a  share  in  a  company   signifies  a  definite 
Nature  of  a  portion   of  its  capital.      When    a    company  is 

companV.^  *662  formed,  a  sum  of  *money  is  fixed  upon  and  is 
called  its  capital;  this  sum  is  divided  into  a 
number  of  equal  portions;  each  of  these  portions  is  a  share,  and 
whether  the  sum  fixed  upon  is  ever  all  subscribed  or  not,  and 
whether  what  is  subscribed  is  employed  profitably,  or  the  contrary, 
a  share  retains  its  original  meaning.     A   share  in  a  company,  like 

not  resist  such  sale  on  the  groimd  that  {d)  Ekins  v.  Brown,   1  Spinks,  Ecc. 

the  partnership  debts  exceed  the  part-  &  Adm.  Rep.  400;  A.-G.  v.  Higgins,  2 

nership  property.     The  mortgagee  is  en-  H.  &  N.  389. 

titled  to  have  the  ultimate  interest  of  (e)  See  the  last  note  but  two,  and 
the  mortgagor  in  the  property  sold,  and  Smith  v.  Stokes,  1  East,  363. 
the  purchaser  takes  that  interest.     The  (/)  Skipp  v.    Harwood,   2    Swanst. 
sale  does  not  affect  the  right  of  the  other  586;  Re  Wait,  1  Jac.  &  W.  605;  John- 
partners  to  msist  upon  the  application  son  v.  Evans,  7  Man.  &  Gr.  240. 
of  the  jomt  property  to  payment  of  the  ^  See  Menagh  v.  Whitwell,  52  N.  Y. 
firm  debts,  and  to  the  payment  of  any  146;  and^jos^  689,  note, 
balance  due  them.     Smith  v.  Evans,  37  {g)  R.  v.  Sanderson,  Wightw.  50;  R. 
Ind.  526.  v.  Rock,  2  Price,  19S;  R,  v.  Hodge,  12 

A  partner  has  an  insurable  interest  in  ib.  537;  Spears  v.  Att.-Gen.  6  Ci.  &  Fin. 

the  property  of  the  firm,  and  a  sale  of  ISO. 

insured  property  to  a  firm  of  whidh  the  {h)  2  Bl.  Com.  4'J9;   Hales  v.  Petit, 

vendor.is  a  member,  does  not  vitiate  his  Plow.  257. 

policy  of  insurance  as  to  the  extent  of  (0  See   Collyer  on  Partn.  72.     For- 

his  interest  in  the  property.     Cowan  v.  feiture  for  felony  and  treason  was  .abol- 

lowa  State.  Ins.  Co.  40  Iowa,  551.  ished  by  33  &  34  Vict.  c.  23,  §  1.     See 

(c)  Farquhar  v.  Hadden,  7  Ch.  1.  ante,  p.  80. 

890 


CHAP,  v.]  GENERAL    NATL'RK    OF    SHAKES.  '"(iG3 

a  slifire  in  a  partnership,  is,  in  truth,  a  definite  pro])ortion  of  the 
joint  estate,  after  it  lias  been  turned  into  money  and  applied  as  far 
as  may  be  necessary  in  payment  of  the  joint  debts,  (k) 

What  are  calleJ  ]M-eferential  or  guaranteed  shares,  are  nothing 
more  than  shares  the  owners  of  which  are  entitled  to  preference 
share  profits,  to  a  certain  extent,  in  preference  to  other  s*^^""^^- 
shareholders.  The  holders  of  preference  or  guaranteed  shares,  in  a 
company,  are  not  creditors  of,  but  shareholders  in  that  company; 
differing  from  the  other  shareholders  only  in  being  entitled,  as 
against  them,  to  payment  of  dividends  in  priority  to  them.  (1) 

Shares  in  companies  are  unfortunately  too  often  regarded  by  the 
public  in  the  light  of  securities.     To  "  invest  money  in  investing  in 
shares"  is  a  common  expression  not  a  little  calculated  ^^''^^• 
to  perpetuate  this  error.     But  it  ought  never  to  be  overlooked  that. 
a  shareholder  is  a  partner  in  and  not  a  creditor  of  the  company  toj 
which  he  belongs;  that  if  the  company  becomes  insolvent,  he  can- 1 
not  recover  any  part  of  his  money  invested  until  the  company's 
debts  are  paid  in  full;  that  whether  he  is  personally  liable  for  the 
payment  of  those  debts,  and  whether  the  extent  of  his  liability  is 
unlimited  or  limited,  depends  upon  the  nature  of  the  cotnpauy. 

Shares,  in  short,  are  not  securities;  they  have  been  held   not  to 
pass  under  a  bequest  of  bonds,  moneys,  and  securi-    ^^^^^^  ^^^ 
ties  (m);  and  no  lawyer  need  be  told  that  trustees  who  securities. 
invest  trust  moneys  in  shares  do  that  which  is  extremely  improper, 
unless   such   an    investment   is   clearly  authorized    by  the 
trust,  {n)     *Directors  who  invest  the  money  of  their  com-     *6G3 
])any  in  shares  of  other  companies  oxe  pHnui  facie  guilty  of 
a  breach  of  trust,  {o) 

A  power  to  invest  upon  the  security  of  the  funds  of  any  com- 
pany incorporated  by  act  of  Parliament,  does  not  authorize  an 
investment  in  preference  railway  shares,  {li) 

A  power  to  invest  in  the  stocks,  shares,  or  securities  of  an  incor- 
porated company  paying  a  dividend,  authorizes  an  investment  in 

[k)  See  Watson  v.  Spratley,  10  Ex.  (/i)  Bank  Stock  and  East  India  Stock 

222;  Sparling  v.  Parker,  9  Beav.  450;  are  an  exception.     See  23  &  24  Vict.  c. 

Hunt  V.  Gunn,  13  C.  B.  N.  S.  226.  38,  S  H,  and  Cons.  Ord.  in  Chancery  of 

(Z)  See  ante,  p.  618.  1  Feb.  1861. 

(w)  Ogle  V.  Knipe,  8  Eq.  434;  Collins  (w)  Hope  v.   International    Fiuancial 

V.  Collins,  12  Eq.  455;  Huddlestone  v.  Soc.  4  Ch.  D.  327;  Joint  Stock  Discount 

Goldsbmy,  10  Beav.  547.  Comp.  Knight  Co.  v.  BrowTi,  3  Eq.  139. 

V.  Knight,  2  Giff.  616.  {v)  Han-is  v.  Harris,  29  Beav.  107. 

891 


^QQ4:  SHADES.  [book  ni. 

the  stock  or  shares  of  an  incorporated  company  paying  a  fixed  rate 
of  interest  to  its  stock  or  shareholders.  But  such  a  power  does  not 
justify  a  purchase  or  even  the  retention  of  stock  or  shares  in 
the  name  of  one  trustee  only,  even  although  the  regulations  of 
the  company  do  not  allow  sliares  to  be  held  in  the  names  of  more 
than  one  person,  (q) 

In  a  recent  case,  a  testator  bequeathed  his  residuary  estate  to  his 
widow  for  life,  and  after  her  death  to  his  daughter  and  her  chil- 
dren. The  trustees  were  expressly  authorized  to  invest  in  certain 
shares.  An  investment  in  them  was  made  accordingly,  but  one  of 
the  trustees  afterwards  expressed  his  unwillingness  to  retain  the 
investment.  A  suit  having  been  instituted  for  the  administration 
of  the  testator's  estate,  the  Court,  at  the  instance  of  the  testator's 
grandchildren,  ordered  the  shares  to  be  sold,  and  the  proceeds  of  the 
sale  to  be  invested  in  consols,  (r) 

Althouo-h  shares  are  not  securities  on  which  trustees  can  invest 
Shares  are  without  an  cxprcss  powcr  SO  to  do,  shares  in  incorpo- 
the  meaning  of  rated  compauies  are  stock  within  the  meaning  of  the 
acte.  ^^^  ^^  Trustee  act,  1850,  and  orders  for  their  transfer  under 
that  act  may  accordingly  be  made,  {s) 

Shares  in  companies  governed  by  modern  statutes  are  not,  how- 
sharesnot        ever,  mere  choses  inaction;  the  legal,  as  well  as  the 

mere  choses  in  .•,■..  .     .      .^  •  ^  ^        jy  j.  r  i 

action.  equitable,  interest  in  them  is  capable  ot  transier;  and 

where  the  legal  ownership  in  them,  or  even  only  the  legal  right  to 

be  registered,  is  acquired  by  a  bond  fide  purchaser  for  value 
^&Q^    ^without  notice  of  a  prior   equitable  interest,  the  title  of 

such  purchaser  cannot  be  impeached,  {t)  At  the  same  time, 
if  a  share  is  equitably  assigned  or  mortgaged  more  than  once,  the 
priority  of  the  assignees  or  mortgagees  will  be  determined  c(Bteris 
paribus,  not  l;>y  the  priority  of  the  assignments  or  mortgages,  but 
by  the  priority  of  the  notices  thereof,  given  to  the  company  (?i)', 
and,  as  will  be  seen  hereafter,  notice  to  the  company  is  necessary 

(3)    Consterdine    v.    Consterdine,  31  the  purchaser  had  notice  of  the  trust 

Beav.  330.  before  he  procured  himself  to  be  regis- 

(r)  Butler  v.  Withers,  IJ.  &  H.  832.  tered.     See,  also.  Ward  v.  South-East- 

(s)  See  13  &   14  Vict.  c.  60,  §  2;  Re  em  Rail.  Co.  2  E.  &  E.  812;  Waterhouse 

Angelo,  5  DeG.  &  Sm.  278.     See,  also,  v.  Jamison,  L.  R.  2  Sc.  App.  29;  Don- 

Re  Ives,  9  Jur.  N.  S.  611,  as  to  orders  aldson  v.  Gillot,  3  Eq.  274.     Ex  parte 

under  the  Lunacy  regulation  act.  Sargent,  17  Eq.  273. 

(t)  Dodds  V.  Hills,  2  Hem.  &  M.  424,  (u)  Gumming  v.  Prescolt,  2  Y.  &  C. 

where  the  vendors  were  tmstees,  and  Ex.  488. 

892 


CHAP,  v.] 


SHAKES. 


*6Gi 


to  prevent  a  share  registered  in  the  name  of  its  assignor  from  be- 
ing treated  in  bankruptcy  as  in  his  order  and  disposition,  (a?) 

The  general  nature  of  shares  having  been  now  explained,  it  is 
proposed  to  examine  the  rules  by  which  their  devolution  is  gov- 
erned in  case  of  death.  These  rules  may  be  divided  into  two 
classes,  according  as  they  apply  to  the  surviving  partners  on  the 
one  hand  and  the  representatives  of  the  deceased  partner  on 
the  other,  or  simply  to  those  representatives  as  between  them- 
selves. 


Of  the  doctrine  of  non-survivorship  hetween  partners. 

It  is  an  old  and  well-established  maxim,  that  Jus  accrescendi 
inter  niercatores  locum  non  habet.  (v)     This  is  a  com-   ,    „ 

^  J  >  Jus  accres- 

mon  law,  and  not  only  an  equitable  maxim;  but  whilst  ^^^'i^ii. "^c. 
its  application  in  equity  was  suljject  to  few,  if  an}^  exceptions  (2), 
it  was  not  at  law  so  universally  applicable  as  the  generality  of  its 
terms  might  lead  one  to  suppose. 

As  regards  real  property  and  chattels  real,  the  legal  estate  in 
them  is  governed   by  the   ordinary  doctrines  of  real  DevoiijUon  of 

ill  1     ii         i»  'c  1  .  legal  estate  in 

property    law;     and,  thereiore,  ii  several   partners  are  laud. 


{x)  See  infra,  book  iv.  ch.  2.  Re 
Jackson,  12  Eq.  354,  decides  that  shares 
are  still  subject  to  the  doctrines  of  re- 
puted ownership. 

(y)  Co.  Lit.  182  a. 

{z)  In  Nelson  v.  Bealby,  4  DeG.  F.  & 
J.  321,  affirming  S.  C.  30  Beav.472,  ar- 
ticles of  partnership  provided  that  on 
the  death  of  A  his  executors  should  re- 
ceive one-half  of  the  assets  from  B  ; 
but  they  were  silent  as  to  what  was  to 
be  done  on  the  death  of  B.  It  was, 
however,  held  that  his  executors  were 
entitled  to  half  the  assets  from  A. 

'  See  the  general  subject  of  partnership 
real  estate  considered  ante,  652,  note. 

Partnership  real  estate  preserves  its 
distinct  qualities  and  descends  to  the 
heir,  who  holds  in  common  with  the 
surviving  partners  in  trust  for  the  pur- 
poses of  the  partnership,  first  for  the 
creditors  and  second  for  the  members 


of  the  finn  and  their  representatives. 
Han  way  v.  Robertshaw,  49  Miss.  758; 
Robertshaw  r.  Hanway,  52  id.  713; 
Piatt  V.  Oliver.  3  McLean,  27;  Andrews 
V.  Brown,  21  Ala.  437;  Bassett  v.  Mil- 
ler, 39  Mich.  13:3.  See,  also,  ante.  652, 
note;  Holland  v.  Fuller,  13  Ind.  195. 

The  surviving  member  of  a  partner- 
ship owning  real  property  is  something 
more  than  a  mere  tenant  in  common 
with  the  representatives  of  the  estate  of 
the  deceased  partner.  He  is  trustee  for 
the  purpose  of  winding  up  the  afl'aii-s 
of  the  firm,  and  is  accountable  for  the 
value  of  the  use  and  occupation  of 
the  landed  estate  of  the  partnership. 
Smith  V.  Walker,  38  Cal.  385. 

The  interest  of  the  survivor  in  his  de- 
ceased partner's  share  of  real  estate 
held  in  the  name  of  the  fii-m,  is  equita- 
ble merely,  and  one  who  purchases  it 
under  a  judgment  and  execution  at  law 
893 


*665 


NON-SURYIVORSfllP    BETWEEN    TAETXEKS.  [bOOK  III. 


*665     jointly  seized  or  ^possessed  of  land  for  an  estate  in  fee,  or 
for  j^ears,  on  the  death  of  any  one,  the  legal  estate  therein 
Rule  as  to  the     will  devolve  on  the  surviving  partners  («) ;  but  they  are, 
Istate!^^^  as  reo-ards  the  interests  of  tlie  deceased  partner,  deemed 

to  be  trustees  thereof  for  the  persons  entitled  to  his  estate,  and  are 
compellable  to  account  with  them  accordingly,  {h)     This,  however, 


against  the  survivor,  acquires  no  such 
title  as  a  court  of  equity  will  enforce. 
Lang  V.  Waring,  17  Ala.  145. 

As  the  surviving  partner  is  charged 
with  the  payment  of  the  debts  of  the 
fii-m,  he  has  the  right  m  equity  to  dis- 
pose of  its  real  estate  for  that  purpose; 
and  although  his  deed  will  not  convey 
the  legal  estate  to  a  purchaser,  yet  it 
wHl  convey  the  equity  to  him,  and 
through  it  he  may  compel  the  heir  to 
to  convey  the  legal  title.  Andrews  v. 
BroAvn,  21  Ala.  437. 

A  surviving  partner,  having  the  right 
to  the  possession  and  control  of  the 
partnership  effects,  may  proceed  dkect- 
ly  in  equity  to  obtain  that  possession 
and  control,  and  to  have  partition  of 
pastnership  real  estate  standing  in  the 
name  of  the  deceased.  Gray  v.  Palmer, 
9  Cal.  616. 

In  Whitman  v.  Boston,  etc.  R.  R.  Co. 
.3  Allen,  133,  it  was  held  that  if  land  is 
purchased  by  partners  with  partnerslaip 
funds,  for  partnership  pui-poses.  and  is 
not  needed  for  the  payment  of  debts,  the 
title  vests  in  the  members  of  the  firm  as 
tenants  in  common;  and  after  the  death 
of  one  of  them,  a  petition  for  damages, 
sustained  by  reason  of  the  location  of 
a  raih-oad  upon  it,  is  properly  brought 
in  the  joint  names  of  his  administrator 
and  the  surviving  partner. 

Those  cases  which  hold  that  the  heirs 
of  the  deceased  partner  and  the  surviv- 
ors hold  the  legal  title,  evidently  pro- 
ceed upon  the  assumption  that  the  land 
was  originally  held  by  the  partners  as 
tenants  in  common.  If  they  are  con- 
sidered as  holding  as  jomt  tenants,  the 
legal  title  mil  of  course  remain  in  the 

891 


survivors  alone,  and  no  interest  will  d  - 
scend  to  the  heirs.  See  Waugh'  r. 
Mitchell,  1  Bev.  &  Bat.  510,  where  it 
was  held  that  the  legal  title  sui-vived 
upon  the  death  of  a  partner,  and  that  a 
sale  of  the  land  ordered  in  a  suit  to  set- 
tle the  partnership  affairs,  bound  the 
heirs  of  the  deceased  partner,  though 
not  parties  to  the  suit.  Waugh  r. 
Mitchell,  1  Dev.  &  B.  Eq.  510. 

A  surviving  partner  has  the  right  to 
control  real  estate  held  by  the  partners 
until  the  partnership  debts  are  paid  and 
the  affairs  of  the  firm,  finally  settled; 
and  until  such  time  the  widow  of  a  de- 
ceased partner  has  no  separate  share 
in  the  partnership  property.  Cobblij  v. 
Tomlinson,  50  Ind.  550. 

Surviving  partner  cannot  partition 
real  property  of  partnership;  that  be- 
longs to  a  court  of  equity.  Burnside  r. 
Savier,  6  Oreg.  154. 

(rt)  Jeffreys  v.  Small,  1  Vern.  217  ; 
Elliott  V.  Brown,  3  Swanst.  483,  note. 
[b]  Jeffreys  v.  Small  1  Vern.  217  ; 
Lake  v.  Craddock,  3  P.  W.  158  ;  Lake 
V.  Gibson,  1  Eq.  Ca.  Ab.  290  ;  Ellio':t  r. 
Brown,  3  Swanst.  489,  note  ;  Lyster  v. 
Dollancl,  1  Ves.  J.  435  ;  Jackson  r. 
Jackson,  9  Ves.  596,  597.  See,  also, 
Ee  Ryan,  L.  R.  Ir.  3  Eq.  222,  where  the 
title  of  persons  claiming  under  a  deceas- 
ed partner  prevailed  against  a  mort- 
gagee of  the  surviving  partner;  the 
mortgage  being  for  his  separate  debt, 
and  the  mortgagee  having  notice  of  the 
equitable  interest.  As  to  part  of  the 
property  there  was  no  such  notice,  and 
as  to  that  the  mortgagee's  title  pre- 
vailed. 


CHAP,  v.]  KON-SURVIVOKSrilP    EETWEEN    PAIITNEKS. 


*0G5 


is  only  tlic  case  on  tlie  assumption  that  the  property  in  question  is 
partnership  property,  and  forms  part  of  tlie  common  stock  in  wliich 
tlie  deceased  had  an  interest  as  a  ]iartner.  [c) 

As  regards  choses  in  action,  tht;  right  to  sue  for  a  debt  owing  tu 
the  firm,  as  well  as  the  lialiilitv  to  be  sued  for  a  debt  Devoimion of 
owingby  it,  also,  at  law,  devolved,  in  the  event  oi  the   Uon. 
death  of  one  partner,  ujuin  the  surviving  partners  exclusively,  (d 


(c)  Morris  v.  Barrett,  3  Y.  &  J.  384  ; 
Reillyp.  Walsh,  11  Jr.  Eq.  22.     A  case 
of  a  lease  acquire  1  for  the  purpose  of   a 
partnership  which  was  never  formed. 
See  ajite,  p.  652. 

{(1)  Kemp  V.  Andrews,  Carth.  170  ; 
Dixon  V.  Hammond,  2  B.  &  A.  310  ; 
Martin  v.  Crompo,  1  Lord  Raymond, 
340,  and  2  Salk.  344  ;  anl  see  Slipper 
V.  Sidstone,  5  T.  R.  493  ;  French  v. 
Andrade,  6  T.  R.  582.  There  is  indeed 
an  olil  ca«e  in  which  an  action  of  as- 
SHDijisit  for  a  partnership  debt  was  held 
to  b3  propsrly  brought  by  the  executors 
of  a  deceas  >d  partner,  and  the  surviv- 
ing partners  jointly  ;  Hall  v.  HufFam 
alias  Hall  v.  Rougham,  2  Lev.  188  and 
228,  and  3  Keble,  798  ;  but  this  case  is 
in  direct  opposition  to  the  last  cited, 
and  is  contrary  to  what  was  clearly  set- 
tled before  the  Judicature  Acts. 

■  See  Roosvelt  t\  McDowell,  1  Geo. 
489;  Robinson  v.  Thompson,  1  Sm.  & 
M.  Ch.  454;  Southard  v.  Lewis,  4  Dana, 
14S;  Childs  r.  Hyde,  10  Iowa,  294; 
Black  V.  Struth  -:■;:,  11  id.  459;  Maples  v. 
Geller,  1  Nev.  2!!;  Bnrgwin  r.  Hastier, 
1  Tayl.  (N.  C.)  124;  Wright  v.  Storrs, 
6  Bosw.  600;  W.lson  v.  Nicholson,  01 
Ind.  241;  Barlow  v.  Coggan,  1  Wash. 
Ter.  (N.  S.)  257;  Davidson  v.  Weeras, 
58  Ala.  187;  Skinner  v.  Bedell,  32  Ala. 
44,  Davis  V.  Church,  1  Watts  &  S. 
240;  Birnnrd  v.  AVilcox,  2  Johns.  Cas. 
374;  Walker  r.  Galbrath,  3  Head,  315; 
Marvin  v.  LIcRae,  1  Rice,  171;  Mc- 
Candless  r.  Hadden,.  9  B.  Mon.  186; 
Bclton  v.  Fishrr.  44  111.  33;  Nicklaus  r. 
Dahn,  63  In  I.  87;  Wilson  r.  Soper,  13 
B.  lion.  411;  Voorhoes  r.  Ci.ilds,  17  N. 


Y.  354;  Higgins  v.  Rockwell,  2  Duer. 
650;  Lane  v.  Doty,  4  Barb.  534;  Richler 
r.  Popnenhausen,  42  N.  Y.  373;  S.  C.  9 
Abb.  Pr.  (N.  S.)  263.  See,  however, 
Saunders"  r.  Wilder,  2  Head,  577;  Rem- 
son  V.  Pomeroy,  5  Blackf.  383;  Ex  parte 
Ware.  48  Ala."  22:3. 

If,  after  dissolution  inter  vivo«,  the 
choses  in  action  are  left  with  one  part- 
ner for  collection,  and  he  dies,  th:;  title 
does  not  vest  in  his  administrator,  but 
in  the  surviving  partner.  Kinsler  r. 
McCants.  4  Rich.  46. 

B.  H.,  after  the  dissolution  of  a  part- 
nership between  himself  and  S.  W., 
made  a  negotiable  promissory  *note.  in 
the  name  of  the  late  firm  of  W.  and  H.. 
payable  to  S.  W.  and  S.  F.  as  partnis. 
under  the  firm  of  W.  and  F.;  and  aft  t 
a  dissolution  of  the  last-named  finn. 
and  the  death  of  S.  W.,  S.  F.,  in  th;- 
name  of  "W.  and  F.,  indorsed  the  not-^ 
to  himself:  Held,  that  S.  F.  couLl  not 
maintain  an  action  on  the  note  a<;  in- 
dorsee; but  that,  a?  sui-vivingpromi.-.  v. 
he  was  entitled  to  recover  on  the  moa  'v 
counts,  against  B.  H.,  either  as  surviv- 
ing promisor,  if  the  note  had  been  sib- 
scquently  ratified  by  S.  W.,  •r  as  so!  * 
promisor  if  it  hal  not  been  so  ratI2?d. 
Fowle  V.  Harrington,  1  Cush.  146. 

A  sui'viving  dormant  partner  may  sue 
alone  upon  a  debt  due  the  p-irtner-h'^. 
Beach  r.  Hay  ward,  10  Ohio,  455. 

.\  surviving  partner,  suing  to  r,':ov  r 
a  pirln'^rship  claim,  nr.iy  join  his  in  11- 
vidual  claim  in  th?  same  action.  D.:vis 
V.  Church,  1  Watts  i^c  S.  210. 

A  surviving  partner  in  an  r.^t'nn 
agi^inst  hims:'lf  to  rccov:r  a  d-'lt':  wli  ^h 

s:;3 


*665 


NON-SURVIVORSHIP   BETWEEN    PARTNERS.  [boOK  III. 


In  equity,   however,   the  legal  personal  representatives  of  a  de- 
ceased partner  were  entitled  to  have  a  debt  due  to  the  partnership 


he  individually  incurred,  can  set  off  a 
claim  of  the  firm  against  the  plaintiff. 
Johnson  v.  Kaiser,  40  N.  J.  Law,  280. 

A  demand  due  to  the  plaintiff,  as  sur- 
viving partner  of  one  fii'm,  may  be 
joined  in  the  same  action  with  a  demand 
due  to  him  as  the  surviving  partner  of 
another  firm.  Stafford  v.  Gold,  9  Pick. 
533. 

After  death  of  one  partner,  a  suit  ap- 
on  a  bond  to  the  partnership,  brought 
by  the  survivor  joining  the  name  of  the 
deceased  as  if  he  were  still  alive,  cannot 
be  supported,  and  the  erroneous  joinder 
cured  by  proof,  that  at  time  of  suit 
brought,  another  person,  of  the  same 
name  with  the  deceased  partner,  was 
living;  for  this  does  not  prove  identity. 
Teller  v.  Wetherell,  9  Mich.  464. 

A  judgment  recovered  in  the  name 
of  a  surviving  partner,  as  such,  can  be 
enforced  only  in  his  name,  or  that  of  his 
personal  representative;  a  sci.fa.  to  re- 
vive cannot  be  sued  out  in  the  name  of 
the  administrator  of  the  deceased  part- 
ner, even  after  the  death  of  the  survivor. 
Copes  V.  Fultz,  9  Miss.  623. 

Where  a  debt  was  originally  due  to 
two  partners,  and  one  has  died,  and  the 
debtor  has  done  nothing  to  change  his 
original  liabQity,  the  action  on  the  debt 
must  be  brought  in  the  name  of  the  sur- 
viving partner,  althoagh,  by  an  agree- 
ment between  the  parties,  the  beneficial 
interest  was  in  the  deceased.  Clark  v. 
Howe,  23  Me.  560;  Diily  v.  Ericson,  45 
N.  Y.  786. 

So,  where  one  of  two  partners  of  a 
firm  retired  from  it,  and  assigned  all  his 
interest  in  the  store  accounts  to  the 
other,  and  the  latter  afterwards  died: 
Held,  that  actions  to  recover  such  debts 
should  be  in  the  name  of  the  surviving 
partner,  and  not  in  that  of  the  personal 
representative  of  the  deceased  one,  to 
whom  they  had  been  assigned.    Felton 

896 


V.  Reid,  7  Jones  L.  269. 

The  administrator  of  a  deceased  part- 
ner was  sued  at  law  by  the  surviving 
partner  for  moneys  which  he  had  col- 
lected from  debtors  of  the  firm.  De- 
fense, a  dissolution  of  the  partnership  be- 
fore the  death,  and  a  division  of  the 
accounts  of  the  firm:  Held,  that  in 
order  to  make  this  a  good  defense  to  the 
administrator,  he  must  show  a  division 
to  such  an  extent  as  to  vest  in  each  part- 
ner the  absolute  property  in  his  share  of 
the  accounts.  Shields  r.  Fuller,  4  Wis. 
102. 

On  the  death  of  one  of  two  partners, 
plaintiffs  in  an  action,  the  survivor,  on 
suggesting  the  death,  may  proceed  to 
judgment  without  any  formal  judgment 
in  abatement  of  the  suit  as  to  the  de- 
ceased being  entered.  Sprawbs  v. 
Barnes,  9  Miss.  629. 

The  death  of  a  partner,  co-plaintiff  in 
the  court  below  and  co-appellant  in  the 
supreme  court,  being  suggested,  the 
case  may  proceed  to  final  judgment  in 
the  name  of  the  surviving  partner  ;  if, 
however,  either  the  surviving  partner 
or  the  appellee  moves  for  a  sci.  fa.  to 
make  the  representative  of  the  deced- 
ent's estate  a  party,  it  will  be  awarded. 
Gunter  v.  Jarvis,  25  Tex.  581. 

A  creditor  of  a  firm  both  members  of 
wliich  are  dead,  may,  to  satisfy  his 
debt,  on  the  proper  proof,  by  a  surro- 
gate's order,  procure  a  sale  of  the  real 
estate  of  one  who  survived  the  other, 
although  the  latter  is  shown  to  have 
left  abundant  assets  to  meet  all  de- 
mands against  his  estate.  Bridge  v. 
Swain,  3Redf.  487. 

In  an  action  for  money  paid,  &c.,  for 
the  use  of  a  partnership,  one  of  the 
partners  having  died  before  the  right  of 
action  accrued,  the  promise  must  be  al- 
leged to  have  been  made  by  the  survi- 
vors alone ;  and  if  alleged  to  have  been 


CHAP,   v.]  NON-SURVIVOKSIIIP    BETWEEN    PAKTNEKS. 


*005 


broui^lit  into  account  by  tlie  survivinj^  partners  (e),  and  were  liable 
to  be  proceeded  against  by  a  creditor  of  the  firm;'   and  since  the 


m  -de  by  the  deceased  and  his  survivors, 
it  will  be  fatal.  Tone  v.  Goodrich,  2 
Johns.  213. 

Wliere  a  debtor  of  a  co-partnership 
stated  an  account  between  them  admit- 
ting a  balance  due  from  himself  for 
goods  sold  in  the  lifetime  of  a  dcceiused 
partner  :  Hehf,  that  the  survivors  might 
recover  such  balance  on  an  ixsinnil 
computassent,  without  stating  the  death 
of  the  other  partner  and  the  survivor- 
ship ;  the  stating  of  an  account  being 
in  the  nature  of  a  new  promise  to  the 
survivors.  Holmes  v.  De  Camp,  1 
Johns.  34. 

Payment  to  an  executor  or  admin- 
istrator of  a  deceased  partner,  of  a 
partnership  claim,  is  no  defense  to  an 
action  by  the  survivor.  Wallace  v. 
Fitzsimmons,  1  Dall.  248  ;  Rice  v.  Rich- 
ards, 1  Busb.  Eq.  277. 

A  surviving  partner  is  the  sole  repre- 
sentative of  the  partnership  property, 
and  the  representatives  of  the  deceased 
partner  need  not  be  made  a  pai-ty  to  a 
proceeding  at  law  or  in  equity  aifecting 
such  property.  Robinson  r.  Thompson, 
1  Smed.  &  M.  Ch.  454;  Jones  v.  Har- 
disty,  10  Gill  &  J.  404. 

No  joint  action  can  be  maintained 
against  the  several  administrators  of  de- 
ceased partners,  for  the  debt  is  severed 
by  the  death  of  either,  and  the  remedy 
must  Ije  against  their  estates  severally. 
McXally  v.  Kerswell,  37  Me.  550. 

Where  a  bill  is  brought  against  part- 
ners, and  one  of  them  dies,  no  revivor 
against  his  representatives  is  necessary, 
but  the  biU  may  proceed  against  the 
survivors;  and    if  it  be    dismissed   for 


want  of  such  revival,  it  is  error.  Ham- 
mond r.  St.  John,  4  Yerg.  107;  Troy 
Iron  &  Nail  Factory  v.  Winslow,  11 
Blatch.  513. 

No  suit  at  law  or  in  equity  can,  in 
this  country,  be  sustained  against  the 
representatives  of  a  deceased  co-partner, 
or  to  charge  his.  estate  for  the  co-pai-t- 
norship  debts,  if  the  surviving  partners 
are  solvent  and  the  assets  of  the  fiiin 
are  sufficient.  Troy  Iron  &  Nail  Fac- 
tory V.  Winslow,  supra.  See  2)0st, 
1053,  note. 

In  case  of  the  death  of  one  of  the 
partners,  the  creditor  must  exhaust  his 
remedy  against  the  survivor  in  the  first 
instance,  and  having  failed  to  collect 
his  debt  he  may  then  resort  to  an  equit- 
able action  against  the  representatives 
of  the  deceased  partner.  Richter  r. 
Poppenhausen.  42  N.  Y.  373;  9  Abb. 
Pr.  N.  S.  263.  See,  also.  Barlow  r. 
Coggan,  1  Wash.  Ter.  (N.  S.)  257.  See 
post,  1053,  note. 

An  action  will  lie  for  a  partnership 
debt  against  the  representatives  of  a  de- 
ceased jiartnor,  after  the  recovery  of  a 
judgment  therefor  against  the  survivor 
and  the  return  of  an  execution  unsatis- 
fied, notwithstanding  it  may  be  shown 
that  the  survivor  had  property,  out  of 
which  the  execution  might  have  been 
satisfied.  And  payment  of  a  partner- 
ship debt  may  be  enforced  against  the 
estate  of  the  deceased  partner  without 
bringing  an  action  against  the  survivor, 
if  the  insolvency  of  the  latter  can  be 
proved.  Pope  v.  Cole,  55  N.  Y.  124. 
See,  also.  First  Nat.  Bank  r.  Morgan, 
73  N.  Y.  593. 


{e)  The  receipt  of  the  survivors  for  a 
debt  due  to  the  finn  is  good  discharge 
to  the  delator,  Brasier  v.  Hudson,  9 
Sim.  1  ;  Philips  r.  Philips,  3  Ha.  281  ; 
and  the  surviving  partner  can,  without 


malring  the  executors  of  the  deceased 
parties,  sustain  an  action  for  an  account 
against  a  debtor  to  the  firm.    Haig    v. 
Gray.  3  De  G.  &    Sm.  741. 
.^  See  note,  supra;  also, post  1053,  note. 

897 


'me 


SHAKES. 


[book  III 


6Q(j'-^     *Jndicatnre  acts  this  diversity  between  law  and  equity  has 
ceased  to  be  important. 
As  regards  ordinary  chattels,  it  was  held  in  Buckley  v.   Barber 
Devolution  of     (  f)  that  the  interest  of  a  deceased  partner  in  chattels 

ordinary  chat-      ,      ,  .  i        <•  t  i  <_    i         i  ^i 

ties.  belonging  to  the  nrm  did  not  devolve  upon  the  surviv- 

ing partners,'  so  as  to  enable  them  to  give  a  good  legal  title  to  the 

chattels   as  against  the   executors   of  the   deceased  ; 

and  that  consequently  such  chattels  might  be  seized 


Buctley  v.  Bar 
ber. 


Although  the  general  rule  is  that, 
when  one  member  of  a  firm  dies,  the 
legal  remedy  on  its  contracts  is  against 
the  survivors  only;  yet  where,  pending 
an  action  against  partners,  one  died, 
and  his  administrators  asked  and  ob- 
tained leave  to  defend,  filed  a  separate 
answer,  and  contested  the  merits :  Held, 
that  this  course  waived  any  objection  to 
the  right  of  plaintiff  to  proceed  at  law, 
instead  of  in  equity,  though  it  did  not 
relieve  hun  from  the  necessity  of  show- 
ing before  the  administrator  could  be 
charged  that  the  survivors  were  in- 
solvent. Shennan  v.  Kreul,  42  Wis. 
33. 

A  creditor  of  a  firm  who  has  recovered 
a  judgment  against  one  member  thereof 
upon  his  guaranty  of  a  firm  debt,  and 
issued  an  execution  thereon  which  has 
been  returned  unsatisfied,  cannot  main- 
tain an  action,  in  the  nature  of  a  credit- 
ors' bill,  to  reach  the  equitable  assets 
of  the  firm;  a  judgment  must  first  be 
recovered  against  the  firm  or  the  sur- 
viving partrer  thereof,  and  an  execution 
be  issued  thereon,  and  returned  unsatis- 
fied.    Lewishon  r.  Drew,   15  Hun,  467. 

Where  one  of  several  members  of  a 
firm  removes  from  the  state,  equity  has 
jurisdiction  to  subject  his  individual  es- 
tate to  the  claims  of  the  creditors  of  the 
firm,  such  estate  not  being  bound  by 
any  judgment  at  law  which  the  credit- 
ors might  recover  against  the  firm. 
Farrar  v.  Haselden,  9  Rich.  Eq.  331. 

As  to  what  averments  the  declaration 
should    contain    in    an    action    by    or 

898 


against  a  surviving  partner  upon  a  part- 
nership demand.  See  Perth  Amboy 
Manfg.  Co.  r.  Condit,  21  N.  J.  L.  659; 
Knovvles  v.  Byrnes,  5  Met.  115;  Vanden- 
hewvil  V.  Storrs,  3  Conn.  203;  Keith  v. 
Pratt,  5  Ark.  661 ;  Kennedy  v.  Richey,  1 
Strobh.  4;  JoysljTi  v.  Taylor,  24  N.  H. 
268;  Bonne  v.  Kay,  5  Ark.  19;  Hill  r. 
McNeil,  6  Port.  29;  Hubball  v.  Skiles, 
16  Tnd.  138;  Ledden  v.  Colby,  14  N.  H. 
33;  Raborg  r.  Bank  of  Columbia,  1  Har. 
&  G.  231;  Culbertson  v.  Townsend.  6 
Ind.  64. 

(/)  Buckley  v.  Barber.  6  Ex.  164;  and 
Isee  per  Dampier,  J.  in  R.  v.  The  Col- 
ector  of  Customs,  2  M.  &  S.  223. 

^  When  a  partnership  is  dissolved  by 
the  death  of  one  or  more  of  the  part- 
ners, the  legal  title  to  all  the  personal 
property  belonging  to  the  firm  becomes 
vested  exclusively  in  the  survivor  as 
trustee  for  the  purpose  of  paying  the 
debts  of  the  firm,  and  distributing  the 
residue  among  the  parties  entitled.  An- 
drews V.  Brown,  21  Ala.  437;  Hanway 
V.  Robertshaw.  49  Miss.  758;  Robert- 
shaw  V.  Hanway,  52  Miss.  713;  Filley 
V.  Phelps,  18  Conn.  294;  Strange  v. 
Graham,  56  Ala.  614;  J3ari7  v.  Briggs, 
22  Mich.  201;  Forrester  v.  Oliver,  1 
Brad  well,  259;  Knox  v.  Schepler,  2  Hill 
(S.  C.)  595;  Holland  r.  Fuller,  13  Ind. 
195;  Filley  v.  Phelps,  18  Conn.  294; 
Whitmore  v.  Shiverick,  3  Nev.  288; 
Bassett  v.  Miller,  39  Mich.  133.  See, 
also,  Rammelsberg  r.  Mitchell,  29  Ohio 
St.  22.  See,  however,  Skipwith  v.  Lea, 
16  La.  Ann.  247;  McKowant).  McGuire> 


CHAP,  v.] 


SHARES. 


*6C6 


under  ?l  jl.  fa.  issued  on  a  judi^ment  obtained  against  the  exec- 
utors by  a  separate  creditor  of  the  deceased  partner,  {g) 

The  extent  to  which  goodwill  survives  will  be  noticed 
hereafter.  (A) 

Before  quitting  the  ])rescnt  subject,  it  may  be  observed  tliat  the 


15  id.  637;  Adams  v.  Ward,  26  Ark. 
135;  Putnam  v.  Parker,  55  Me.  235; 
Wilson  V.  Soper,  113  B.  Mon.  411. 

'ITie  surviving  partner,  thouyli  legally 
vested  with  the  title  to  all  firm  assets,  is 
also  trustee  to  dispose  of  them  for  the 
best  int<}rests  of  decedent's  estate,  and 
is  bound  to  keep  its  representative  fully 
infoiTned  of  their  condition.  Heath  x\ 
Waters,  40  Mich.  457.  See,  also,  Ogden 
V.  Astor,  4  Sandf.  311;  Justices  v.  Mc- 
Laren, 1  Ga.  289. 

A  sole  surviving  partner  may  transfer 
the  choses  in  action  and  other  personal 
effects  of  the  partnership,  by  way  of 
pledge  or  mortgage,  to  secure  a  partner- 
ship debt,  and  when  such  transfer  is 
made  in  good  faith  it  is  effectual  against 
aU  other  creditors,  as  well  as  the  repre- 
sentatives of  the  deceased  partner. 
Bohler  v.  Tappan,  1  Fed.  Rep.  469. 

The  representatives  of  a  deceased 
partner,  before  the  partnership  business 
has  been  settled  and  the  debts  paid,  and 
while  they  have  not  yet  been  let  into 
joint  possession  by  the  surviving  part- 
ner, have  but  an  equitable  interest  in 
the  partnership  property,  and  are  not 
tenants  in  common  at  law;  and  the 
right  of  action  at  law  for  any  trespass 
upon,  or  injury  to  the  property,  which 
in  this  case  was  a  store  leased  by  the 
finn,  during  tliis  inteiTal,  is  vested  sole- 


ly in  the  8ur\'iving  partner.  Pfeffer  r. 
Steiner,  27  Mich.  537. 

A  surviving  partner  has  a  right  to 
the  possession  and  control  of  the  part- 
nership property  for  the  purpose  of  set- 
tling and  closing  the  business,  and  not 
for  the  purpose  of  carrying  it  on.  Chne 
V.  Wilson,  26  Ark.  154.  See  Adams  v. 
Ward,  id.  135. 

A  surviving  partner,  though  he  kas 
a  legal  right  to  the  partnership  effects, 
yet,  in  equity-,  is  considered  merely  as 
the  trustee  to  pay  the  partnership  debts, 
and  to  dispose  of  the  effects  of  the  con- 
cern for  the  benefit  of  himself  and  the 
estate  of  his  deceased  partner.  If  he 
continues  the  partnership  business  with 
the  partnership  funds,  he  is,  as  a  gen- 
eral itile,  liable  to  account  for  all  profits 
made  thereby,  and  the  losses,  if  any. 
must  be  borne  by  liimself.  Skidmore  r. 
Collier,  15  N.  Y.  Supreme  Ct.  50.  See, 
also,  Fon-ester  v.  Oliver,  1  Bradwell, 
259. 

Upon  the  death  of  one  member  of 
the  finn,  the  sui-\-ivor  is  bound  in  equity 
to  apply  the  joint  estate  to  the  payment 
of  the  joint  debts;  and  the  representa- 
tives of  the  deceased  partner,  imd,  in 
case  of  bankruptcy,  the  creditors  of  the 
firm,  may  enforce  this  equity.  Ee  Clap, 
2  Low.  l&S. 

A    partner,    by    his    will,   made   his 


{g)  This  case  was  certainly  perplex- 
ing. It  made  a  useless  distinction  be- 
tween land,  debts,  and  ordinary  chat- 
tels ;  it  logically  involved  the  conse- 
quence that  a  surviving  partner  could 
only  properly  sell  his  share  of  a  partner- 
ship chattel;  and  it  was  inconsistent 
with  the  principles  which  induced 
courts  of  equity  to  decline  (except  under 


special  circumsbmces)  to  grant  a  receiv- 
er at  the  instance  of  the  executors  of  a 
decea.sed  against  a  surviving  partner. 
In  Taylor  r.  Taylor,  7  Mar.  1873,  Lord 
Justice  James,  s.ttingfor  V.-C.  Wickens, 
expressed  his  disapproval  of  Buckley  r. 
Barber.  All  this  is,  however,  of  little 
consequence  now. 
{Jl)  See  book  iii.  ch.  9,  §  3. 

891) 


'6m 


SHARES. 


[book  III. 


doctrine  of  non-survivorship  amongst  partners  is  not  confined  to 
merchants  nor  even  to  traders,  but  extends  to  partners  generally,  (i) 
The  maxim  Jus  acci'escjtidi  inter  7nercatores  locum  non  hahet 
Application  of  applies  to  the  property  of  unincorporated  companies  to 
shares.'^''  the  Same  extent,  and  with  the  same  qualifications,  as 

to  the  property  of  ordinary  partnerships.     But  the  property  of  a 


brother,  who  was  his  co-partner,  execu- 
tor, and  dev-ised  to  him  the  residue  of 
his  estate  in  trust  for  certain  purposes, 
and  authorized  him  to  use  in  his  busi- 
ness the  property  given  him  in  trust, 
until  it  should  be  wanted  for  distribu- 
tion: Held,  that  the  intent  of  the  will 
was,  that  the  residue  only  should  be 
used  in  business,  and  that  the  sui-viving 
partner  was  bound  to  settle  the  aifairs 
and  pay  the  debts  of  the  firm  m  the 
usual  way,  notwithstanding  this  clause. 
Re  Clap,  supra. 

The  surviving  partner  carried  on  the 
business  as  before,    and  notified  credi- 
tors and  others  dealing  with  him  that 
his  brother's   capital  remained  in  the 
business;  he  paid  the  greater  part  of 
the   joint  debts,    and  contracted    new 
debts;  he  converted  a  part  of  the  joint 
property  into  money,  but  less  in  value 
than  the  sum  of  the  joint  debts,  and 
became  bankrupt,  having  in  possession 
bank  stock    and  other    specific  assets, 
standing  in  the  name  of  the  firm,  with- 
out change  since  the  death  of  his  broth- 
er:    Held,  that  a  joint  creditor  of  the 
old  firm,  who  had  not  received  the  no- 
tice above  mentioned,  could  require  that 
joint  property  remaining  in  specie  as  it 
stood  at  the  death  of  the  deceased  part- 
ner, should  be  applied  to  the  payment 
of  Viis  debt  in  exclusion  of  the  separate 
creditors  of  the  bankrupt.    It    seems, 
that  if  the  creditor  had  received  the 
notice  above  mentioned,  it  would  not 
have  affected  his  lien,   unless  he  had 


done  some  act  amounting  to  an  elec- 
tion,    lie  Clap,  supra. 

The  fact  that  the  surviving  partner 
was  executor  and  trustee  of  the  deceased 
partner  does  not  affect  the  rights  of 
joint  creditors,  for  equitable  rights  are 
not  lost  by  the  merger  or  union  of  differ- 
ent titles  in  one  person ;  and  when  bank- 
ruptcy occurs,  the  creditors  may  them- 
selves assert  the  lien,  which,  while  the 
sui-viving  partner  is  solvent,  is  vested  in 
the  executor  of  the  deceased  partner. 
Ee  Clap,  supra. 

The  rights  and  liabilities  of  a  deceased 
partner  under  the  partnership  devolve 
upon  the  surviving  partner.  In  the  settle- 
ment with  the  representatives  of  the 
former,  the  latter  would  be  entitled  to 
credit  for  a  judgment  for  a  finn  debt 
recovered  against  him  without  his  col- 
lusion or  neglect.  Hanna  r.  Wray  77 
Pa.  St.  27. 

If  representatives  of  a  deceased  part- 
ner undertake,  without  authority,  to 
affect  the  rights  of  the  partnership  by 
agreement  with  a  firm  creditor,  as  to  a 
matter  over  which  the  survivor  had  en- 
tire control,  and  not  in  its  nature  sever- 
able, equity,  in  relieving  him,  must  treat 
the  agreement  as  wholly  inoperative 
upon  the  finn.  Lockwood  v.  Mitchell, 
7  Ohio  St.  387. 

The  partnership  funds  in  the  hands 
of  garnishees  may  be  orderd  to  be  paid 
over  to  separate  creditors  of  the  surviv- 
ing partner,  on  their  giving  bond  and 
security  to  answer  any  claim  which  may 


(i)  See  Buckley  v.  Barber,  6  Ex.  164; 
Aunand  v.    Honiwood,  2  Ch.  Ca.    129; 
Jefferys  v.  Small,  1  Vem.  217  ;   Lake  v. 
900 


Gibson,  1  Eq.  Ca.   Ab. 
Craddock,  3  P.  W.  158. 


290;   Lake   v. 


ciiAr.  v.] 


SHARES    ARE   PERSONAL    ESTATE. 


*667 


body  corporate  remains  vested  in  the  corporate  body  notwitlistand- 
ing  any  liuctuation  amongst  its  members  by  death  or  otherwise.  The 
shares  of  the  individual  members  of  an  incorporated  company  de- 
volve on  their  respective  deaths  to  their  representative.^,  and  not 
upon  the  surviving  members:  and  the  devolution  of  such  shares 
as  distinguished  from  the  property  of  the  body  corporate  is  con- 
forniiible  to  the  maxim  in  question. 

'^AVhen  a  sliare  in  a  company  is  held  by  several     *G07  ^^;?/;;fi^fJ^J^^ 
persons  jointly  and  one  of  them  dies,  the  legal  ]o\iniy. 

title  to  that  share  devolves,  it  is  conceived,  on  the  survivors,  what- 
ever may  be  the  case  as  to  the  equitable  title.  If  the  holders  are 
partners,  and  the  share  is  partnership  property,  the  equitable  inter- 
est of  the  deceased  will  not  survive  ;  but  if  the  holders  are  not 
partners,  the  question  of  survivort>hip  or  non-survivorship  will  de- 
pend upon  those  principles  which  would  be  applicable  under  simi- 
lar circumstances  to  other  property;  and  the  fact  that  the  regula- 


afterwards  be  made  on  the  funds.     Knox 
V.  Schepler,  2  Hill,  (S.  C.)  595. 

In  Bushf.  Clark,  127  Mass.  Ill,  how- 
ever, it  was  held  that  assets  of  a  part- 
nership in  the  hands  of  the  surviving 
partner  at  his  death  are  so  far  his  per- 
sonal estate  that  the  probate  court  may 
make  an  allowance  therefrom  to  his 
widow,  although  the  assets  ai"e  insuffi- 
cient to  pay  the  partnership  creditors  in 
full. 

On  the  death  of  the  surviving  part- 
ner, his  pei-sonal  representative  succeeds 
to  his  right  to  collect  the  outstanding 
accounts  of  the  firm.  Costley  v.  Wilk- 
erson,  49  Ala.  210. 

Tlie  administrator  of  a  surviving  part- 
ner stands  in  the  same  position  as  the 
surviving  partner  in  his  lifetime. 
Though  he  has  the  legal  title  to  the 
partnership  assets,  yet  they  are  assets  of 
the  firm,  and  not  of  his  intestate,  and 
should  neither  be  inventoried  as  proper- 
ty of  his  hitestate,  nor  be  accounted  for 
as  property  of  his  intestate.  The  ad- 
ministrator is  m  fact  a  trustee,  whose 
duty  it  is  to  collect  the  partnership 
property,  and  pay  the  debts  of  the  firm; 
and  after  the  surplus  is  ascertained,  and 


the  interests  therein  settled,  to  pay  the 
share  of  the  partner  first  deceased  to  his 
personal  representatives,  and  bring  the 
share  of  the  partner  hist  deceased  into 
the  account  of  his  estate.  Thomson  r. 
Thomson,  1  Bradf.  24. 

When  a  partnership  agreeniont  to 
take  effect  infiituro  is  dissolved  by  the 
death  of  one  of  the  partnei-s  before  the 
time  fixed  for  commencing  business,  no 
estate  int^^nded  to  be  contributed  by 
either  partner  vests  in  the  partnership, 
nor  does  the  survivor  take  anything  as 
such.     Chne  v.  Wilson,  26  Ark.  154. 

In  the  articles  of  co-partnership  it 
was  agreed,  that  in  the  case  of  the  death 
of  one  partner,  the  other  should  have 
the  right  to  recover  the  fourth  part  of  a 
certain  chattel,  and  against  that  he 
should  pay  to  the  estate  of  the  deceased 
tlie  sum  of  one  thousand  dollai-s,  after 
the  estate  of  deceased  should  have  paid 
all  his  debts  which  he  owed  to  the  part- 
nei-ship  up  to  the  date  :  Held,  that  this 
clause  gave  the  surviving  partner  an 
option  of  purchase,  and  did  not  import 
an  absolute  covenant  or  engagement. 
Scharringhausen  v.  Luebsen,  52  Mo. 
337. 

901 


*668  BHARES.  [book  III. 

tions  of  the  company  contain  a  clause  to  the  effect  that  no  benefit 
of  survivorship  shall  take  place  amongst  the  shareholders  will  be 
of  little,  if  any,  consequence.  For  example:  shares  purchased  by 
A.,  in  the  names  of  himself  and  B.,  j^rimd  facie  belong  in  equity 
to  A.,  bat  if  A.  dies  before  B.,  the  legal  interest  in  them  devolves 
on  13.;  and  if  the  evidence  rebuts  the  presumption  which  primd 
facie  exists  in  A's.  favor,  B.  will  be  entitled  to  the  shares  both  at 
law  and  in  equity,  although  the  company's  deed  may  contain  such 
a  clause  as  that  just  mentioned,  (k) 


Of  the  doctrine  that  shares  are  personal  estate. 

From  the  principle  that  a  share  of  a  partner  is  nothing  more  than 
^  ^         his  proportion   of  the   partnership   assets    after   they 

sonai  estate.  jj^ve  been  turned  into  money  and  applied  in  liquida- 
tion of  the  partnership  debts,  it  necessarily  follows  that,  in  equity, 
a  share  in  a  partnership,  whether  its  property  consists  of  land  or 
not,  must,  as  between  the  real  and  personal  representatives  of  a  de- 
ceased partner,  be  deemed  to  be  personal  and  not  real  estate,  unless 
indeed  such  conversion  is  inconsistent  with  the  agreement  between 
the  parties.  (?)'  And  although  the  decisions  upon  this  point  are 
conflicting,  the  authorities  which  are  in  favor  of  the  above  conclu- 
sion certainly  preponderate  over  the  others. 

In  Thornton  v.  Dixon   (w),  the  Court  recognized  the  rule  that 

partnership  property  must  be  considered  as  per- 

Thorntonr.        ^ggg     qox\q\  estate  1    '^but  held  that  the  lands   which 

Dixon.  '  ,11  •  1 

were  there  in  question,  could  not  be  so  consid- 
ered, as  they  had  been  conveyed  to  all  the  partners  in  common,  and 
there  was  no  agreement  for  a  sale. 

In  Bell  u  Pliyn  {n\  partners  in  trade  purchased  with  the  funds 
of  the  Arm  a  share  in  a  plantation,  and  kept  the  ac- 
BeUv.  Phyn.  ^^^^^g  relating  to  the  estate  in  the  partnership  books  ; 
and  it  was  held  upon  the  authority  of  the  last  case,  that  assuming 
the  land  to  have  become  partnership  property,  it  ought  not  to  be 
regarded  as  personal  estate. 

(fc)  Garrick  v.   Taylor,   4  DeG.  F.  &  and  the  cases  collected,  ante,  652,   note 

J.  159,  affirming  S.  C.  29  Beav.  79.  in  connection  with  the  subject  of  part- 

[l]  See,  as  to  this,  Stewart  r.   Blake-  nership  real  estate, 
way,  4  Ch.  603,  and  6  Eq.  479.  (m)  3  Bro.  C.  C.  199. 

^  This  subject  will  be  found  considered  (»)  7  Ves.  453. 

902 


Cookson  V. 
Cookson. 


CHAP,  v.]  SIIAUKS    ARE    PERSONAL    ESTATE.  *0G9 

In  rtandall  v.  Kandall  (o),  the  partners  were  farmers,  malsters, 
and  Inscuit  makers.       They   bonglit  land  lor  the  farm-   Ran^iurv 
inw  business,  and  it  was  held  that  as  it  was  not  acquired  R'^n^^'i- 
fur  the  purpose  of  any  partnership  in  trade,  the  land  could  not  be 
treated  as  personalty. 

In  Cookson  v.  Cookson  {p\  a  father  who  was  seized  in  fee  of  land 
on  which  he  carried  on  business  as  a  bottle  manufac- 
turer, took  his  son  into  partnership,  and  conveyed  a 
share  in  the  land  to  him.  The  land  was  declared  by  the  articles  of 
])artnership  to  be  partnership  property.  But  on  the  death  of  the 
father,  it  was  held  that  his  share  in  the  land  was  to  be  treated  as 
real  estate,  no  sale  being  required  for  the  payment  of  the  partner- 
ship debts  for  any  other  purpose. 

These  are  the  cases  which  militate  against  the  rule  under  discus- 
sion.    The  following  are  those  which  sujiport  it  : — 

In  Hipley  v.  Waterworth  (.7),  partnership  land  was  convej^ed  to 
trustees  upon  trust,  upon  a  dissolution  of  the  ])artner-  j^ipji^^^ 
ship,  to  sell  and  ]iay  the  ])artnership  debts,  and  divide  ^vuterworth. 
the  residue  of  the  money  arising  from  the  sale  amongst  the  part- 
ners; and  it  was  held  upon  the  death  of  one  of  them,  that  his  share 
in  the  land  was  personal  estate,  although  the  land  was  not  in  fact 
sold,  and  the  deceased's  share  in  it  was  purchased  by  the  surviving 
partners  under  a  clause  enabling  them  so  to  do,  aad  contained  in  the 
conveyance  to  the  trustees. 

In  Townsend  v.  Devaynes  (r),    two   persons  in   partnership  as 
]mper  makers,  purchased  paper  mills  for  the  use  of  the  firm,  and 
paid  for  them  out  of  its  funds.      It  was  agreed 
that  on  the  *death  of  either,  the  survivor  should     *669  Ji^vaync"**  "" 
have  the  option  of  purchasing  his  share.       One 
of  the  partners  died,  and  his  share  was  purchased  by  the  survivor. 
It  was  held  that  the  whole  of  the  purchase-money  formed  part  of 
the  personal  estate  of  the  deceased,  although  most  of  the  money  was 
paid  in  respect  of  the  interest  of  the  deceased  in  the  mills. 

In  Pliillips  V.  Phillips (6-),  two  persons  in  partnership  as  brewers 
purchased  public-houses  for  the  purposes  of  their  trade,   pi,niips» 
and  had  them  conveyed  to  both  in  fee.     On  the  death  P^^i'^'ps- 

(0)  7  Sim.  271.  (s)  1  M.  &  K.  G49.      See  aufe,  p.  a52, 

(p)  8  Sim.  529.  note  (»i)>  ^s  to  the  estates  which  were 

(q)  7  Ves.  425.  devised,  and  which  were  held  not  con- 

(>•)  1  Mont.  Part,  note 2  A.  Appx.  p.       verted  iuto  personalty. 


96;  see,  too,  11  Sim.  498,  note. 


903 


*G70  SHARES.  LBOOK  III. 

of  one  of  them,  it  was  held  that  his  share  in  the  houses  was  to  be 
treated  as  personal  estate. 

Broom  v.  Broom  (t)  is  a  decision  to  the  same  effect 

Broom  v.]  ^   ■' 

Bioom.  g^g  t]jg  last,  and  decided  on  its  authority. 

In  Morris  v.   Kearslej  (u),  a  partnership  of  brewers  was  pos- 
j^j^j.j.jg  ,  sessed  of  real  estate  conveyed  partly  to  the  partners  as 

Kearsiey.  tenants  in  common,  and  partly  to  one  or  more  of  the 

partners  in  trust  for  the  lirm;  and  it  was  decided  that  the  several 
lands,  hereditaments,  and  premises  belonging  to  the  partnership, 
ought  to  be  considered  as  personal  estate. 

In  Houghton  v.  Houghton  {x),  two  brothers,  A.  and  B,,  were  part- 
Hou  htonv  "®^*^  ^®  ^^"^P  ^^^'1^''S-  They  purchased  land  for  the  pur- 
Houghton.  purposes  of  their  trade,  took  a  conveyance  to  tliem- 
selves  as  tenants  in  common,  and  mortgaged  the  land  for  the 
purchase  money.  They  then  built  on  the  land,  insured  the  build- 
ings, and  paid  the  expenses  and  the  interest  on  the  mortgage  debt 
out  of  the  partnership  funds.  A.  died  intestate,  and  B.  took  another 
brother,  C,  into  partnership.  B.  and  C.  paid  off  the  mortgage,  and 
took  a  reconveyance  to  themselves  as  joint  tenants  in  fee,  and  ex- 
pended money  in  building  and  insurance,  defraying  the  expense, 
as  well  as  providing  the  mortgage  money,  out  of  the  funds  of  the 
partnership.  On  B.'s  death  it  was  held  that  the  land  and  buildings 
had  clearly  become  partnership  property,  and  that  it  ought,  there- 
fore, to  be  treated  as  personal  estate. 
*670  *In  Darby  v.  Darby  (y),  two  brothers  embarked  in  joint 
speculations  in  land.  Their  scheme  was  to  buy  land,  con- 
Darbyt)  ^^^^  ^^  ^^^^  building  sites,  and  then  sell  it  at  a  profit. 

Darby.  Tliis  was  douc  on  several  occasions,  the  land  being  gen- 

erally conveyed  to  one  of  them  only.  On  the  death  of  that  one  it 
was  held  that  his  interest  in  all  the  land  bought  by  botli,  and  still 
unsold,  was  personal  and  not  real  estate. 

In  Essex  v.  Essex  (s),  two  brothers  were,  under  the  will  of  their 
Essex  V  father,  seized  of  freehold  lands.     They  agi*eed  to  be- 

Essex.  come   partners  as   curriers  and   tanners  for   fourteen 

years,  and  to  carry  on  their  business  on  those  lands.  It  was  stipu- 
lated that  if  either  died  during  the  co-partnership  term,  the  other 

(t)  3  M.  &  K.  443.  quired. 

(w)  2  Y.  &  C  Ex.  139.      The  report         {x)  11  Sim.  491. 
does  not  state  how,  when,  or  for  what  (y)  3  Drew.  495. 

purpose,  the  property  was  originally  ac-  {z)  20  Beav.  442. 

904 


CHAP,  v.]  BITARES.  *071 

should  take  liis  share  in  the  frcehol<ls,  and  that  the  entirety  thereof, 
including  the  plant  and  tan-pits,  should  be  valued  at  5000^.  The 
fourteen  years  expired,  but  the  partnership  was  continued  as  be- 
fore. On  the  death  of  one  of  the  partners,  it  was  held  that  his 
share  in  the  freeholds  was  to  be  re<ijarded  as  personal  estate;  they 
having  been  converted  by  the  agreement  for  sale. 

In  "Waterer  v.  "Waterer  («),  the  property  of  a  nurseryman,  devised 
by  him,  with  the  good  will  of  his  business,  to  his  sons  ^vatererv. 
as  tenants  in  common,  was  on  the   death  of  one  of  ^^'*^*^''*^''- 
them  treated  as  personal  and  not  as  real  estate. 

There  are  also  various  dicta  of  Lord  Eldon  in  favor  of  the  broad 
principle  that  partnership  property  is  to  be  regarded  as  personal 
and  not  as  real  estate,  {h) 

Upon  the  whole,  therefore,  it  is  submitted, 

1.  That  notwithstanding  Thornton  v.  Dixon,  Bell  v.  Phyn,  and 
Kandall  v.  Randall,  the  true  rule  is,  as  stated  by  the  Vice-  j^g^^u  ^^  j^e 
Chancellor  Kindersley,  in  Darby  v.  Darby  (<?),  "  that  *^*^^- 
whenever  a  partnership  purchases  real  estate  for  the  partnership 
purposes,  and  with  the  partnership  funds,  it  is,  as  between  the  real 
and  personal  representatives  of  the  partners,  personal  estate."  (</) 

2.  That,  notwithstanding  Cookson  v.  Cookson,  no  satisfac- 
tory ^distinction,  with  reference  to  the  question  of  conver-     *671 
sion,  can  be  drawn  between  land  purchased  with  partnership 
monej'^s  and  land  acquired  in  any  other  way,  provided  such  land 
is  in  the  proper  sense  of  the  expression  an  asset  of  the  partner- 
ship, {e) 

3.  That  the  general  rule  may,  nevertheless,  be  excluded  by  an  agree- 
ment, express  or  implied,  to  the  effect  that  the  land  shall  not  be  soli. 
The  reason  of  the  rule  excludes  its  application  in  such  a  case,  (y ) 

Upon  this  ground  it  was  held  in  a  recent  and  difficult  case,  that 
a  farm  and  quarry  worked  by  co-owners  in  partner-  ,c,p„.„r(i  v 
ship,  and  additional  lauds  bought  by  them  out  of  their  i^'»'ke\vay. 

(a)  15Eq.  402,  noticed  ante,  p.  652,  J.-ukson,  9  Ves.  593.     "It  is  very  diffi- 

note  (wi).  cult  to  make  a  distinction  botwoon  a 

[h)  See  the  judgment  of  V.-C  Kinders-  joint  tenancy  by  will,  by  a  gratuitous 

ley,  in  Darby  v.  Darby,  3  Drew.  499,  etc.  deed,  or  a  purchase.     The  law  of  mor- 

(c)  3  Drew.  506.  chants,  if  it  .applies  to  one,  must  apply 

{d)  See,  in  addition  to  the  cases  re-  to  all." 

feiTcd  to  above,  Holroyd  v.  Hokoyd,  7  (/)  Steward  ».  Blakeway,  4  Ch.  603, 

W.  R.  426.  and  6  Eq.  479. 


(e)  See  per  Lord  Eldon  in  Jackson  v. 


905 


*672  SHARES.  [book  III. 

profits  for  the  purposes  of  tlieir  business,  were  not  to  be  treated  as 
converted  into  money.  Tlie  Court  held  that  no  partner  could  have 
enforced  a  sale,  either  of  the  original  farm  and  quarry  or  of  the 
subsequent  additions  to  it.  {g) 

It  is  well  settled  that  the  doctrine  of  conversion  does  not  apply 
to  co-owners  as  distinjjjuished  from  co-partners;   nor  to 

The  rule  only  =>  i  n   i  i       i 

applies  to  part-  property  owned  by  persons,  who,  although  they  may 
trty-  be  partners  in  profits  are  only  co-owners  of  the  land 

which  yields  them.  Thus,  where  two  out  of  three  partners  were 
owners  of  land  occupied  by  the  firm,  and  for  which  the  firm  paid 
a  rent,  and  the  land  was  in  fact  kept  distinct  from  the  joint  prop- 
erty of  the  three  partners,  it  was  properly  held,  on  the  death  of  one 
of  the  two  partners  to  whom  the  rent  was  paid,  that  his  interest  in 
the  land  was  not  to  be  considered  as  personal,  but  as  real  estate.  (Ji) 
So,  if  land  belongs  to  all  the  partners  as  tenants  in  common,  but 
not  as  partners,  and  that  land  is  used  by  them  for  partnership  pur- 
poses, but  is  nevertheless  intended  to  remain  vested  in  them  as 
tenants  in  common,  and  not  to  form  part  of  the  assets  of  the  firm, 

the  share  of  eacli  partner  will  be  real,  and  not  personal  es- 
'•672     tate.  (^)     *In  the  c^se  now  supposed,  co-owners  of  land  are 

partners,  but  the  co-ownership  continues  unaifected  by  the 
partnership.  But  it  is  not  possible  on  this  ground  to  uphold 
Thornton  v.  Dixon,  Bell  v.  Phyn,  Eandall  v.  Randall,  or  Cookson 
V.  Cookson.  In  each  of  these  four  cases  the  land  had  become  part 
of  the  assets  of  the  firm,  or  it  had  not;  if  it  had,  these  four  cases 
are  in  direct  confiict  with  those  which  have  been  alluded  to  above; 
whilst,  if  it  had  not,  they  are  in  no  less  direct  confiict  with  other 
cases  which  are  authorities  on  the  question  what  is  and  what  is  not 
property  of  the  firm. 

The   doctrine  of  conversion  which   has  just   been   considered, 
^   ,  .      ,        merelv  amounts  to  this,  that  on  the  death  of  a  partner 

Doctnneof  -  '  ^       ^ 

conversion  has  j^jg  share  in  the  partnership  is,  as  between  his  real  and 

only  a  restrict-  r  r        ^ 

ed  application,  personal  representatives,  to  be  treated  as  money  and 
not  as  land.  In  Custanee  v.  Bradsliaw  (_;')  it  was  decided  that  pro- 
bate duty  WHS  not  payable  upon  the  share  of  a  deceased  partner 
in  partnership  real  estate;  but  this  case  has  been  disapproved,  and 

[g)  Ibid.  (0  Steward  v.  Blakeway,  4  Ch.  603, 

[h)  Rowley  v.  Adams,  7  Beav.  548;  and  6  Eq.  479. 

Balmain  v.  Shore,  9  Ves.  500;  see,  too,  (j)  Castance  v.  Bradshaw,  4  Ha.  315. 
Phillips  V.  Phillips,  ante,  p.  652, 

906 


CHAP,  v.]  SHARES    ARE    PERSONAL    ESTATE.  *GT3 

cannot  be  relied  upon,  (k)     Lej^aej  duty  is  payable  on  a  partner's 
share  of  the  assets,  part  of  which  consist  of  real  estate.  {I) 

If  the  sliaresof  the  partners  in  partnership  realty  are  of  sufficient 
value,  they  are  not  prechided  by  the  equitable  doctrine  of  conver- 
sion from  voting  in  respect  of  those  shares  at  elections  for  mem- 
bers of  Parliament,  (in) 

With  respect  to  shares  in  companies,  they  are  ex-  ^jJnL^  u"uTi?^" 
pressly  declared  by  statute  to  be  personal  estate  in  the  [^'^i'^"'"^^  ^' 
following  cases: — 

1.  Shares  in  companies  governed  by  the  Companies  clauses  con- 
solidation act  (8  &  9  Yict.  c.  16,  §  7). 

2.  Shares  in  companies  governed  by  the  Companies  act,  1SG3 
(25  &  26  Vict.  c.  89,  §  22). 

Shares  in  other  companies  are  also,  as  a  rule,  personal  and  not 
real  estate,  by  virtue  of  the  general  principles  which  have  been 
already  discussed.  But  it  cannot  be  affirmed  that  shares 
■'^in  companies  are  universally  personal  estate,  inasmuch  as  *G73 
there  are  undoubtedly  exceptional  cases  which  render  it  nec- 
essary to  examine  the  constitution  of  every  company  before  the 
character  of  its  shares  can  be  determined.  The  point  to  asceilain 
is  whether  the  shareholders  have  individually  any  interest  in  land 
as  land,  or  whether  their  interest  is  represented  by  mere  money.  (;?) 

In  conformit}',  however,  with  the  general  rule,  it  has  been  held 
that  shares  in  a  waterworks  cotnpany  will  pass  under  an  unattested 
will  if  made  before  the  ])resent  "Wills  act  (o)  ;  that  shares  in  dock, 
canal,  mining,  or  railway  companies  are  not  interests  in  land  with- 

(k)  See  A.-G.  v.  Brunning',  8  H.  L.  C.  Mortmain  act,  although  by  the  deed  of 

243,  and  the  case  cited  in  the  next  note.  settlement  of  the  company  the  sliaros 

(/)  Forbes  v.  Steven,  10  Eq.  178.  were  declared  to  be    personal    estate. 

(m)  Baxter  v.  Brown,  7  Man.  &  Gr.  This  case  was,  however,  disapproved  in 
199.  See,  too,  Rogers  i'.  Hai-vey,  C.  B.  Entwistle  v.  Davis,  4  Eq.  272.  By  act 
N.  S.  1.  Compare  Bt-nuctt  r.  Blain,  15  of  Parliament  New  River  shares  are  real 
C.  B.  N.  S.  581,  and  Freeman  v.  Gains-  estate.  See  Townseud  r.  Ash,  3  Atk. 
ford,  18  C.  B.  N.  S.  185,  where  the  33G.  See  as  to  debentures  the  conflict- 
partners  had  no  interest  in  the  land,  but  ing  cases  of  Holdsworth  v.  Davenp  irt, 
only  in  the  proceeds  of  its  sale.  See,  3  Ch.  D.  185,  and  Chandler  v.  Howell, 
also,  Wadmore  v.  Dear,  L.  R.  7  C.  P.  212.  4  ib.  651.     In  re  Mitchell's  estate.  6  Ch. 

(n)  See  Morris  v.  Glynn,    27   Beav.  D.  G55,  a  railway  mortgage  debenture 

218,  where  shares  in  an  unincorporated  was  held  not  to  confer  an  interest   in 

iron  company,  working  iron  got  from  its  land  withm  the  Mortmain  acts, 

own  estates,  and    having    estates  for  [o)   Bligh    v.  Brent,  2  Y.  &  C.  Ex. 

other  purposes  than  those  of  u'on  manu-  26S,  and  Weekley  v.  Weekloy,  ib.  281,  >». 
facture,  were    held  to    be   witliin  the 

907 


*G74  SHARES.  [book  III. 

ill  the  mcfining  of  the  Mortmain  act  ;  nor  within  tlie  fourth  section 
of  the  Statute  of  Frauds;  and  do  not  give  a  riglit  to  vote  for  mem- 
bers of  Parliament,  (p)  And  after-  some  conflict  of  opinion,  it 
seems  at  hist  settled  that  this  is  so,  altliough  the  shares  are  not  ex- 
pressly declared  to  be  personalty  in  the  act,  charter,  or  deed  of  set- 
tlement constituting  the  company.  The  cases  establishing  these 
propositions  are  here  collected  for  reference  : — 


1,  Shares  not  interests  inland  within  the  Mortmain 

Mortmain  acts.  , 

acts. 

Land  companies  Entwistle  v.  Davis,  4  Eq.  272* 

Dock  companies,  Hilton  v.  Giraud,  1  DeG.  k  Sm.  183;  *  Sparling  v.  Parker, 

9  Beav.  450;*  Walker  v.  Milne,  11  Beav.  507.* 

674*         *Railway  companies.  Ashton  v.  Lord  Langdale,  4  DeG.  &  Sm.  402* 

(shares  and  scrip);  Linley  v.  Taylor,  1  Giff.  67,  and  2  DeG.  F.  &  J.  84. 

Canal  companies,  Ashton  v.  Lord  Langdale,  ubi  sup.;*  Edwards  v.  Hall,  6  DeG. 

M.  &  G.  74  ;  Walker  v.  Milne,  11  Beav.  507.* 
Gas  companies,  Sparling  r.  Parker,  9  Beav.  450.* 
Waterwork  companies,  Ashton  v.  Lord  Langdale,  ubi  sup.  ;* 
Banking  companies,  Ashton  v.  Lord  Langdale,  ubi  sup.  (g);*  Myers  p.  Perigall, 

11  C.  B.  90,  and  2  DeG.  M.  &  G.  599.* 
Cost-book  mining  companies,  Hayter  v.  Tucker,  4  K.  &  J.  243. 
Foreign  mining  companies,  Baker  v.  Sutton,  1  Keen,  234. 
Insurance  companies,  see  March  v.  A.-G.,  5  Beav.  433,  where  the  question  arose 
on  the  bequest  of  a  policy  payable  out  of  the  funds  of  the  company. 


statute  of  2.  Shares  not  interests  in  lands  withi7i  the  meaning 

frauds,  g  4.         ^y  ij^Q-fgurth  sectiou  of  the  Statute  of  Frauds. 

Waterwork  companies,  Bligh  v.  Brent,  2  Y.  &  C.  Ex.  268  ;  Weekley  v.  Week- 
ley,  ib.  281,  n. 

Cost-book  Mining  companies,  Powell  v.  Jessopp,  18  C.  B.  336;  Walker  v.  Bart- 
lett,  18  C.  B.  845  ;  Watson  v.  Spratley,  10  Ex.  222.  (r) 

*In  all  the  cases  thus  marked,  the      deed  of  settlement.     In  the  other  cases 
shares  were  declared  to  be  personal  es-      nothing  was  declared  as  to  this  point, 
tate  by  the  company's  charter,   act,    or 


(j))  Bulmer  v.  Norris,  9  C.  B.   N.  S.  (?)  Ware  v.  Cumberledge,  20  Beav. 

19  ;  Acland  v.  Lewis,  ib.  32;  Tepper  v.  503,  contra,  was  oveiTuled  in  Edwards 

Nichols,  18  ib.  121.      See,  also,  Bennett  v.  Hall,  6  DeG.  M.  &  G.  74. 

V.  Blain,    15  ib.   581,   and  Freeman  v.  (r)  Vice  v.  Anson,  7  B.  &  C.  409,  in 

Gainsford,  18  ib.  185.  which  it  was  held  that  a  share  in  a  mina 

908 


CITAP.  v.]  SHARES.  *CT5 

Banking  companies,  Humbler.  Mitchell,  11  A.  &  E.  205. 
Railway  companies,  Duncuft  v.  Albrecht,  12  Sim.  189 ;  Bradley  v.  Holdswortb, 
3  M.  &  W.  422. 

Although,  however,  shares  in  companies  or  partnerships  holding 
land  are  not  interests  inland,  it  does  not  therefore  fol-  g«^^^,^^7hat- 
low  that  they  have  all  the  attributes  of  goods  and  chat-  tics. 
tels.     They  are  not  goods,  wares,  or  merchandise  within  the  excep- 
tion in  the  Stamp  acts,  exempting  agreements  relating  to    the  sale 
of  goods,  sliarcs,  and  merchandise  from  stamp  duty  {s.)     Xor 
are  *thej  goods  and  chattels  within  the  seventeenth  section     *G75 
of  the  Statute  of  Frauds,  wliich  requires  an  agreement  for  the 
sale  of  goods  and  chattels  for  the  price  of  10^.  and  upwards,  to  be  in 
writino".  (^)     But  as  will  be  seen   Jiereafter,  shares  are  goods  and 
chattels  within  the  meaning  of  tlie  reputed   ownership  clauses  in 
the  Bankrupt  acts;  their  price  may  be  recovered  in  an  action  for 
"  o-oods  and  chattels"  sold  and  delivered  (w);  they  were  Jjona  nota- 
hilia  in  the  diocese  where  tlie  chief  office  of  the  company  was  situ- 
ate (x);  they  are  legal  and  not  equitable  assets  {y)\  they  pass  under 
a  bequest  of  ])ersonal  estate  (2);  and  they  have  been  decided  to  be 
propertv  in  respect  of  which  bail  may  justify,  {a)     Whether  shares 
in  a  cost-book  mine  are  goods  and  effects  attachable  in  the  Lord 
Mayor's  court  has  been  discussed,  but  not  decided,  {h) 

was  real  estate,  and  could^not  be  trans-  (0  See  Humble  v.  Mitchell,  11  A.  & 

ferred  except  by  deed  is  sc'arcely  consis-  E,  205,  as  to  banking:  companies;  Tem- 

tent  with  th':;   modern     decisions.     In  pest  v.  Kilner,  3  C.  B.  249,  as  to  pro- 

Boyce  v.  Grvn,  Batty,  608.   cited    in  jected  railway  companies  ;  Watson  r. 

Sugd.  V.  k  P.  p.  101,  ed.  13,  a  share  in  Spratley,  10  Ex.  222,    as  to  cost-book 

a  mining  company  was  held  to  be  an  in-  mining  companies;  Bowlby  v.  Bell,  3  C, 

terest  in  land  within  t)ie  meaning  of  the  B.   284,  and  Duncuft  r.   Albrecht,    12 

4th  section   of  the  Statute  of  Frauds,  Sim.  189,  as  to  railway  companies.  See, 

the  share  having  been  regarded  as  a  too,   Colt  v.  Nettervill,  2  P.   W.  304; 

share  of  the  land  as  land,  rather  than  as  Pickering  v.  Appleby,  Conn.  354. 

a  share    of   a  money   capital.     If  this  (u)  Lawton  v.  Hickman,  9  Q.  B.  5G3, 

really  had  been  so,  the  case  would  have  railway  shares. 

been  rightly  decided  (see    Watson  v.  {x)  See  A.-G.  v.  Higgins,  2  H.  &  N. 

Spratley,  10  Ex.  222  ;  Hayter  r.  Tucker,  339,  railway  shares. 

4.  K.  &  J.  243)  ;  but  having  regard  to  (.y)  Cook  v.  Gregson,  3  Drew.  547. 

the  terms  of  the  Company's    act,    it  is  {z)  Cadman  v.  Cadman,  13  Eq.  470, 

difficvdt  to  arrive  at  the  conclusion  that  shares  in  a  canal  company, 

the  shareholders  had  more  than  a  mon-  (a)  Pierpoint  v.  Brewer,  10  Jur.  79. 

ey  interest.  (^)  Tredinnick  v.  Oliver,  5  H.   &  N. 

is)  Knight  V.  Barber,  16  M.  &  W.  66.  780. 

909 


*676 


AMOUNT   OF   EACH    TARTNER  S    SHARE. 


[book  III. 


An  action  may,  it  is  apprehended,  be  sustained  by  a  shareholder 
whose  title  is  slandered,  and  who  can  prove  special 
damage,  (c) 


Slander  of 
title. 


SECTION  II.— OF  THE  AMOUNT  OF  EACH  PARTNER'S  SHARE. 

The  proportions  in  which  the  members  of  a  firm  are  entitled  to 
the  property  of  the  firm,  or  in  other  words,  the  amount  of  each 
partner's  share  in  a  partnership,  depends  upon  the  agreement  into 
which  the  partners  have  entered. 

In  the  event  of  a  dispute  between  the  partners  as  to  the  amount 
of  their  shares,  such  dispute,  if  it  does  not  turn  on  thct  con- 
struction of  written  documents,  must  be  referred 
*676  to  a  *jury.  {d)  And  if  there  is  no  evidence  from 
which  any  satisfactory  conclusion  as  to  what  was 
ao-reed  can  be  drawn  (e\  the  shares  of  all  the  partners  will  be  ad- 

ft 

judged  equal.  (,/)' 


Shares  are 
prima  facie 
equal. 


(c)  See  Malachy  v.  Soper,  3  Bing.  N. 
C.  371. 

(f7)  As  it  -was  in  Peacock  v.  Peacock, 
16  Ves.  49;  McGregor  v.  Bainbridge,  7 
Ha.  164;  Binfbrd  v.  Dommett,  4  Ves. 
756. 

{e)  Stuart  v.  Forbes,  1  Mac.  &  G.  137; 
Webster  v.  Bray,  7  Ha.  159;  Copland  v. 
Toulmin,  7  CI.  &  Fin.  349. 

( f )  Robinson  v.  Anderson,  20  Beav. 
98,  and  7  DeG.  M.  &  G.  239;  Peacock  v. 
Peacock,  16  Ves.  49;  Webster  i\  Bray, 
7  Ha.  159;  Farrar  v.  Beswick,  1  M.  Rob. 
527. 

1 A  business  apparently  carried  on  in 
partnership  without  specific  terms,  is 
presumed  to  be  upon  equal  terms,  both 
as  to  profit  and  loss,  and  the  partners 
are  presumed  to  be  equally  interested 
until  the  contrary  is  shown.  Farr  v. 
Johnson,  25  111.  522;  Moore  v.  Bare,  11 
Iowa,  198;  Stein  v.  Robertson,  30  Ala. 
286;  Roach  V.  Perry,  16  111.  37;  Ratzer 
V.  Ratzer,  28  N.  J.  Eq.  136;  Wolfe  v. 
Gilmer,  7  La.  Ann.  583;  Quine  v.  Quine, 

910 


17  Miss.  155;  Taylor  v.  Taylor,  2  Murph 
70;  Jones  v.  Jones,  1  Ired.  Eq.  332 
Turnipseed  v.  Goodwin,  9  Ala.  372 
Honore  v.  Colmesnil,  1  J.  J.  Marsh 
506;  Rider  v.  Gilbert,  16  Hun,  163; 
Honore  v.  Colmesnil,  1  J.  J.  Marsh. 
506. 

Ai-ticles  of  co-partnership  provided 
that  two  partners  who  were  to  put  in 
$2,500,  should  pay  the  other  interest  on 
the  excess  of  capital  put  in  by  him,  such 
capital  being  a  building  and  machinery 
valued  at  lOtOl^^and  that  the  losses 
in  business  and  profits  should  be  di- 
vided, one-half  to  him,  and  the  other 
half  among  the  other  two;  and  further 
provided,  that  the  partnership  might  be 
renewed  when  the  term  expired,  and  in 
that  event  the  partners  should  become 
equal  owners  in  the  capital  stock.  The 
partnership  was  renewed  by  indorse- 
ment on  the  original  articles :  Held, 
that  each  became  an  equal  owner;  and 
that  the  property  put  in  by  the  first 
having  been  destroyed  by  fire,  the  loss 


CHAP,  v.] 


AMC)rNT    OF    EACH    I'AKT.NER  S    SHAKE. 


*G7t} 


This  rule  no  doiiht  occasionally  leads  to  ii]>j):irent  injustice  ;  but 
it  is  not  easy  to  lay  down  any  other  rule  which,  under  observations 
the  circutfistances  supposed,  could  he  fairly  applied.  *>"  this  mie. 
It  is  sometimes  suggested  that  the  shares  of  partners  ought  to  he 
proportionate  to  their  contril)nti()ns;  hut  without  in  any  way  deny- 
ing this,  it  may  be  asked,  how  is  the  value  of  each  partner's  con- 
tribution to  be  measured  ?  Certainly  not  merely  l)y  the  capital  he 
may  have  brought  into  the  iirm.  His  skill,  his  connection,  his 
command  of  the  confidence  and  respect  of  others,  must  all  l)e 
taken  into  account;  and  if  it  is  impossible  to  set  a  money  value  on 
each  partner's  contribution  in  this  res])ect,  it  is  obviously  impos- 
sible to  determine  in  the  manner  suggested,  the  shares  of  the  part- 
ners in  the  partnership.  Nor  can  it  be  said  to  be  unreasonable  to 
infer,  in  the  absence  of  all  evidence  to  the  contrary,  that  the  part- 
ners themselves  have  agreed  to  consider  their  contributions  as  of 
equal  value,  although  they  may  have  brought  in  unequal  sums  of 
money,  or  he  themselves  unequal  as  regards  skill,  connection,  or  char- 
acter. "Whether  therefore,  partners  have  contributed  money  equally 
or  unequally,  whether  they  are  or  are  not  on  a  par  as  regards  skill, 
connection,  or  character,  whether  they  have  or  have  not  labored 
equally  for  the  benefit  of  the  firm,  their  shares  will  be  considered 
as  equal,  unless  some  agreement  to  the  contrary  can  be  shovrn  to 
have  been  entered  into,  {g) 


should  be  borne  eqiiallj-  by  all.  Taftr. 
Sehwamb,  80  111.  289. 

In  case  of  an  association  for  manufac- 
turing pui-poses,  not  incorporated,  in 
the  absence  of  an  agreement  to  thecon- 
traiy,  each  will  be  liable  in  equal  pro- 
portions for  any  loss  that  may  be  sus- 
tained, but,  if  by  the  articles  of  associ- 
ation, they  are  to  share  in  the  profits 
in  proportion  to  the  stock  each  puts  in, 
then  the  loss  must  be  shared  in  the 
same  manner.  Flagg  v.  Stowe,  80  111. 
1G4. 

Partners  share  equally  in  the  profits 
and  losses  of  a  fimi,  in  the  absence  of 
any  agreement  to  the  contran-,  notwith- 
standing they  may  have  put  in  unequal 
portions  of  capital.  Griggs  v.  Clark, 
23  Cal.  427.     ^qq  post,  807,  and  note. 

Where  tlie  concubine  of  defendant 


has  contributed  equally  with  him  her 
labor  and  capital  in  a  universal  partner- 
ship, she  will  be  entitled  to  half  the 
profits  and  immovables  acquired  with 
the  proceeds  of  their  business,  which, 
though  registered  in  his  own  name,  he 
has  in  repeated  letters  acknowledged  to 
be  their  joint  property.  Del  amour  r. 
Roger,  7  La.  Ann.  153. 

As  between  the  parties  forming  a 
partnership,  the  executive  or  managing 
jiartner  may  bind  himself  to  repay  to 
the  other  partner,  on  dissolution,  the 
capital  advanced  by  him,  whetlier  prof- 
its are  made  or  not.  Ford  r.  McBride, 
4.5  Tex.  498. 

{g)  See  the  la.st  three  notes.  Peacock 
V.  Peacock,  2  Camp.  4t,  and  Shai-pe  r. 
Cummings,  2  Dowl.  it  L.  .')04,  which 
was  apparently  decided  on  its  authority, 


*677  AMOUNT    OF    EACH    PAKTXEIi's    SHARE.  [uOOK  III. 

When  it  is  said  that  the  sliares  of  partners  are  ^Wm<t  facie 
equal,  although  their  capitals  are  unequal,  wliat  is  meant  is  that 
losses  of  capital  like  other  losses  must  be  shared 
efuai'S"*^  *677  equally;'  *but  it  is  not  meant  that  on  a  final  set- 
tlement of  accounts,  capitals  contributed  un- 
equally are  to  be  treated  as  one  aggregate  fund  which  ought  to  be 
divided  between  the  T)artners  in  equal  shares.  (A) 

An  a^-reement  for  inequality  may  be  conclusively  inferred  from 
Evidence  the  modc  in  which  the  partners   have  dealt  with  eacli 

quaTity°  "^^'      other,  and  from  the  contents  of  the  partnership  books.  (?) 

Moreover,  if  an  agreement  for  inequality  clearly  at  one  time 
existed,  no  presumption  of  any  alteration  in  this  respect  will  arise 
from  the  mere  fact,  that  some  of  the  original  members  have  re- 
tired. In  the  absence  of  evidence  to  the  contrary,  the  inference  is 
that  the  shares  of  the  retiring  members  have  been  taken  by  the 
continuing  parties  in  the  proportions  in  which  these  last  were 
originally  interested  in  the  concern.  (^) 

The  rule  that  the  shares  of  partners  are  equal,  unless  they  have 
Rule  as  to  pre-  agreed  for  inequality,  applies  as  well  to  persons  who 
lirySpH^to'  are  partners  in  business  generally,  as  to  those  who  are 
ffielS'''  partners  as  regards  one  single  matter  only.  Thus  in 
actions.  Robinson  v.  Anderson  (Z),  where  two  solicitors,  not  in 

Robison  v.  ,  .        i  j    <»       i  i.    • 

Anderson.  partnership,  were  jomtly  retamed  to  deiencl  certain 
actions,  and  there  was  no  satisfactory  evidence  to  show  in  what 
proportions  they  were  to  divide  their  remuneration,  it  was  held 
that  they  were  entitled  to  share  it  equally,  although  they  had  been 
paid  separately  and  had  done  unequal  amounts  of  work.  The 
Master  of  the  Rolls,  after  observing  on  the  importance  in  such 
cases  of  attending  to  the  onus  jprohandl^  said: 

"Now  I  should  entertain  no  doubt,  even  if  I  liad  not  been  confirmed  by  the  two 
cases  of  Webster  v.  Bray,  and  McGregor  v.  Bainbridge,  that  where  two  solicitors 
undertake  a  matter  of  business  on  behalf  of  a  client,  the  same  rule  would  follow 

cannot  be  supported.     See,  as  to  Scotch  (t)  Robley  v.   Brooke,    7   Bii.  N.  S. 

law,   Thompson  v.   Williamson,  7  Bli.  90  ;  and  see  Copland  v.  Toulmin,  7  CI. 

N.  S.  432;  3  Ross,  L.  C.  on  Com.  Law,  &  Fin.  349. 

381.  (?)  20Beav.  98,  and7DeG.  M.   &  G. 

"  See  post,  807  and  note.  239.     See,  too,  Webster  v.  Bray,  7  Ha. 

(70  See  infra,  ch.  8,  §  1,  on  partner-  159,  and  McGregor  v.   Bainbridge,   ib. 

ship  accounts.  164,  note  ;  Hanshp  v.  Kitton,  8  Jur.  N. 

(i)  As    in    Stewart  v.  Forbes,  1  Mac.  S.  835,  V.-C.  S. 
&  G.  137. 

912 


CHAP,  v.]  SHAKES.  *uTS 

in  Hint,  as  in  any  other  undortalcinfr,  where  two  p-^rsons  caTy  on  a  bu.^ine=s  jointly 
on  lit'hc.ir  of  thenis'lves  or  as  ajri-'nts  of  oth^'r  perso-«s.  It  is,  in  point  of  fact,  a 
Kniitid  partnership  for  a  particular  sort  of  business.  Assuming  nothnj,'  to  have 
been  said  as  to  the  manner  in  which  the  profits  were  to b? divided,  it  aji^'ars  tome 
follow  as  a  nocessaiy  consequence  of  law,  that  they  arc  to  bi  divided 
equally  betwo -Ml  them.  *And  although  one  may  do  more  business,  and  *6T8 
iiave  exerted  himself  more  ll:an  the  other,  yet  if  nothing  is  said  upon  the 
subject  of  prolit,  the  pi-tsumpl ion  is  that  they  are  to  be  equally  divided  between 
them.  It  appears  to  me,  that  if  the  clieuts  had  gone  to  Mr.  liobinson  and  !Mr. 
Anderson,  and  said — We  wish  you  to  undertake  the  business  for  us,  and  thereupon 
Mr.  Robinson  and  Mr.  Anderson  had  both  said.  We  agree  to  do  so,  and  noth- 
ing had  taken  place  between  them  as  to  the  manner  in  which  they  were  to  be 
paid,  the  necessaiy  consequences  would  have  been  that  after  payment  of  the 
costs  out  of  pocket,  the  net  profits  made  by  the  business  would  have  been  divisible 
equally  between  them,  and  that  neither  of  them  could  say  to  the  other — I  have 
done  more  business  than  you  have,  and  am  therefore  entitled  to  a  larger  share 
of  profits.  It  was  the  duty  of  the  party  who  intended  tliat  this  should  not  be  a 
partnership  transaction,  and  that  he  should  be  paid  for  the  amount  of  business 
which  he  did  without  participating  in  that  of  the  other,  so  to  express  himself." 

A  question  of  some  difficulty  arises  wlien  a  firm,  say  of  two 
partners,  engages  in  a  partnersliip  speculation  with  a  Applications  of 
third  person  not  a  member  of  that  firm.  Is  the  inter-  fi^nro'mprises 
est  of  such  ])erson  in  the  speculation  to  be  treated  as 
one  half,  the  other  two  persons  being  treated  as  one?  or  is  the  in- 
terest of  each  of  the  three  to  be  treated  as  equal,  each  taking  one- 
third?  The  answer  to  these  questions  must  depend  upon  whether 
the  tM'o  pai'tners  entered  into  the  speculation  as  a  firm  or  as  two 
individuals.  If  the  former,  there  will  in  substance  be  only  two 
parties  interested  in  the  speculation,  and  the  profits  thereof  must 
be  divided  into  two  equal  parts;  whilst  if  the  latter  is  the  case, 
there  will  be  three  parties  interested,  and  the  profits  must  be 
divided  into  three  equal  parts,  (m) 

With  respect  to  shares  in  companies,  it  is  to  be  observed,  that 
they  are  foi-nied  in  the  first  instance  bv  dividing  tlie  AppHoation  of 
capital  of  the  eompany  into  equal  parts,  and  the  only  in  companies, 
question  which  can  arise  is  as  to  the  number  of  ]Kirts  or  shares  to 
which  the  members  of  the  company  are  respective!}'  entitled.  This 
is  a  mere  matter  of  evidence;  but  supposing  that  it  should  so  hap- 
pen that  there  is  no  evidence  to  show  the  number  of  shares  held  by 
the  members  or  any  of  them,  it  would  be  difticult  to  come  to  any 
other  conclusion  than  that  each  member  was  entitled  to  an  equal 

(w)  See  "Wamer  v.  Smith,  1  DeG.  J.      to  be  divisible  into  two  and  not  three 
&  S.  337,  where  the  profits  were  held      parts. 

M  913 


*G79  EQUALITY    OF    SIIAllES.  [bOOK  III. 

number  of  shares,  to  be  ascertained  by  dividing  the  total  nnm- 
*679     ber  of  shares  by  the  total  number  of  members.     *Shares  in 

companies,  like  shares  in  partnerships,  must  be  taken  to  be 
equal,  unless  the  contrary  is  proved. 

In  point  of  fact,  shares  in  a  company  always  are  equal,  except 
when  there  have  been  successive  issues  of  shares  arising  from  suc- 
cessive increases  of  capitah  But  it  sometimes  liappens  that  a  ca])i- 
shares  in  com-  tal  of  a  Certain  amount  divided  into  a  certain  number 
limes uuequai.  of  equal  sliarcs,  is  raised;  and  tliat  then  a  further  capi- 
tal is  raised  by  the  issue  of  a  certain  number  of  new  shares,  equal 
to  each  other,  but  not  equal  to  the  old  shares.  Moreover,  it  some- 
times also  happens,  that  whilst  the  old  shareholders  have  paid  u]) 
their  shares  in  full,  the  new  sliareholders  have  paid  in  respect  of 
theirs,  less  than  the  amount  per  share  paid  up  by  the  old  share- 
holders. In  such  a  case  there  is  not  only  inequality  of  shares,  but 
inequality  of  money  paid  in  respect  of  them;  and  questions  then 
arise  as  to  the  relative  rights  of  the  holders  of  the  different  kinds 
of  shares,  and  especially  with  respect  to  the  payment  of  dividends, 
and  in  case  of  dissolution,  the  apportionment  of  surplus  assets. 
Generally  speaking,  such  questions  are  determined  by  reference  to 
the  company's  act,  charter,  or  deed  of  settlement;  but  where  they 
cannot  be  so  determined,  the  rights  of  the  shareholders  to  profits 
and  surplus  assets  will  be  proportionate  to  the  money  paid  to  the 
company  in  respect  of  their  respective  shares,  and  not  to  the  nomi- 
nal value  of  such  shares.  If  one  shareholder  has  paid  100/.,  and 
another  only  50Z.,  it  is  clear  that  unless  some  reason  to  the  con- 
trary can  be  shown,  the  first  ought  to  receive  for  dividends,  and 
surplus  assets,  twice  as  much  as  the  last,  {n) 


SECTION  ITT.— OF  THE  LIEN  WHICH  EACH  PARTNER  HAS  ON  THE 
PROPERTY  OF  THE  FIRM,  AND  ON  THE  SHARES  OF  HIS  CO- 
PARTNERS. 

In  order  to  discharge  himself  from  the  liabilities  to  which  a 
person  may  be  subject  as  partner,  every  partner  has  a  right  to 
have  the  property  of  the  partnership  applied  in  payment  of  the 
debts   and   liabilities   of  the   firm.      And   in   order   to   secure   a 

(w)  See  Somes  v.  Currie,  1  K.  &  J.  605. 

914 


CHAP.  L.J 


SHARES. 


*0S0 


*proj)er  division  of  the  surplus  fvssetis,  he  has  a  riojht  to  have     *CSO 
whatever  may  be  due  to  the  linn  from  his  co})artners,  as 
members  thereof,  deducted  from  wliat  would  otherwise  be  payable 
to  them  in  respect  of  their  shares  in  the  partnership. 

In  other  words,  each  partner  may  be  said  to  have  an  equitable 
lien  on  the  partnership  property  for  the  purpose  of  Foundation  of 
having  it  applied  in  discharge  of  the  debts  of  the  firm;  P^rtaer's ikn. 
and  to  have  a  similar  lien  on  the  surplus  assets  for  the  purpose  of 
having  them  a])]»lied  in  payment  of  what  may  be  due  to  the  part- 
ners respectively,  alter  deducting  what  may  be  due  from  them,  as 
partners,  to  the  tirm.  (/)' 


(o)  West  r.  Slap,  1  Ves.  S.  239;  Skipp 
r.  Harwood,  2  Swanst.  586;  Doddinyton 
V.  Hullet.  1  Ves.  S.  498  and  499;  Ex 
parte  Riiffin,  6  Ves.  119;  Ex  parte  Wil- 
liams, 11  ib.  3;  Holdemess  v.  Shackels, 
8  B.  &  C.  612.  Smith  v.  DeSilva, 
Cowp.  469,  can  hardly  be  recom-iled 
u-ith  the  other  cases,  but  see  upon  it  the 
observations  of  Lord  Tenterden,  in  8  B. 
&  C.  618.  As  to  the  ri<rht  of  a  minority 
of  partners  to  insist  on  the  payment  of 
a  partnei-ship  debt  out  of  the  partner- 
ship assets,  see  the  observations  of  Tur- 
ner, V.-C,  in  Stevens  v.  The  South 
Devon  Rail.  Co.  9  Ha.  326.  Any  mem- 
ber of  an  ordinary  firm  is  at  liberty  to 
pay  any  debt  of  the  firai,  and  to  charge 
the  firm  with  the  amount  paid. 

1  See  Matlock  v.  Matlock,  5  Ind.  404; 
Strange  v.  Graham,  56  Ala.  614;  Wade 
V.  Rusher,  4  Bosw.  537;  Allen  v.  Haw- 
ley,  6  Fla.  142;  Boyce  v.  Coster,  4  Strobh. 
Eq.  25;  Hunt  r.  Benson,  2  Humph.  459; 
Sage  V.  Chollar,  21  Barb.  596;  Talbot 
V.  Pierce,  14  B.  Mon.  195;  Saloy  v.  Al- 
brecht,  17  La.  Ann.  75;  Parish  v. 
Lewis,  1  Freem.  (Miss.)  Ch.  299;  Don- 
elson  r.  Posey,  13  Ala.  752;  Duryea  r. 
Burt,  28  Cal.  569;  Peai-son  r.  Keedy,  6 
B.  Mon.  128;  Black  r.  Bush,  7  id.  210; 
Crookerp.  Crooker,  46  Me.  250;  Wil- 
liams V.  Love,  2  Head,  80;  Frith  v. 
Lawrence,  1  Paige,  434;  Conwell  r. 
Sandidge,  8  Dana,  273;  Meador  v. 
Hughes,  14  Bush,  652;  WaiT-n  r.  Tay- 


lor, 60  Ala.  218;  Parker  r.  Parker,  65 
Barb.  205  ;  Meridan  Nat.  Bank  v. 
Brandt,  51  Ind.  56;  Pearl  v.  Pearl.  1 
Tenn.  Ch.  206;  Nelson  v.  Hayner,  66  111. 
487;  McCauley  v.  Fulton,  44  Cal.  355; 
and  cases  there  cited.  See,  also,  Ex 
2wrte  Shepherd,  3  Tenn.  Ch.  189;  Mil. 
ler  V.  Price,  20  Wis.  117;  Wliite  v.  Col- 
fajc,  as  N.  T.  Superior  Ct.  297. 

An  agreement  between  two  firms  to 
purchase  hogs  and  pack  pork,  one  season 
on  joint  account,  constituted  a  partner- 
ship as  to  that  adventure,  and  wheth- 
er regarded  as  a  pai-tnei-ship  or  on  joint 
account,  the  same  equities  exist  be- 
tween the  parties.  The  nict  that  one 
finn  had  control  of  the  product,  and 
could  alone  sell,  did  not  destroy  the 
right  of  the  other  to  have  the  partner- 
ship assets  applied  to  the  payment  of  the 
partnership  debts.  Meador  r.  Hughes, 
14  Bush,  652. 

The  effects  of  a  partnership  cannot  be 
exempt-ed  from  payment  of  the  firm 
debts  without  the  consent  of  all  the 
partners;  and  if  a  mere  dissolution  takes 
place,  it  will  be  presumed  that  the  one 
partner  to  whom  the  assets  are  handed 
over,  holds  them  in  tiiiat  to  pay  thr' 
firm  debts,  etc.  People  v.  Till,  3  Neb. 
261. 

Where  a  partner  sells  his  interest  to  a 
stmnger,  or  it  is  sold  upon  execution 
against  him.  his  right  to  have  the  part- 
nei-h:hip  debts    paid,    and  his    liability 

915 


•680 


SHARKS. 


[book  III. 


This  rii^ht,  lien,  qva!<l-\\e^,  or  whatever  else  it  may  be  called, 
does  not  exist  for  any  practical  purpose  nntil  the  affairs 
oaheTiln"^^^  of  tlic  partnership  have  to  be  wonnd  np,  or  the  share 
of  a  partner  has  to  be  ascertained;  nor  has  any  partner  a  ri^^ht  to 
insist  as  against  a  judgment  creditor  of  the  firm,  that  he  shall  have 
recourse  to  the  assets  of  the  firm  before  seeking  to  obtain  payment 
from  the  partners  individnally.  (p)  But  when  partnership  ac- 
counts have  to  be  taken,  and  the  shares  of  the  partners  have  to  be 

therefor  discharged  out  of  the  property, 
is  not  divested  by  the  sale.  This  right 
is  not  affected  by  the  fact  that  the  sep- 
arate interests  of  all  the  partners  are 
thus  disposed  of.  Menagh  v.  Whitwell, 
52  N.  Y.  147. 

If  the  assets  of  a  firm  composed  of  A, 
B  and  C  are  applied  to  pay  the  debts  of 
a  former  firm  of  A  and  B,  without  C's 
consent,  A  and  B  are  liable  in  solido  to 
A,  B  and  C,  and  A  and  B  in  equity  are 
liable  to  C  for  his  share  if  such  debts. 
Raigul's  Appeal,  80  Pa.  St.  234. 

D.  and  P.  shipped  a  cargo  on  a  for- 
eign voyage  on  a  joint  account,  in  the 
name  of  D.;  after  the  vessel  sailed,  D. 

assigned  his  undivided  moiety  for  the 

benefit  of  creditors,  and  the  return  cargo 

came  into  the  hands  of  his  trustees. 

They  refused*  to  pay  P.  more  than  his 

undivided  moiety  of  the  proceeds  of  the 

return  cargo,  but  it  appearing  that  in 

fact  he  had  paid  more  than  his  moiety 

on  account  of  this  partnership  transac- 
tion ,  and  with  a  view  to  it :    Held,  upon 

a  bill  filed  against  the  trustees,  of  vrhich 

he  was  one,  that  he  had  a  lien  on  D.'s 

moiety  of  the  proceeds  for  his  reimburse- 
ment.   Pierce  v.  Tieman,  10  Gill  &  J. 

253. 

If,  on  the  settlement  of  the  fii-m  af- 
fairs, one  partner  is  found  to  be  indebted 

to    the    other,    the    latter    may  retain 

enough  of  the  firm  assets  to  cancel  the 

indebtedness,  if  they  are  in  his  hands, 

and  the  firm  debts  are  all  paid;  but  if 

he  does  not  have  such  means  in  his 


hands,  and  cannot  procure  them,  his 
only  remedy  is  to  collect  the  amount 
from  his  partner  as  a  debtor.  Mack  v. 
Woodrutf,  87  111.  570. 

That  a  partnership  may  happen  to  be 
in  debt  does  not,  however,  give  one 
partner  the  right  to  prevent  the  other 
from  takmg  possession  of  the  partner- 
ship property.  Carithers  v.  Jarrell,  20 
Ga.  842. 

A  retiring  partner  who,  upon  dissolu- 
tion of  a  firm,  has  withdrawn  part  of 
the  assets  for  his  individual  use,  wdl  not 
be  sustained  in  holding  such  fund,  unless 
there  is  clear  proof  that  the  fund  left  for 
creditx3rs  of  the  firm  was  ample  for  all 
demands.  That  he  has  invested  the 
fund  withdrawn  in  a  homestead  gives  it 
no  protection,  at  least  as  agamst  pro- 
ceedings in  equity.  Re  Sauthoff,  16 
Bankr.  Reg.  181. 

Ordhiary  jouit  owners  may  at  their 
pleasure  sell  their  joint  interest  and  then 
destroy  their  joint  tenancy.  A  partner 
camiot  sell  his  interest  in  the  partner- 
ship property  so  as  to  deprive  his  co- 
tenants  of  their  lien  on  the  property  for 
partnership  debts  or  liabilities  due  from 
the  party  selling,  nor  can  a  mortgage 
executed  by  one  partner  have  such  effect. 
Whitmore  v.  Shiverick,  3  Nev.  288. 

In  a  controversy  between  one  partner 
and  a  purchaser  from  the  other,  after 
the  dissolution  of  the  partnership,  it  is 
competent  to  show  that  the  partnership 
debts  had  all  been  paid  prior  to  the  sale. 
Hobendobler  v.  Lyon,  12  Kan.  276. 


{p)  See  ante,  p.  516. 
916 


CHAP,  v.] 


PABTNER  8   LIEN. 


*681 


ascertained,  tlic  lien  of  the  partners  on  the  assets  of  the  partner- 
ship, and  on  each  other's  sliares,  becomes  of  the  i::reatest  import- 
ance. Whilst  tlie  partnership  lasb".,  the  lien  attaches  to  what  prop- 
to  everything  that  can  be  considered  partnership  prop-  eny it i^tttti-hts. 
ertj'',  and  is  not  therefore  lost  by  the  substitution  of  new  stock  in 
trade  for  old.  [q)  Further,  on  the  death  or  bankiuptcy  of  a  part- 
ner, his  lien  continues  infavorof  his  representatives  or  trus- 
tees, and  does  not  terminate  until  his  share  *has  been  ascer-  *GS1 
tained  and  provided  for  by  the  other  partners.  (/')  But  af- 
ter a  partnership  has  been  dissolved,  the  li'en  is  confined  to  what 
was  partnership  property  at  the  time  of  the  dissolution,  and  does 
not  extend  to  what  may  have  been  subsequently  acquired  by  the 
persons  who  continue  to  carry  on  tlie  business.  In  this  respect 
the  lien  in  question  dificrs  from  the  lien  of  a  mortgagee  on  a  vary- 
ing stock-in-tnule  assigned  to  him  as  a  security  for  his  loan,  (.s-) 

It  follows  from  the  principle  on  which   the  lien  of  a  partner  is 
founded,  that   it  only  extends   to  the  property  of  the   Lienexists 
lirm,  and  to  tlie  sejiarate  interest  ot  each  partner  in   uership assets. 
such  property.'     In  those  cases,  therefore,  where  there  is  a  partner- 


The  lien  of  a  partner  on  partnership 
effects  arises  on  a  balance  due  him  on 
the  partnership  accounts,  occurring  after 
as  well  as  before  a  dissolution.  Hodges 
V.  Holeman,  1  Dana,  50. 

One  part  owner  of  merchandise,  who 
has  given  bonds,  as  principal,  to  secure 
the  payment  of  the  duties  thereon,  and 
who  afterwards  pays  the  duties,  acquii-es 
no  lien  upon  the  merchandise  by  virtue 
of  any  statute  of  the  United  States. 
Ladd  r.  Billinq's,  15  Mass.  15. 

Where  one  of  the  memliers  of  a  part- 
nership put  in,  as  part  of  his  share  of 
the  capital,  the  land  on  which  mills  (the 
partnei-ship  property)  were  built,  but 
did  not  make  any  conveyance  to  the 
others,  and  sold  out,  reserving  a  lien  on 


the  land  for  the  price,  and  on  a  settle- 
ment, was  found  indebted  to  another 
partner:  Held,  that  it  wa,s  erroneous, 
after  decreeing  against  him  personally 
the  amount  of  his  deficiency,  to  decree 
him  to  convey  the  land  to  the  firm  for 
the  benefit  of  purchasers,  and  thereby 
defeat  his  own  lien.  Savage  v.  Carter, 
9  Dana,  408. 

'The  lien  which  partners  have  upon 
the  partnership  property,  to  enforce  its 
application  to  the  payment  of  the  part- 
nership debt,  attaches  to  all  their  joint 
property,  but  relates  no  further.  Part- 
ners, as  such,  have  no  other  equities  in 
relation  to  the  separate  property  of 
each  other,  than  separate  creditors. 
Maim  V.   Higgins,   7  Gill,    2G5.     See. 


iq)  See  West  v.  Sk-p,  1  Yes.  S.  289; 
Skipp  V.  Harwood,  2  Swanst.  586; 
Stocken  v.  Dawson,  9  Beav.  289,  and  17 
L.  J.  (Ch.)  282.  Compare  the  cases  in 
the  next  note  but  one. 

(r)  See  Stockton  i'.  Dawson,  9  Beav. 
239,  affirmed  17  L.  J.  (Ch.)  2b'2,  and  the 


cases  cited  in  note  {q). 

{s)  Payne  v.  Hornby,  25  Beav.  2S0. 
See,  too,  Xerot  r.  Bm-nand,  4  Russ.  247, 
and  2  Bh.  N.  S.  215,  ante,  p.  646.  Ex 
parte  :^[orley,  8  Ch.  1026.  Compare 
the  cases  in  tlie  last  note  but  one. 

917 


'682 


SHARKS, 


[book  III. 


ship  in  profits  on!}',  but  that  which  produces  those  profits  belongs 
exchisively  to  one  of  the  partners,  the  lien  of  the  others  is  confined 
to  the  profits,  and  does  not  extend  to  that  which  produces  them,  {ty 
Moreover,  if  two  persons  engage  in  a  joint  adventure,  each  con- 
sio-ning  goods  for  sale  upon  the  terms  that  each  is  to  have  the  produce 
of  his  own  goods,  neither  of  them  will  liave  a  lien  on  tlic  goods  of 
the  other,  nor  on  the  produce  of  sucli  goods,  altliongli  each  may 
have  raised  the  money  to  pay  for  his  own  goods  by  a  bill  drawn  on 
himself  by  the  tlie  other,  and  ultimately  dishonored,  (u) 

The  lien  of  each  p*artner  exists  not  only  as  against  tlie  other 
Lien  exists  as  partners,  but  also  against  all  persons  chiiming  through 
sons  claiming  a  them   or  anv  of  them  ;   and  it  is  therefore  available 

share  in  the  .  ,     ,"  ,  ,.  , 

assets.  agamst  their  executors,  execution  creditors,  and   trus- 

tees in  bankruptcy,  {v)  To  hold,  however,  that  this  lien  could  be 
enforced  against  persons  purchasing  partnership  propei-ty,  would 
be  in  effect  to  prevent  any  sale  of  that  property  without  the  con- 
sent of  the  whole  firm,  and  would  practically  stop  all  partnership 
trade.  "Whilst,  therefore,  a  person  w^ho  purchases  a  share  of^a 
partner  takes  that  share  subject  to  the  liens  of  the  other 
*682     partners  (a?),*  a  *person  who  bond  fide  purchases  from  one 


also,  Mack  v.  Woodruff,  87  lU.  570. 

Co-partners  cannot  claim  an  equitable 
lien  in  property  purchased  by  one  part- 
ner with  money  which  he  has  drawn 
by  then'  consent  from  the  firm,  though 
in  excess  of  his  share.  McCormick  v. 
McCoi-mick,  7  Neb.  440. 

Where  a  partner  in  a  firm  purchased 
a  slave  in  his  own  name,  but  used  the 
means  of  the  firm  for  a  small  part  of 
the  purchase-money,  and  the  slave  was 
afterwards  employed,  in  part,  in  the 
seiTice  and  for  the  convenience  of  the 
firm,  without  compensation  for  such 
employment:  Held,  that  the  partner 
purchasing  the  slave  was  chargeable  in 
an  account  between  the  partners,  for 
money  of  the  finn  apphed  to  his  own 


use,  but  that  the  firm  had  no  lien  on 
the  slave  for  such  money.  Cabaniss  v. 
Clark,  31  Miss.  423. 

'^  Where  one  partner  simply  puts  into 
the  firm  the  use  of  his  machinery  or 
other  personal  property,  and  the  other 
advances  money  and  assumes  habilities, 
the  latter  being  in  possession,  will  have 
the  right  to  retain  the  property  until  he 
is  reimbursed  for  any  excess  paid  by 
him,  and  for  indemnity  against  out- 
standing liabilities.  Flagg  v.  Stowe, 
85  in.  165. 

'Boyce  r.  Coster,  4  Strobh.  Eq.  25; 
Glynn  v.  Phetteplace,  26  Mich.  383. 

Each  member  of  a  partnership  has  a 
lien  on  the  shares  of  his  co-partners,  for 
extra  advances  made  by  him,  enforce- 


{t)   See  infra,  as  to  the  lien  of  co-  cited,  ante,  note  (g). 

owners.  (x)  Cavander  v.  Bulteel,  9  Ch.  79.  See 

(m)  Ex  par/e  Gemmel,  3  M.  D.  &  D.  as  to  companies  with  transferable  shares, 

198.  wj'ra. 

(r)  West  V.   Skip,  and    other    cases 

918 


CUM',   v.] 


sn.vuES. 


^GS2 


].;irriior  specific  chattels  bL-loivjinc!:  to  tlie  lirm,  acquires  a  good  title 
to  such  chattels,  whatever  liens  the  other  jKirtners  might  have  had 
on  them  prior  to  their  sale,  {y)' 

In  re  Laiigniead's  trusts  a  ])artner»hip  between  A.  and  B,  was 
dissolved.  A.  retired,  and  by  deed  agreed  to  execute  Re LangmcaJ'3 
an  assignment  to  !>.  of  the  ])artnership  assets  (part  of  '^'^^• 
which  consisted  of  a  policy  of  wluch  the  partners  were  assignees), 
and  13.  agreed  to  covenant  to  pay  the  partnership  debts,  and  indem- 
nify A.  against  tliem.  No  further  instrument  was  executed.  A. 
died,  and  !>.  afterwards  assigned  the  ]>olicy  by  way  of  mortgage  to 
a  person  who  had  notice  of  the  deed.  A.'s  executors  were  after- 
wards compelled  to  jiay  partnership  debts,  wliich  ought  to  have 
been  discharged  by  B.,  and  B.  became  bankrupt.  The  policy  being 
adversely  claimed  by  the  mortgagee,  by  A.'s  executor,  and  by  a 
])urchaser  from  B.'s  assignees,  it  was  lield  that,  even  if  A.  and  his 
executors  had  been  entitled  to  pursue  any  portion  of  the  partner- 
ship property  in  the  hands  of  B.,  and  to  have  it  applied  in  pay- 
ment of  the  partnership  debts,  yet  that  they  had  no  such  right 
as  against  the  purchaser  from  B.,  though  with  notice,  for 
he  was  not  bound  to  see  to  the  application  of  the  purchase 
money,  (s) 


able  on  the  dissolution  of  the  partner- 
ship; and  where  a  new  partner  bought 
the  interest  of  a  retiring  partner,  who 
was  indebted  to  the  firm,  agreeing  to 
indemnify  him  against  all  the  partner- 
ship deljts:  Held,  that  they  must  be 
considered  as  purchasers  with  notice, 
iiad  that  the  lien  of  the  remaining  part- 
ner must  be  satisfied,  before  a  mort- 
gage given  by  the  new  partners  on  the 
share  bought  by  them,  to  the  retired 
partner,  could  be  paid  out  of  the  part- 
nership effects;  that  advances  made 
subsequently  to  the  date  of  the  mort- 
gage must  be  postponed  to  it;  and  that 
on  a  bill  to  foreclose  such  mortgage,  all 
the  members  of  the  partnei-ship  are 
necessary  parties.  Con  well  f.  Sandidge, 
8  Dana,  273. 

(j/)  See  lie  Langmead's  Trusts,  20 
Beav.  20,  and  7  DeG.  M.  &  G.  353. 

'The  pai-tner  to  whom  a  balance  is 
due,  has  a  lien  upon  the  partnei-ship 


property  and  upon  other  property  into 
which  it  may  have  been  converted  by 
the  debtor  partner,  not  only  as  against 
him,  but  as  against  all  assignees  of  it 
who  are  not  bona  fide  purchasers  of  it 
for  value.  Wade  v.  Rusher,  4  Bosw. 
537;  Meridan  Nat.  Bank  v.  Brandt,  51 
Ind.  56;  Williams  r.  Love,  2  Head,  80; 
Pierce  r.  Wilson,  2  Iowa,  20;  Addison 
V.  Burckmyor,  4  Sandf.  Ch.  498. 

One  partniT  cannot,  by  a  conveyance 
in  trust  for  the  payment  of  his  individ- 
ual and  partnership  debts,  defeat  the 
lien  of  the  other  partner  on  the  partner- 
ship funds.  B.mk  of  Kentucky  v.  Hem- 
don,  1  Bush,  359. 

Parties,  however,  who  have  purchased, 
and  in  good  faitii  paid  for  the  stock  of  a 
partnership  concern,  are  not  liable  for 
the  debts  of  that  conci'm,  nor  ai-e  the 
goods  liable.  Frank  v.  Peters,  9  Ind. 
343. 

[z)  Ibid. 

919 


■^^683  partner's  lien.  [book  hi. 

The  lien  of  partners  on  the  partncrsliip  property  extends,  as  has 
Noiienona       been  Stated,  to  whatever  is  due  to  or  from  the  iirni,  Ly 

partner's  share  i  i  i-  i  t       i  i        ' 

for  ordinary  or  to  the  members  thereor,  as  such.  It  does  not,  how- 
debts  due  from  i  i    i        •  it  ^      j-  ^   • 

him  to  firm.  ever,  extend  to  debts  incurred,  between  the  nrm  and  its 
members,  otherwise  than  in  their  cliaracter  of  meniucrs."  It  lias 
therefore  been  lield  that  where  a  partner  borrowed  money  of  the 
firm  for  some  private  purpose  of  his  own,  and  then  became  bank- 
rupt, his  assignees  were  entitled  to  his  share  in  the  partnership, 
ascertained  witliout  taking  into  account  tlie  sum  due  from  him  to 
the  firm  in  respect  of  this  loan;  and  that  the  solvent  partners  were 
driven  to  prove  against  liis  estate  in  order  to  obtain  payment  of 
Application  of  ^'^6  moncy  lent.  («)     This  qualification    of  the 

companies.  *683  general  rule  *is  peculiarly  applicable  to  compa- 
nies, and  to  debts  contracted  between  them  and 
their  members.  And  it  has  been  held  that  if  a  shareholder  in  a 
company  borrows  money  of  the  company  for  purposes  of  his  own, 
and  the  company  deals  with  him  as  if  he  w'ere  a  stranger,  it  has  no 
lien  on  liis  shares  in  respect  of  the  money  so  borrowed  (b),  unle.^s 
there  is  some  special  agreement  creating  such  a  lien,  (c) 

Further,  a  partner's  lien  on  partnership  property,  is  lost  by  the 

conversion  of  such  property  into  the  separate  proper- 
Loss  of  lien.  .  '^      '       "     ^        .,        '  '. 

ty  01  another  partner.      Ihereiore,  it  on  a  dissolution  it 

is  agreed  between  the  partners  that  the  property  of  the  firm  shall 

be  divided  in  specie  among  them,  and  that  the  debts  shall  be  paid 

in  some  specified  manner;  and  if  the  propertj'  is  accordinglj^  di- 

^  Although  one  partner  has  alien  upon  advance,  beyond  his  share,  is  only  i7ifcr 

the  partnership  effects  for  moneys  ad-  sc,  and  not  a  lien  against  creditors  of 

vanced  by  him  to  the  partnership  be-  the  firm.     Ketchum  v.  Durkee,  1  Hoft'm. 

yond  his  share  of  the  capital,  he  has  no  538. 

such  lien  for  money  advanced  or  lent  to  (a)  See   Ryall  v.   Rowles,  1  Ves.  S. 

an  individual  partner,   though  a  morfc-  3i8,  and  1  Atk.    165;  and  Meliorucchi 

gage  or  judgment  against  such  partner,  v.     The    Royal    Exchange    Ass.    Co. 

if  properly  executed  or  entered,  -will  be  1     Eq.    Ab.    8 ;    and    Croft    v.   Pike, 

a  prior  lien  on  such  partner's  share.  ?>.  P.  W.  180.     Perhaps    Smith  v.  De 

Uhler  V.  Semple,  20  N.  J.  Eq.  288.  SUva,  Cowp.  469,  was  decided  on  this 

Money  borrowed  or  goods  bought  by  principle,  as  suggested  by  Lord  Tenter- 
one  partner  on  his  own  security  only,  den,  in  8  B.  &  C.  618. 
whether  before  or  during  the  existence  of  (h)  See  Pinkstt  v.  Wright,  2  Ha.  120 ; 
the  partnership,  although  used  for  part-  affirmed  12  CI.  &  Fin.  764. 
nership  purposes,  and  with  the  knowl-  (c)  As  there  was  in  Hague  v.  Dande- 
edge  of  the  other  partner,  is  not  suffi-  son,  2  Ex.  741;  Ex  parte  Plant,  4  Deac. 
cient  to  mak3  tha   lender  a  creditor  of  &  Ch.  160.     See  infra,  p.  6S6. 
the  firm;  and  the  partner's  lien  for  the 

920 


PAKTXEK  6    LIEN. 


*e,s:i 


CHAP,  v.] 

vide:],  but  the  debts  remain  unpaid,  the  lien  which  each  partner 
had  on  the  property  before  its  division  is  gone:  and  consequently 
no  partner  lias  a  right  to  have  the  spccitic  things,  allotted  to  any 
other  partner,  brought  back  into  the  common  stock,  and  applied  in 
liquidation    of   the  partnership    liabilities.  (tZ) '     Upon    the  same 


(d)  Linrjen  r.  Simpson,  1  Sim.  &  Stu. 
600;  and  see  re  Lang'mead's  Trusts,  7 
DeG.  M.  &  G.  353;  the  jud-mont  of  L. 
J.  Turner. 

» Robertson  r.  Baker.  11  Fla.  192; 
Giddin^  v.  Palmn-,  107  Mass.  269. 

The  lien  of  partners  upon  the  part- 
nership property  may  be  lost,  either  by 
a  sale  in  good  faith  to  a  third  person,  or 
by  the  retirement  of  one  partner  from 
the  fii-m,  disposing  of  his  interest  to  the 
other  partner,  or  to  a  third  person,  with 
his  co-partner's  consent,  and  takhig  the 
assumption  of  liis  co-partner  or  of  a 
third  pei-son,  to  discharge  all  the  finn 
debts.  McGregor  v.  Ellis,  2  Disney 
(Ohio),  286;  Croono  v.  Bivens,  2  Head, 
339;  West  v.  Chosten,  12  Fla.  315;  Grif- 
fith V.  Buck,  13  Md.  102,  Andrews  v. 
Mann,  31  Miss.  322;  MUler  v.  Estill,  5 
Ohio  St.  508;  Vospor  v.  Kramer,  31  N. 
J.  Eq.  420:  Ladd  r.  Griswold,  4  Gilm. 
25;  Parish  I'.  Lewis,  1  Frcem.  (Miss.) 
Ch.  299;  Hapgood  v.  Cornevell,  48  111. 
64;  Smith  v.  Edwards,  7  Humph.  106. 

Sec,  however,  Morss  r.  Gleason,  64  N. 
Y.  204,  where  it  Wiis  held  that  where  a 
member  of  a  firm  transfers  his  interest 
therein  to  a  third  person,  who  is  received 
into  the  firm  as  a  partner  in  his  stead, 
he  thereafter  occupies  the  position  simply 
of  surety  for  the  finu  debts  to  the  extent 
that  the  assets  of  the  firm  are  sufficient 
for  thoii  payment,  and  that  such  assets 
are  held  by  the  new  firm,  charged  with 
a  trust  for  the  payment  of  the  debts  of 
the  old  firm.  Morss  /'.  Gleason,  64  N. 
Y.  204.  See,  also,  Ketchum  v.  Durkee, 
1  Hoff.  538. 

In  Riddle  r.  Moore,  3  Penn.  St.  161; 
.A..  l.iy  the  articles  for  a  dissolution  of 
partnership   with  B,    agreed  to  convey 


certain  land  to  B  in  consideration  (f 
B's  assuming  and  paying  the  debts  of 
the  concern,  except  certain  ones  speci- 
fied, which  A  agreed  to  pay,  on  being 
famished  with  notes  of  third  persons  to 
a  certain  amount.  The  land  was  sub- 
sequently sold  by  the  sherlfl'  as  the  prop- 
erty of  B :  Held,  that  it  was  competent 
for  A,  by  an  equitable  ejectment  and 
conditional  verdict,  to  enforce  pay- 
ment of  the  purchase-money  due  him- 
self, the  debts  of  the  firm,  and  those 
debts  which  he  had  agreed  to  pay  on 
conditions  not  perfonned  by  B. 

A  promise,  by  a  partner  who  has  piu-- 
chased  his  co-pai'tner's  entire  mterest  in 
the  finn,  that  he  will  pay  the  firm  debts, 
creates  only  a  personal  obligation,  and 
not  a  lien  on  the  partnership  effects, 
which  may  still  be  used  by  him  in  pay- 
ment of  his  individual  debts;  and  when 
so  applied,  the  individual  creditor  taking 
them  without  notice  of  any  such  prom- 
ise, stands  in  the  position  of  a  purchaser 
for  a  valuable  consideration,  and  holds 
fi-ee  of  any  firm  creditor's  hen.  Hap- 
good i:  Cornevell,  48  111.  64. 

So,  a  mere  covenant  by  a  remaining 
partner  to  pay  the  partnership  debts, 
and  to  indemnify  the  outgoing  partner 
against  them,  raises  in  his  favor  no 
equity  to  have  the  firm  property  applied 
to  the  papnent  of  firm  debts.  Upon 
such  a  covenant  the  outgoing  partner 
can  look  only  to  the  personal  indemnity, 
and  cannot  require  the  application  of 
the  partnei-ship  property  to  the  payment 
of  the  debts.  Cory  r.  Long,  2  Sweeny, 
491. 

Wlien  one  partner  sells  out  to  another 
the  fonner's  interest  in  the  partiv.'rship, 
the  question  whether  the  former  hiis  a 
021 


^683 


partner's  lien. 


[book  III. 


principle,  if  two  partners  eonsio;n  goods  for  sale,  and  direct  the  con- 
siixnee  to  carry  the  proceeds  of  the  sale  equally  to  their  separate  ac- 
cuiints  without  any  reserve,  and  this  is  done,  neither  partner  has 


right  after  the  sale  to  require  the  part- 
nership estate  to  be  applied  to  the  part- 
nership debts  in  liis  exoneration,  depends 
upon  the  true  meaning  of  the  contract 
of  sale  in  this  respect.  Under  the  con- 
tract in  this  case,  the  vendor  has  a  right 
to  have  all  the  assets  of  the  partnership 
so  applied.  Shackleford  v.  Shackleford, 
:32  Grat.  4S1. 

But  if  one  partner  assign  his  interest 
to  his  co-partner,  who  binds  himself  to 
appropriate  the  partnership  property  to 
the  payment  of  the  debts  of  the  firm, 
the  assignee  becomes  a  trustee  for  the 
creditors  and  for  the  assignor,  and  will 
be  compelled  by  a  court  of  equity  to 
discharge  his  trust.  Sedan  v.  Williams, 
4  McLean,  51. 

Where  two  partners  agreed  with  an 
ex-partner  that  certain  notes  should  be 
applied  to  the  payment  of  debts  of  the 
partnership  of  which  the  three  were 
members,  the  ex-partner  thereby  ac- 
quires a  mere  equity  to  have  this  agree- 
ment performed,  which  can  only  be  en- 
forced against  those  who  have  notice  of 
it.  Commercial  Bank  of  Manchester  v. 
Lewis,  21  Miss.  226. 

A,  being  a  mere  nominal  partner  in  a 
fain,  having,  in  fact,  a  salary,  left  it, 
taking  a  bond  of  indemnity  against  the 
partnership  debts  from  the  other  part- 
ners, who  formed  a  new  partnership, 
and  the  new  firm  assigned  a  part  of  the 
partnership  property  to  a  creditor  in 
payment  of  a  debt.  A,  having  paid 
debts  of  the  old  firm,  filed  liis  bill  in 
equity  to  have  such  assignment  set  aside 
as  fraudulent  as  to  him:  Held,  that  A 
had  no  right  of  preference  over  any 
other  creditor  of  the  new  firm,  as  he 
was  a  simple  contract  crechtor  of  it,  and 
had  his  remedy  at  law  like  other  credit- 
ors. Stone  V.  Manning,  2  Scam.  530. 
If,  on  the  fonnation  of  a  new  firm  by 

922 


the  addition  of  another  partner,  the 
oi'iginal  stock  of  goods  is  credited  equal- 
ly to  the  two  old  partners,  as  then-  re- 
spective shares  of  the  capital  stock  of 
the  new  company;  and  on  the  death  of 
one  of  the  original  partners,  liis  admin- 
istrator obtains  a  deci-ee  in  chancery,  on 
settlement  of  the  partnership  accounts, 
for  the  intestate's  share  of  the  partner- 
ship effects,  the  surviving  original  part- 
ner has  no  lien  on  this  fund,  for  the  pay- 
ment of  the  original  partnership  debts. 
Coffin  V.  McCullough,  30  Ala.  107. 

A  sale  by  a  commercial  partner,  on 
the  eve  of  failmg,  of  all  his  interest  in 
the  partnership  to  his  co-partner,  is  void, 
and  will  be  set  aside.  The  partnership 
property  is  the  common  pledge  of  the 
partnership  creditois,  who  must  be  paid 
out  of  it  before  the  individual  creditors 
of  the  members;  and  if  not  fully  paid, 
they  may  pursue  either  partner,  but  with 
no  higher  rights  upon  his  individual 
property  than  his  individual  creditors 
have.    Saloy  v.  Albrecht,  17  La.  Ann.  75. 

When  a  partner  purchases  his  co- 
partner's entke  interest  in  the  firm, 
takes  upon  himself  all  the  partnership 
debts,  and  afterwards  absconds,  leaving 
his  individual  and  the  partnership  debts 
unpaid,  a  court  of  equity  will  reinvest 
the  retu-mg  partner  with  his  original 
rights  as  partner,  giving  him  a  lien 
on  the  partnership  assets  for  the  pay- 
ment of  partnership  debts.  McGown  v. 
Sprague,  23  Ala.  524. 

Where  one  partner  sells  out  his  inter- 
est in  a  firm  to  a  third  person  and  takes 
securities  for  the  price,  they  fonn  no  part 
of  the  firm  assets,  but  are  his  private 
property  and  upon  or  over  which  his 
former  co-partner  has  no  lien  or  con- 
trol. The  latter  may  file  a  bill  to  wind 
up  the  concern  and  have  its  assets  ap- 
plied to  the  payment  of  its  debts  ;   but' 


/ 


ClfAP.  v.] 


SHARES. 


=-os-t 


any  lien  on  the  share  of  the  other  in  those  proceeds;  although  it 
would  have  been  otherwise  if  they  had  remained  part  of  the  com- 
mon property  of  the  two,  {e) 

If  a  partnership  is  illegal  its  members  have  no  lien  upon  their 
common  proT)4jrtv,  or  upon  each  other's  shares  therein   No  Men  i;  part- 
(y);  unless  it  be  by  virtue  of  some  agreement  not  af-  g«»i- 
fected  by  the  illeijality. 

Mere  co-owner  have  no  such  lien  as  is  enjoyed 
by  *GO-partners.  {(/)     Out  a  part  owner  of  a  ship     "^684:  J-jl^iiofco-owii- 
has  a  right  to  have  the  gross  freight  applied  in 
the  first  place  in  payment  of  the  expenses  incurred  in  earning  it.  (/«) 


in  order  to  do  so,  he  must  bring  in  as 
defendants  the  persons  ownmg  the  in- 
terest of  the  retiring  partner,  who  hold 
their  purchase  subject  to  the  paiiner- 
ship  accounting.  Glynn  v.  Phette- 
place,  26  Mich.  883. 

A  partnership  lion  is  waived  by  a 
pai'tner's  pm-chase  of  his  d:'coased  part- 
ner's interest  at  administrator's  sale. 
Hart  V.  Clark,  54  Ala.  490. 

The  acceptance  by  one  partner  of  a 
mortgage  made  by  another  partner  to 
secure  a  balance  due  from  him  has  been 
held  to  vacate  and  neutralize  the  part- 
nership lien  to  that  extent.  Robertson 
V.  Baker,  11  Fla.  192. 

See,  however,  Hodges  v.  Hoceman,  1 
Dana,  50,  where  it  was  held  that  the 
lien  of  a  partner,  for  a  balance  on  the 
partnership  accounts,  is  hot  an  incident 
of  the  legal  title  to  the  effects,  but  re- 
sults from  the  partnership,  and  is  not 
affected  by  the  mortgages  of  either  part- 
ner on  his  share. 

So  m  Warren  v.  Taylor,  60  Ala.  218, 
it  was  held  that  whore  the  partnership 
name  is  used,  with  the  consent  of  both 
jiartners,  in  borrowingmoney  for  the  in- 
dividual accommodation  of  one,  who  ex- 
ecutes to  the  other  a  mortgixge  on  his  in- 
terest in  the  partnership  property  as 
security,  and  the  latt3r  pays  the 
debt,  his  lien  as  a  partner  upon  the 
partnership  pi-operty,  for  ^he  sum  so 
paiil,  is  not  dependent  on  the  mortgage 


or  its  registration,  and  is  superior  to  the 
lien  of  a  prior  unrecorded  mortgage,  of 
which  he  had  no  notice,  but  which  was 
recorded  before  his,  and  was  given  for 
the  individual  debt  of  his  co-partner. 
See,  also,  Irwin  i'.  Bidwell,  72Penn.  St. 
244. 

Though  real  property,  purchased  with 
the  eft'ects  and  used  for  the  purposes  of 
a  mercantile  firm,  may  in  equity  be  lia- 
ble to  discharge  the  balance  due  from 
the  company  to  any  partner,  in  prefer- 
ence to  the  private  creditor  of  any  other 
partner,  it  is  nevertheless  competent  to 
the  members  of  such  co-partnership  to 
acquire  such  property  jointly  as  indivi- 
duals, or  to  lose  the  lien  aforesaid  by 
acts  tending  to  mislead  or  deceive  cred- 
itors or  purchasers  in  this  pai-ticular;  as 
where  the  deed  neither  desciibes  the 
parties  purchasing  as  merchants  and 
partners,  nor  states  that  the  piurchase 
was  made  for  the  use  of  the  firm,  but 
merely  purports  a  conveyance  to  them 
as  indi\'iduals.  Forde  v.  Herron,  4 
Munf.  316. 

(<>)  See  Holroyd  v.  Griffiths,  3  Drew. 
428.  In  Holdernoss  v.  Shakels.  8  B.  & 
C.  612,  the  transfer  to  each  partner  wiis 
subject  to  the  lieu  which  was  not  there- 
fore lost. 

(/)  See  Ewing  v.  Osbaldiston,  2  M. 
&  Cr.  88. 

(//)  Kay  r.  .lohnston,  21  Beav.  5:36. 

(/j)  See  Green  v.  Briggs,  6  Ha.   395; 

923 


*685  compais'y's  lien.  [book  hi. 

By  analogy  to  the  doctrine  that  each  member  of  an  ordinary- 
Lien  of  compa-   partnership  has  a  lien  on  the  shares  of  his  co-partners 

ny  on  share  of     ,  ,  .       -,  „  ,  i        ,  • 

member.  lor  what  IS  Gue  irom  them    as   partners  to  the  nrni, 

every  company  should  have  a  lien  on  the  shares  of  its  members  for 
what  may  be  due  from  them  to  the  company  in  respect  of  such 
shares.  The  writer  is  not  aware  of  any  case  expressly  establishing 
such  a  lien  in  favor  of  companies  generally;  but  he  conceives  that 
its  existence  cannot  be  successfully  disputed,  except  where  it  is  in- 
consistent with  an  express  right  of  transfer;  and  he  has  not  met 
with  any  decision  or  dictum  inconsistent  with  this  view. 

It  must,  however,  be  observed  that  the  lien  which  each  partner 
Lienofone  has  ou  the  assets  of  the  partnership,  and  on  the  shares 
against  another,  of  liis  co-partners.  Cannot  be  held  to  reside  in  every 
member  of  a  company,  \vithout  considerable  modification;  for  its 
existence  is  to  a  great  extent  inconsistent  with  the  principle  that  a 
company  is  distinct  from  the  individuals  composing  it,  and  would 
destroy  many  of  the  advantages  resulting  from  that  principle. 
Rheamv  Upon   these  grounds  Lord   Cottenham,  in  Rheam  u 

Smith.  Smith  (i),  declined  to  restrain  a  creditor  of  a  company 

from  proceeding  at  law  against  one  of  its  members;  although  the 
creditor  was  himself  a  member  of  the  companj^  and  it  was  insisted 
that  each  member  had  a  right  to  have  the  accounts  of  the  company 
taken,  and  to  have  its  assets  applied  in  payment  of  its  debts. 

Again,  the  ordinary  partnership  lien  is  inconsistent  with  an  uii- 
Lien  of  compa-  restricted  riglit  of  transfer.  Hence  it  was  held,  in 
due  to  it'^  Pinkett  V,  Wright  (h),  that  an  Irish  banking  company 
pinkettt;  ^^^^  "^  -^^^^  ^^  ^^®  shares  of  one  of  its  shareholders  for 

Wright.  advances  made  to  him  by  the  bank.     The  Court  was 

of  opinion  that  with  respect  to  the  advances,  the  shareholder 
685*  was  in  the  position  of  an  ^ordinary  customer  to  whom  the 
bank  had  advanced  money,  and  that  what  was  due  from  him  as 
a  customer  did  not  give  any  right  of  lien  upon  his  shares.  The  ques- 
tion arose  between  the  bank  and  a  transferee  of  the  sliares  of  the 
customer;  and  to  have  allowed  the  lien  would  have  gone  far  to  de- 
stroy the  transferability  of  the  shares.     Tlie  inconsistency   of  tlie 

Alexander  v.  Simms,  18  Beav.  80,  and  Plummer,  1  B.  «fe  A.  582. 

5  DeG.  M.  &  G.  57;  Lindsay  v.  Gibbs,  (/)  2  Ph.  726.     See,  too,  Hardinge  v. 

22  Beav.  522,  and  3  DeG.  &  J.  690.     See,  Webster,  1  Dr.  &  Sm.  101. 

as  to  the  Hen  of  the  master  on  freight,  (k)  2  Ha.  120,  and  12  CI.  <fe  Fin.  764, 

Bristow  V.  Whitmore,  4  DeG.  &  J.  325,  sub  «o»i/»e*^Iurray  v.  Pinkett. 

reversing  S.    C.    Jolms,    96;  Smith  v. 

924 


CHAP,  v.]  SHARES.  ''^CSO 

licM  contc'.ided  for  with  the  ^i^enonil  objects  of  the  company  is  well 
put  l)y  the  Yice-Chancellor  Wii,M-am  in  the  case  in  question. 

"  It  was  said  that  Wright,  as  a  proprietor  of  shares  in  the  bank,  wiis  a  partner 
with  the  other  proprietors  of  shares — that  by  the  general  rules  of  law  which  regu- 
late the  rights  of  partners  inter  se,  persons  claiming  an  interest  in  Wright's  shares 
could  only  claim  such  interest,  subject  to  all  the  equities  between  Wright  and  his 
partners,  and  that,  by  such  general  law  without  any  special  contract,  the  money 
owing  by  Wright  to  the  bank  was  a  charge  or  lion  upon  his  interest  in  the  capital 
of  the  concern,  which  would  justify  the  bank  in  refusing  to  transfer  his  shares  un- 
til the  debt  was  paid.  This  argument  I  have  little  hesitation  in  rejecting.  In  the 
ca.se  of  ordinary  partnerships  a  partner  can  retire  and  withdraw  his  capital  from 
the  concern  only  upon  a  dissolution  of  a  pai-tnership,  and  it  is  upon  taking  the  gen- 
eral partnership  account  between  the  partners  that  the  right  of  setting  off  the  debt 
of  each  partner  in  account  with  the  partnership  arises.  The  essential  distinction 
between  a  partnership  like  that  of  thj  Provincial  Bank  of  Ireland  and  an  ordinary 
trading  partnership,  consists  in  the  power  and  privil'ge  which  by  the  provisions  of 
the  deed  of  settlement  are  given  to  a  proprietor  to  retire  and  withdraw  his  capital 
from  the  concern  without  the  dissolution  of  the  partnership,  by  transferring  his 
shares  to  another.  This  power  and  privilege  constitute  very  main  inducements  to 
the  investment  of  capital  in  concerns  like  that  of  the  Provincial  Bank  of  Ireland, 
and  thereby  enable  the  society  or  partnership  to  raise  a  capital  and  carry  on  trans- 
actions, which  it  would  be  impracticable  to  raise  or  carrj'  on  upon  the  basis  of  an 
orduiary  mercantile  partnership.  The  consequences,  which,  as  between  a  share- 
holder and  the  company  arise  by  opn-ation  of  law  alone  upon  a  transfer  of  shares, 
cannot  therefore  be  inferred  from  those  which  attach  upon  the  dissolution  of  an  or- 
dinary partnership.  There  is  an  absence  of  that  analogy  between  the  cases  which 
would  support  such  an  inference.  The  consequences  arising  upon  a  transfer  of 
shares  must  be  sought  for  in  the  provisions  of  the  deed  of  settlement,  or  in  some 
rule  of  law  not  repugnant  to  those  provisions.  Now,  after  a  pemsal  of  the  deed  of 
settlement  constituting  the  Pro\'incial  Bank  of  Ireland,  I  have  come  to  the  conclu- 
sion that  a  right  like  that  claimed  by  the  bank  in  this  case  against  the  plaintiffs 
would  be  repugnant  to  the  scope  and  provisions  of  the  deed  of  settlement,  and 
that  such  chiim  cannot  be  sustained  except  by  special  contract.  In  the  absence  of 
any  special  contract  giving  the  bank  a  lien  upon  the  shares  of  a  proprietor  in  res- 
pect of  money  lent  by  the  bank  to  such  proprietor,  I  am  satisfied  the  proprietor 
nmst  be  considered  and  treated  by  the  Court  as  any  stranger  who  might  borrow 
money  of  the  bank  in  the  coui-se  of  their  ordinary  dealings  as  a  bank  with  a  cus- 
tomer." 

*It  need   scarcely  be  observed,  that  if  it  is  expressly  en-     *()S6 
acted  or  agreed  by  the  members  of  a  com]")any  that  the  com- 
pany shall  iiave  alien  on  their  shares  for  all  moneys  which  may  be 
due  from   them  to  the  company  on  any  account  what-   Agreements 
ever,  alien  will  be  created  in  cases  where  it  would  not 
otherwise  have  existed;  and  the  lien  so  created  is  not  a  mere  pas- 
sive right  of  retainer,   but  an  equitable  charge  actively    enforce- 

925 


*687  SALE    OF   SHARE    UNDER    FIERI    FACIAS.  [BOOK  III. 

able  (?);  and  so  far  as  it  gives  a  right  to  prevent  a  transfer,  it  is 
available  against  all  persons  claiming  under  a  member  indebted  to 
the  company,  (m)  Whether  it  prevents  a  transfer  if  the  member 
has  given  the  company  a  bill  for  the  amount  due,  and  such  bill  is 
still  running,  depends  upon  the  true  construction  of  the  enactment 
or  a<i-reement.  The  currency  of  the  bill  will  nsually  be  found  to 
suspend  tlie  lien  {?i);  but  a  case  may  arise  where  it  does  not  pro- 
duce this  efi'ect.  (o)  The  language  of  the  clause  confirming  the 
lien  will,  moreover,  nsually  be  found  to  extend  it  not  only  to  the 
shares,  but  to  the  dividends  and  other  moneys  payable  in  respect  of 
them,  (j)) 

As  regards  banking  companies  governed  by  7  Geo.  4,  c.  46,  it  is 
Lienofcompa-  Gxpressly  enacted  that  no  claim  which  any  member 
b>^pfrtici™a^  niay  have  in  respect  of  his  share  shall  be  set  off  either 
statutes.  ^j.  1^^^  ^j.  jj^  eqnity  against  any  demand  which  the  com- 

pany may  have  against  such  member,  on  account  of  any  other  mat- 
ter or  thing  whatsoever,  (q) 

Unpaid  up  shares  in  a  company  governed  by  the  Companies 
clauses  consolidation  act,  are  not  transferable  so  long  as  anything 
is  due  to  the  company  from  their  holder  for  calls  either  upon  them 
or  upon  any  other  shares,  {r) 

Cost-book  mining  companies  are  not  bound  to  recognize 
*6S7     *ti-ansfers,  unless  all   calls  on  the   shares  transferred,  with 
interest  and  expenses,  have  been  paid,  (s) 

As  regards  companies  governed  by  the  Companies  act,  1862, 
Table  A.,  it  is  provided  that  the  company  may  decline  to  register 
any  transfer  of  shares  made  by  a  member  who  is  indebted  to 
them,  {t)  The  act  itself,  however,  contains  nothing  on  the  subject, 
neither  does  the  Letters  Patent  act,  7  Wm.  4  &  1  Yict.  c.  73. 

(7)  Be  Lewis,  6  Ch.  818.  advances  made  to  liitn  as   a  custonn  r, 

(w)  Ex  parte  Plant,  4  D.  &  C.  163.  but  see  as  to  this,  ante,  p.  682. 

(n)  Stockton  Malleable  Iron  Co.  2  Ch.  {q)  1  &  2  Vict.  c.  96,   §  4.    See  Ex 

D.  101,  which  see  as  to  the  words  "due"  parte  Davidson,  1  Mon.  M.  D.  &  DeG. 

and  "  indebted."  648;  Ex  parte  Caldecott,  2  ib.  368. 

(o)  Lond.  Birm.  and  S.  Staff.  Bank,  (r)  8  &  9  Vict.  c.  16,  §  16;  Hubbersty 

34  Beav.  332 ;  but  see  the  case  in  the  v.  Manchester,    Sheffield,  etc.  Rail.  Co. 

preceding  note.                                   '  L.  R.  2  Q.  B.  59  and  471. 

ip)  Re  Lewis,  6  Ch.  818;   Hague  v.  («)  32  &  .33  Vict.  c.  96,  §  14. 

Dandeson,  2  Ex.  741.     It  was  assumed  (t)  25  &  26  Vict.  c.  89,  Table  A.,  cl. 

in  this  case  that  a  banking  firm  has  a  10.     This  hardly  confers  a  right  to  have 

lien  on  the  share  of  each  partner,  for  the  shares  sold  for  payment  of  the  debt.  , 

926 


CIIAl'.  v.]  SALE    OF    SHARES    IN    rAKTNERSHIl'S.  *Gi  S 


SECTION    IV.— OF    THE    MODE   IN   WHICH   A   SHARE   IS   TAKEN   IN 
EXECUTION  FOR  THE  SEPARATE   DEBTS  OF   ITS  OWNER. 

1.  In  the  case  of  'partnerships. 

The  nature  of  a  partner's  share  in  ])artner.^hii)  property,  and  tlie 
effect  of  the  lien  noticed  in  the  precediiif^  sections,  are  Execution 
well  seen  when  a  separate  judgment  creditor  of  a  part-   nt-r'^rafeV 
ner  seeks  to  levy  execution   upon  that  partner's  share 
in  the  partnership.     Such  a  creditor  has  always  been  at  liberty  to 
execute  his  judgment,  not  only  against  his  debtor's  separate  prop- 
erty, but  also  against  the  property  of  any  firm  in  which  the  debtor 
may  be  a  partner.     This  at  first  sight  seems  extremely  unjust;  in- 
asmuch as  it  looks  like  taking  one    man's  property  for  another 
man's  debt;  l)ut  in  truth  the  creditor  gets  only  what  belongs  to  his 
debtor,    although    it   must   be   confessed    that   executions    of   the 
nature  in  question  put  the  debtor's    partners  to  no  small  incon- 
venience. 

In  order  to  exjilain  the  consequences  of  an  execution  against  the 
partnership  property  for  a  separate  debt  of  one  of  the  partners,  it 
will  be  convenient  to  examine  the  law  as  it  stood  before  the  Judi- 
cature acts  with  reference  to 

1.  The  duty  of  the  sheriff. 

2.  The  position  of  the  purchaser  from  him. 

3.  Tiie  position  of  the  execution  iebtor 

The  ]iositiun  of  the  execution  creditor  and  of  his  debtor's  co- 
partner will  appear  in  the  course  of  this  examination. 
The  effect  of  the  Judicature  acts  will  then  be  noticed. 


*  1 .     Of  the  ihdi)  of  the  sheriff .  *68S 

Tlierc  has  been  cQnsideral)le  doubt  as  to  the  proper  mode  of 
levying  execution  against  the  jv.-operfy  of  a  firm  upon  a  j  of  the  duty 
judgment  recovered  against  one  of  its  members  only.  («)  ^^  "'^  *'^*-'"" 

Jk'fore  tlie  time  of  Lord  ;^^ansf^eld  it  seems  that  the  sheriff  wms 
in  the  habit  of  acting  upon  the  snpp(isition  that  each   siicriffsoizc^ 

^       '  _     _  '  '  ^  the  pnrtuei-sliip 

jtartner  was  entitled    to  an   undiviih-d   share   of  every   property, 
article  belonging  to  the  fi)-m,  without  reference  to  the  state  of  the 

(»)  Bur:o:i  c.  Given.  ^^  Car.  it  V.  -06. 

0->7 


•"6S9  UNDER    FIERI   FACIAS.  [I'.OOK  III. 

]\qrtnership  accounts:  and  in  executing  a  /.  fa.  against  a  partner 
fur  his  separate  debt,  the  ^^x\'^  seized  the  whole  of  the  partnership 
effects  (or  of  so  many  of  then.i  as  were  requisite),  and  sold  the  undi- 
vided share  of  the  judgDient  debtor  therein.  (?;) 

The  sheiif  seized  the  whole  of  every  chattel  whicli  he  sold,  be- 
cause he  could  not  otherwise  seize  the  share  of  the  execution  debtor. 
But  he  did  not  sell  the  whole  of  what  he  seized,  because  his  au- 
thority was  limited  by  the  writ  to  the  goods  and  chattels  of  the 
debtor,  and  an  undivided  share  can  be  sold,  though  it  cannot  alone 
be  seized.  As  stated  by  Lord  Holt  in  lieydon  v.  Hey  don  [x) 
jj    ,  (where  there  were  two  partners,  against  one  of  whom 

Heydon.  '  ^  judgment  bad  been  obtained),  "  the  sheriff  must  seize 
all  because  the  moieties  are  undivded;  for  if  he  seize  but  o.  moiety 
and  sell  that,  the  other  will  have  a  right  to  a  moiety  of  that  moiety  : 
but  he  must  seize  the  whole  and  sell  a  moiety  thereof  undivided, 
and  the  vendee  will  be  tenant  in  common  with  tlie  other 
partner,  {y) 

Lord  Mansfield  endeavored  to  introduce  what  at  first  sight  ap- 
LordMans-  pears  to  be  a  more  equitable  practice  In  his  time  the 
tion.''"^'^"^^'  sheriff  seems  to  have  seized  and  sold  the  whole  of  a 
sufficient  portion  of  the  partuership  goods  (instead  of  selling  only 
an  undivided  share  thereof),  and  then  an  ace  )unt  was  directed  to  be 

taken  of  the  judgment  debtor's  share  of  the  proceeds  of  the 
*689     *sale,  and  that  share,  or  a  sufficient  part  of  it,  was  handed 

over  to  the  execution  creditor.  {2)  This,  however,  was  a  very 
imperfect  mode  of  proceeding  ;  for  it  was  impossible  to  ascertain 
the  share  of  the  debtor  partner  in  the  goods  seized,  without  taking 
all  the  partnership  accounts,  and  tliis  a  court  of  law  had  no  power 
to  do.  Lord  Mansfield's  innovntion  was  therefore  discontinued  {a)\ 
and  it  was  finally  settled,  in  conformity  with  the  older 
Modern  rule.  ^^^^^^  ^^^^^  ^^^^  sherifif's  duty  was,  and  it  still  is,  to  seize 
the  whole  of  the  partnership  effects,  or  of  so  much  of  them  as  may 

[v)  See  Heydon  r.  Heydon,  ISalk  392;  Johnson  v.  Evans,  7  Man.  &  Gr.  249, 

Jackey  v.  Butler,  2  Ld.  Kaymond,  871  ;  250. 

Backhurst  v.  Clinkard,  1  Show.  (K.  B.)  [z)    See  Eddie  v.   Davidson,  Dougl. 

169;  Pope  v.  Haman,  Comb.  217;  Ma-  650. 

riott  V.  Shaw,  Comyn,  277;    Button  v.  (a)  See  Parker  ».  Pistor,  3  Bos.  &•  P. 

Mon-ison,  17  Ves.  205;  Re  Wait,  1  Jac.  288;  Chapman  v  Koops,  ib.  289;  Mor- 

&  W.  608.  ley  v.  Strombom,  3  Bos.  &  P.  254.  Lord 

{x)  1  Salk.  392.  Eldon    greatly  disapproved   of  it,    see 

{y)  See,  too,  per  Tindal,  C.   J.    in  Waters  v.  Taylor,  2  V.  &  B.  301. 
928 


CITAP.  v.] 


UXDEK    FIEUI    FACIAS, 


*GS9 


1)0  requisite,  and  to  sell  the  iiiulivided  sliare  of  the  debtor  partner 
therein,"  MMthont  reference  to  tlie  state  of  the  accounts  as  between 

liini  and  his  cu-ii;irtners.  (i)" 


•  See  Phillips  r.  Cook.  24  Wend.  389; 
Lee  r.  BulUud,  o  La.  Ann.  462;  United 
States  r.  Williams,  4  McLean.  2:',G.  See, 
also,  Nelson  r.  Conner,  3  La.  Ann.  456; 
Thomas  v.  Lusk,  13  id.  277;  W^iles  v. 
Maddox,  26  Mo.  77;  Morgan  r.  W^it- 
niough,  5  Whart.  125.  See,  however, 
Jarvis  v.  Hyer,  4  Dev.  L.  3G7. 

The  interest  of  one  partner  in  the 
partnership  property  may  be  attached, 
t)r  taken  and  sold  on  execution  for  his 
separate  debt.  See  Sitler  r.  Walker,  1 
Freera.  Ch.  (Miss.)  77;  Place  r.  Sweet- 
zer,  16  Ohio,  142;  James  r.  Stratton,  32 
111.  202;  Newhall  r.  Buckingham,  14  id. 
405;  White  v.  .Jones,  38  111.  159;  Dowr. 
Saj-ward,  14  N.  H.  9;  S.  C.  12  id.  271; 
Marston  v.  Dewberry,  21  La.  Ann.  518; 
Nixon  V.  Nash,  12  Ohio  St.  647;  Chopin 
V.  Wilson,  27  La.  Ann.  444;  Saunders 
r.  Bartlett,  12  Heisk.  316;  WUson  v. 
Strobach,  59  Ala.  488;  Weaver  r.  Ash- 
croft,  50  Tex.  428:  Peoples'  Bank  r. 
Shrj'ock,  48  Md.  427;  and  the  cases 
above  cited.  See,  also,  Meyberg  v. 
Steagall,  51Tex.  351. 

A  creditor  of  an  individual  partner 
has  a  right  to  seU  on  execution  only  that 
partner's  interest  in  the  firm  property, 
that  is,  what  of  the  partnership  proper- 
ty belongs  to  the  debtor  partner,  after 
paying  the  debts  due  by  the  firm,  and 
his  own  debt  to  the  finn.  Merrill  v. 
Rinker,  1  Baldw.  528;  Lyndon  r.  Gor- 
liam,  1  Gall.  367;  White  i\  Dougherty, 
Mart.  &  Y.  309;  M'Carty  v.  Emlen,  2 
Yeates,  190;  Dower  v.  Stanffer,  2  N.  J. 


L.  193;  Knox  r.  Schepler.  2  Hill,  (S.  C.) 
595;  Knox  r.  Summ-rs,  4  Yeates,  477; 
Tappan  r.  Blaisdell,  5  N.  H.  189;  Pierce 
r.  Jackson,  6  Mass.  242;  Fish  v.  Her- 
rick,  6  id.  271;  Place  r.  Swectzer,  16 
Ohio.  142;  Witler  v.  Richards.  KJ  Conn. 
37;  Jones  v.  Thompson,  12  Cal.  191: 
Filleyr.  Phelps,  18  Conn.  294;  Gibson 
P.  Stevens,  7  N.  H.  352;  Brewster  v. 
Hammett,  4  Conn.  540;  Menagh  v. 
A\TiitwelI,  52  N.  Y.  146;  Williams  v. 
Gage,  49  Miss.  777.  See,  also.  Peck  r. 
Schultze,  1  Holmes,  28  and  ca.se  there 
cited. 

And  it  makes  no  difference,  whether 
the  company  creditor,  at  the  time  of 
giving  the  credit,  knew  of  the  existence 
of  the  partnei-ship  or  not;  for  the  effect 
of  the  credit  given  to  increase  the  funds 
of  the  partnership  is  the  same,  whether 
it  be  a  known  or  a  dormant  paitnei-ship_ 
Witler  /•.  Richards,  10  Conn.  37. 

The  limit  of  the  assessment  of  value 
in  a  proceeding  under  the  sheriff's  act, 
where  the  property  of  a  firm  has  been 
seized  under  an  execution  against  one 
of  the  partners,  is  the  value  of  the 
debtor  partner's  interest.  PIoss  v. 
Thomas,  6  Mo.  App.  157. 

In  an  action  against  the  members  of 
a  firm,  an  attachment  was  issued  against 
S.,  one  of  the  partners,  which  was 
levied  upon  the  finn  property.  The 
firm  was  at  the  time  insolvent,  and  soon 
after  made  an  assignment  to  defendant. 
Judgment  was  tliereafter  obtained  and 
execution  issued  in  the  attachment  suit. 


(ft)  Holmes  v.  Mentze,  4  A.  &  E.  127;      tied  to  make  the  execution  creditor,  ami 


S.  C.  5  Nev.  &  Man.  563,  and  4  Dowl. 
Pr.  Ca.  300;  Johnson  v.  Evans,  7  Man, 
(t  Gr.  240.  In  Holmes  i\  Mentze,  it  was 
held  that  a  sheriff,  who  for  the  debt  of 
one  partner  executed  a  fi.fa.  against 
the  property  of  the  firm,  was  not  enti- 


the  co-partner  of  the  debtor  interplead; 
but  that  if  the  execution  creditor  denied 
the  partnei-ship  he  was  bound  to  in- 
demnify the  sheriff. 
2  See  Bardwell  r.  Perry,  19  Vt.  292. 

*  929 


^689 


u^;dkr  fieri  facias. 


[book  hi. 


The  sheriiF,  having?  seized  the  property  of  the  firm,  proceeds  to 
saieofexecu-  sell  tlic  interest  of  the  jud,<,niient  debtor  (c),  and  to  as- 
Ihrre.""'"''  sign  the  same  to  the  purchaser.  The  bill  of  sale  recites 
that  the  sheriff  has  entered  upon  and  taken  possession  of  all  the 


under  which  the  sheriff  sold  "all  the 
right,  title  and  interest  which  "  S.  had 
in  the  property  at  the  time  of  the  levy 
of  the  attachment.  Plaintiff  was  the 
purchaser.  In  an  action  brought  to  de- 
termine the  title  to  the  property,  held, 
that  as  the  firm  assets  were  insufficient 
to  pay  its  debts,  the  interest  of  S.  there- 
in was  nothmg,  and  plaintiif  took  noth- 
ing by  his  purchase.  (Van  Brunt  r.  Ap- 
plegate,  44  N.  Y.  544  distinguished. ) 
Staats  V.  Bristow,  73  N.  Y.  265. 

Equity  will  interfere  to  prevent  a  sep- 
arate creditor  levying  on  firm  effects 
from  standing  in  any  better  position 
than  that  of  his  debtor.  Thompson  v. 
Frist,  15  Md.  24. 

V/here  an  execution  against  one  of 
two  partners,  for  his  mdividual  debt, 
was  levied  upon  partnership  goods,  and 
the  goods  were  sold  at  a  constable's 
sale,  and  the  other  partner  replevied  the 
goods  from  the  purchaser:  Held  that 
the  measure  of  damages  against  the 
plaintitf  in  replevin  was  only  the  value 
of  the  interest  of  the  debtor  partner  m 
the  goods  at  the  time  of  the  sale;  that 
is,  his  share  of  the  surplus  after  all  de- 
mands against  the  firm  should  be  paid. 
Sutcliffe  V.  Dohrman,  18  Ohio,  181. 

Where  partnership  property  is  sold 
under  separate  executions  against  the 
partners  individually,  the  proceeds  rep- 
resent the  several  interests  of  the  part- 
ners and  not  that  of  the  partnership, 
and  the  fund  should  be  distributed  ac- 
cordingly. Vandike's  appeal,  57  Pa.  St. 
9.  See,  also,  Cooper's  appeals,  26 
Penn.  St.  262. 
The  interest  of  a  partner  who  contrib- 


utes only  tnne,  labor  and  skill,  in  tha 
partnership  property,  may  be  levied  on 
and  sold  by  execution  against  him  as  nn 
individual.  Knight  «?.  Ogden,  2  Ten:i. 
Ch.  473. 

It  is  not  an  interest  in  any  paiiiculiir 
piece  of  property,  but  in  the  fii-m  asset-* 
after  the  settlement  of  the  firm  accounts, 
that  is  liable  for  a  partner's  separate 
debts.  Atwood  v.  Meredith,  87  Miss.  635. 
See,  however,  Caiillon  v.  Thomas,  6 
Mo.  App.  574. 

The  specific  credits  of  a  partnership 
cannot  be  seized  under  execution  against 
one  of  the  partners,  or  sui-viving  part- 
ner. Th3  entire  interest  of  a  partner 
may  be  seizod  and  sold;  but  no  specific 
asset,  cr-xlit,  or  property  of  the  partner- 
ship is  liable  to  seizure  under  execution 
against  one  of  the  partners.  Levy  r. 
Cowan,  27  La.  Ann.  556;  Marston  r. 
Dewberry,  21  id.  518. 

A  debt  due  to  a  partnership  is  not  lia- 
ble to  attachment  at  the  suit  of  a  cred- 
itor of  one  of  the  partners,  where  the 
partnership  is  a  continumg  one,  and 
where  there  has  been  no  adjustment  of 
the  partnership  affairs.  Peoples'  Bank 
r.  Shryock.  48  Md.  427;  Lj-ndon  v.  Gor- 
ham,  i  Gall.  367;  Bulfinch  v.  Winchen- 
bach,  3  Allen,  161 ;  Sweet  r.  Reed,  12 
R.  I.  121. 

A  was  garnisheed  as  a  debtor  of  B, 
who  was  a  member  of  a  firm,  and  A 
confessed  that  he  did  owe  B,  but,  in  fact, 
the  debt  was  due  the  firm:  Held,  in  an 
action  by  the  firm  to  recover  this  debt, 
that  as  the  property  of  the  finn  could 
not  be  attached  for  the  private  debts  of 
its  members,  A's   confession  and  pay- 


(c)  Formerly  the  sale  must  have  been 
by  auction,  but  now  it  may  be  made  by 

930 


private  contract. 
9  Ch.  432. 


^QQ  Ex  parte  Villars, 


CHAP. 


v.] 


UNDER    KIKKI    FACIAS. 


*GS1)| 


sliare  and  interest  of  A.  B.  (tlie  judgment  delator")  as  partner  with 
one  C.  D.,  of  and  in  all  the  book  debts,  materials,  tools,  inijjle- 
ments,  goods,  chattels,  eft'ects,  and  stock  in  trade  used  in  the  saitl 


ment  of  tin-  debt  w:is  no  clischrti-fro"  of 
the  partnership  debt.  Cook  v.  Arthvir, 
11  Ired.  L.  407. 

P.  and  L.  made  a  contract  by  which 
L.,  who  owned  a  patent  right,  author- 
ized P.  to  sell  the  same  in  certain  states 
of  the  union,  and  it  was  agi-eedthat  P. 
was  to  sell  the  same;  that  out  of  all 
property  and  money  received  by  P.,  by 
means  of  such  sales,  the  expenses  thereof 
should  first  be  paid,  and  the  remainder 
should  be  equally  divided  between  P.  & 
L.,  and  that  this  division  should  be 
made  as  early  as  reasonably  could  be, 
and  from  time  to  time,  whenever  any 
such  money  or  property  should  be  re- 
ceived. Tlie  transaction  of  the  busi- 
ness thus  provided  for  necessitated  the 
incurring  of  expenses  which  did  not  ap- 
ply solely  to  any  particular  sale,  but  to 
the  whole  business  together  :  Held, 
that  under  this  contract  the  proceeds  of 
the  sales  previous  to  a  settlement  of 
their  expenses,  belonged  to  P.  and  L. 
jointly,  and  no  part  thereof  to  either  of 
them  severally,  and  that  individual 
creditors  of  neither  party  could  by 
means  of  the  trustee  process,  attach 
such  party's  interest  in  any  of  their  joint 
property  in  the  hands  of  a  third  person, 
whether  such  property  was  tangible,  or 
was  a  debt  due  from  such  third  person 
to  P.  &  L.    Towne  v.  Leach,  32  Vt.  747. 

In  Maine,  however,  it  is  held  that  the 
debtor  of  a  firm  can  be  holden  as  trustee 
of  one  of  the  partners  in  an  action  in 
which  that  partner  is  jirincipal  defend- 
ant, if  neither  the  creditor  of  the  firm 
nor  ;iny  •  other  partner  inleipose. 
Thompson  r.  Lewis,  84  Me.  1C7. 

In  Maine,  also,  it  is  held  that  a  cred- 
itor of  one  of  the  partners  of  a  finn  may 
attach  such  partner's  interest  in  a  spe- 
cific portion  of  a  stock  of  goods  belong- 
ing to  the  finn,  and  is  not  required   in 


order  to  render  the  attachment  regular 
to  take  the  partners  interest  in  the  en- 
tire stock  of  goods.  Pogg  r.  LawTy,  68 
Me.  78.  See,  also,  Carillon  v.  Thomas, 
G  Mo.  A  pp.  574. 

A  valid  lien  as  against  a  debtor  who 
is  a  member  of  a  partnership,  may  b<^ 
acquired  by  attaching  all  his  interest  in 
the  effects  of  the  finn,  and  summoning 
the  other  partners  as  trustees;  and  such 
lien  may  be  preserved  by  notice  to  the 
parties  concerned,  and  such  other  acts 
designed  to  give  notoriety  to  the  attach- 
ment as  the  nature  of  the  property  will 
admit,  although  possession  cannot  be 
taken  and  the  property  removed,  to  the 
exclusion  of  the  other  partners.  Tread- 
well  r.  Brown,  43  N.  H.  290. 

A  judgment  lien  against  one  of  the 
partners  of  a  firm  individually,  has  been 
held  to  constitute  a  lien  on  the  interest 
of  that  partner  m  the  partnership  pi'op- 
erty.  which  entitles  the  purchaser  of  it, 
when  sold,  to  possession,  divested  of 
liens  for  finn  debts  not  reduced  to  judg- 
ments.    Green  r.  Ross.  24  Ga.  G13. 

Partnership  property  may  be  attach- 
ed for  the  individual  deljt  of  one  of  the 
partners,  after  the  dissolution  of  thi' 
partnership,  and  after  a  receiver  has 
been  appointed  by  a  decree  of  a  court  of 
equity  in  a  sister  State,  to  get  in  and 
dispose  of  the  assets.  Schatzill  r.  Bol- 
ton, 2  McCord,  478. 

In  Louisiana,  however,  a  civditor  of 
partners  in  a  state  of  liquidation  can- 
not, for  a  debt  not  due  by  the  partner- 
ship, seize  a  partnership  asset,  nor  ac- 
quuv  any  rights  by  seizing  the  interest 
therein  of  the  individual  partners. 
Smith  r.  McMicken,  3  La.  Ann.  319. 

Such  a  creditor  must  await  the  liqui- 
dation of  the  partnership;  but  he  may 
meanwhile  lay  hold  of  his  debtors'  resid- 
uary interest  in  the  partnership  gener- 

931 


^689 


UNDER    riEKI    FACIAS. 


[book  III. 


business,  whicli  has  been   vaUied  at  £ ;  and   the  sheriff  then 

asslijns  all  the  share,  right  and  interest  of  him,  the  said  A,  B.,  of 
and  in  all  and  every  the  debts,  chattels,  and  effects  so  seized  under 


ally,  by  levying  a  seizure  in  the  hands 
of  the  partnership  or  its  representative 
charged  with  its  liquidation.  Smith  v. 
McMicken,  supra;  Davis  v.  Carroll,  11 
La.  Ann.  705. 

It  has  been  held  that  upon  execution 
against  one  partner,  the  sheritF  may 
le-v-y  on  that  partner's  undivided  interest 
in  goods,  and  take  the  goods  into  his  ex- 
clusive possession,  and  that  though  the 
firm  debts  exceed  the  firm  effects.  An- 
drews V.  Keith,  34  Ala.  722.  See,  how- 
ever, post  690,  691  note. 

A  sheriff  who  has  levied  upon  the  in- 
terest of  one  partner  on  the  suit  of  his 
separate  or  individual  creditor,  may  re- 
lease the  levy  when  the  partnership  is 
insolvent,  and  the  sale  of  the  partner's 
interest  would  have  been  unproductive 
of  anything  to  satisfy  the  execution.  On 
a  motion  against  the  sheriff  for  his  fail- 
ure to  collect  the  money  due  on  the 
judgment,  it  is  competent  for  him  to 
prove  the  insolvency  of  the  partnership. 
Wilson  V.  Strobach,  69  Ala.  488. 

In  Massachusetts,  however,  if  an  offi- 
cer attach  and  take  possession  of  person- 
al property  of  a  firm  on  a  writ  agamst 
one  partner  who  has  no  equitable  inter- 
est in  such  property,  he  is  a  trespasser. 
Cropper  v.  Cobum,  2  Curt.  465;  and  see 
post  691,  note;  WaiTen  v.  Wallis,  38 
Tex.  225. 

To  a  bill  brought  under  Mass.  Gen. 
Stat.  ch.  113,  §  2,  cl.  11,  by  a  creditor 
of  one  member  of  a  finn  against  aU  the 
partners,  to  reach  and  apply  the  amount 
found  due,  such  member  on  hquidation, 
the  debtors  of  the  firm  cannot  be  made 
parties.  Tobey  v.  McFarhn,  115  Mass. 
98. 

A  sheriff  cannot,  upon  an  execution 
issued  in  an  attachment  suit,  brought 
against  the  members  of  a  limited  part- 
nership, levy  upon,  and  sell,  the  right, 

932 


title,  and  interest  of  a  special  partner, 
in  the  goods,  chatties,  assets,  and  ac- 
counts of  the  firm.  HaiTis  v.  Murray, 
28  N.  Y.  574. 

Under  Ga.  Code,  §  1919,— making  the 
firm  property  first  liable  to  pay  the  firm 
debts — the  undivided  interest  of  a  part- 
ner therein  is  not  liable  to  levy  and  sale, 
even  after  dissolution,but  must  be  reach- 
ed by  process  of  garnishment.  Ander- 
son V.  Chenney,  51  Ga.  372. 

Money  or  property  belonging  to  a 
partnership  may  be  claimed  by  the  part- 
ners individually,  as  exempt  from  levy 
and  sale  under  legal  process  against 
them  individually.  Howard  v.  Jones, 
50  Ala.  67. 

A,  partner's  wrongful  appropriation 
of  the  partnership  property  does  not 
take  the  same  out  of  the  pro^dsions  of 
the  Ga.  Code,  §  1919,  exempting  a  part- 
ner's interest  in  the  assets  from  levy  and 
sale.     Holifield  v.  White,  52  Ga.  567. 

In  Tennessee  it  is  held  that  partner- 
ship property  is  not  exempt  in  the 
hands  of  one  member  of  the  firm,  who 
is  the  head  of  the  family.  Spiro  v. 
Paxton,  3  B.  J.  Lea,  75. 

The  creditors  of  a  firm  have  the  right 
to  follow  the  firm  assets  into  land  bought 
with  the  purchase  money  of  other  land 
in  which  the  assets  were  first  invested, 
and  the  partner^making  the  investment 
cannot  claim  a  homestead  exemption  in 
such  land  as  against  firm  creditors. 
ChalfontP.  Grant,  3  B.  J.  Lea,  118. 

A  judgment  against  a  partner  indi- 
vidually is  a  lien  upon  real  estate  held 
by  the  firm;  subject,  however,  to  the 
payment  of  the  firm  debts,  and  the 
equities  of  his  co-partners.  Johnson  v. 
Eogers,  15  Bankr.  Reg.  1. 

Land  was  bought  and  held  by  a  firm 
for  partnership  pm-poses  ;  and  W.  one 
of   the    partners,    gave  his  individual 


CHAP,  v.] 


UNDER   FIKRI    FACIAS. 


*C89 


and  bv  virtue  of  the  writ  of  ^.  fa.^  and  lield  by  the  said  A.  B.  in 
j)artnership  or  joint  tenancy  with  tlie  said  C.  D.,  to  have  and  to 
liuld,  receive  and  take,  the  said  share,  furniture,  debts,  goods,  cliat- 


ju(lf,'iiicnt  to  the  vendors  for  his  propor- 
tioimto  sliare  of  the  purchase  money.  He 
afterwards  sold  aiid  conveyed  liis  inter- 
est to  the  other  partnei-s,  and  they  sold 
and  conveyed  the  whole  to  a  third  party. 
Subsequently,  within  five  j^ears  from  the 
date  of  its  entry,  a  scire  facias  was  issued 
to  continue  the  lien  of  the  judgment 
against  W.,  and  the  purchasers  from 
the  firm  were  summoned  as  ten-e  ten- 
ants :  Held,  that  the  individual  inter- 
est of  W.  was  real  estate,  and  hence 
bound  in  the  hands  of  the  terre  tenants 
by  the  lien  of  the  judgment  against  him, 
subject  to  the  superior  equitable  lien  of 
the  partnership  debts.  Mead  v.  Witli- 
erow,  8  Phil.  517. 

A  joint-stock  company,  constituted 
for  the  purpose  of  trading  in  lancf,  is  a 
partnership;  and  land  owned  by  the 
company  is  not  subject  to  judgment  and 
execution  in  behalf  of  a  separate  creditor 
of  a  member  of  the  company.  Kramer 
V.  Arthurs,  7  Pa.  St.  165. 

The  levy  of  an  execution  against  one 
partner  on  a  piece  of  land  belonging  to 
the  firm,  gives  the  execution  purchaser 
no  title,  legal  or  equitable,  to  the  land; 
the  levy  should  be  on  the  partner's  in- 
terest in  the  joint  stock,  and  a  sale 
thereof  would  give  the  purchaser  a- right 
to  an  account  and  division,  Clagett  v. 
Kilbourne,  1  Black,  :14G. 

Whei-e  a  partnership  creditor  obtains 
judgment  against  one  of  the  firm,  and 
partnership  land  is  sold  under  execution 
on  such  judgment,  though  the  sheriff's 
deed  should  cover  the  whole  property, 
the  purchaser  acquires  only  the  interi'st 
of  the  partner  who  was  defendant  in  the 
execution.    Price  r.  Hunt,  11  Ired.  L.  42. 

A  purchaser  under  an  execution 
against  one  partner,  in  his  separate 
capacity,  becomes  a  tenant  in  common 
with  the  other  partnei-s,  in  an  undivided 


share  of  the  land  which  he  purchases, 
and  holds  it  subject  to  all  the  rights  of 
the  other  partners,  and  can  have  no 
claim,  but  upon  the  separate  interest  of 
the  individual  partner  in  the  residue 
wliich  may  remain  after  the  partnership 
delits  are  p;iid.  Gilmore  v.  North  Ameri- 
can Land  Co.  Pet.  C.  Ct.  460. 

A  partner  who  permits  the  separatti 
creditors  of  his  co-partner  to  setoff  lands 
on  execution  to  satisfy  such  co-partner's 
debt,  and  to  recover  judgment  in  t\ject- 
ment  for  his  possession,  without  asking, 
before  the  levy,  for  an  account  of  the 
partnership  effects,  cannot  afterwards 
disturb  the  levy  on  the  ground  that  the 
land  was  partnership  property.  Clark 
v.  Lyman,  8  Vt.  290. 

The  fact  that  the  partnership  real  es- 
tate stands  in  the  name  of  one  of  the 
partnei-s,  does  not  prevent  a  separate 
creditor  of  another  partner  from  attach- 
ing his  interest  therein.  Hill  r.  Beach, 
12N.  J.  Eq.  31. 

Real  estate  purchased  and  used  for 
partnership  pui-poses,  but  held  in  the 
names  of  the  partners  individually,  may 
be  subjected  in  equity  to  the  payment  of 
partnei-ship  debts,  but  cannot  be  sold 
under  execution  at  law  against  the  sur- 
viving partner  as  such.  The  sheriff's 
deed  to  the  purchaser,  at  execution  sale 
againt  such  surviving  partner,  conveys 
only  his  undivided  interest  m  the  lands. 
Caldwell  r.  Parmer,  5G  Ala.  405. 

IndiN-idual  mtereste  in  real  estate  con- 
veyed to  a  firm  are  subjected  by  attach- 
mmits  to  the  payments  of  individual  lia- 
bilities, although  such  real  estate  be  con- 
veyed to  and  held  in  the  firm  name,  if 
it  is  not  made  to  appear  that  it  was 
purchase 'd  for  partnership  purposes,  and 
appropriated  to  those  puii^oses,  and 
paid  for  by  p.irtnership  fumls.  Bank  of 
Louisville  r.  Hall,  8  Bush,  (372. 

933 


^690 


SALE    OF    SHAKES   IN    TARTNEliSHIPS. 


[book  III. 


tels,  and  effects  thereby  bargained  and  sold,  or  intended   so  to  be, 

unto  the  said  E.   F.   (the  purchaser),  his  heirs,  executors, 

*690     Administrators,  and  assigns,  as  his  and  their  own   pro])er 

debts,  goods,  and  chattels,  {d) 

It  is  to  be  observed  that  the  sheriff  seizes,  sells,  and  assigns;  but 

he  has  no  business  to  take  the  goods  of  tlie  firm  out  of 

Rights  of  the  '-  ,  ,    ,  i     -x-  4.1 

other  partners.  \\^q  posscssiou  ot  the  solveut  partners!/');  ana  it  tlie 
sheriff  sells  not  the  shai-e  of  the  execution  debtor,  but  the  goods 
themselves,  he  is  accountable  to  the  solvent  partners  for  so  much 


Where  real  estate  was  originally  pur- 
chased by  one  of  two  partners,  and  paid 
for  out  of  his  individual  funds,  and  the 
only  interest  of  the  partnership  ua  the 
premises  is  on  account  of  improvements 
made  thereon  with  the  funds  of  the 
partnership,  the  actual  mterest  in  the 
premises  of  the  partner  advancmg  the 
purchase-money,  at  least  his  individual 
interest  therein,  is  liable  to  be  sold  on 
an  execution  against  him.  Averill  v. 
Loacks,  6  Barb.  19. 

(d)  See  Habershon  v.  Blurton,  1  DeG. 
k  Sm.  121. 

(e)  See  per  Patteson,  J.,  m  BurneU 
V.  Hunt,  5  Jur.  650. 

1  Garvin  V.  Paul,  47  N.  H.  158;  Gib- 
son ».  Stevens,  7  N.  H.  352;  Morrison 
V.  Blodgett,  8  N.  H.  238;  Newman  v. 
Bean,  21  N.  H.  93;  Hill  v.  Wiggm,  81 
N,  H.  292.  See,  however,  Andrews  v. 
Keith,  34  Ala.  722.  See,  also,  Phillips 
V.  Cook,  24  Wend.  389,  where  it  is  said 
that  the  sheriff  may  deliver  possession 
of  the  property  sold  to  the  pm-chaser. 

See,  also.  Carillon  v.  Thomas,  6  Mo. 
App.  574. 

After  the  levy  and  previous  to  the 
sale  of  the  interest  of  a  member  of  a 
firm  in  the  co-partnership  goods,  the 
sheriff  may  hold  joint  possession  with 
the  other  members  of  the  firm.  Bun-all 
V.  Acker,  23  Wend.  606;  21  Id.  605. 

The  power  of  the  sheriff  for  the  piur- 
pose  of  rendering  the  levy  upon  the  m- 
terest  of  one  partner  in  the  co-partner- 
ship property  effectual  to  take  possession 

934 


of  the  whole  property,  is  merely  inci- 
dental to  the  right  to  reach  the  debtor's 
interest,  and  is  to  be  exercised  as  far  as 
possible  in  harmony  with,  not  in  hostil- 
ity to,  the  rights  of  the  other  partners. 
Atldns  V.  Saxton,  77  N.  Y.  195. 

Complainant  in  an  action  against  a 
sheriff  alleged  that  plaintiff  was  the 
owner  and  entitled  to  the  possession  of  a 
certain  undivided  interest  in  certain  per- 
sonal property,  possession  of  which  had 
been  unlawfully  taken,  and  was  un- 
lawfully detained  by  the  defendant,  etc. : 
Held  sufficient,  but  that  proof  of  seizure 
by  the  defendant  of  the  undi\dded  in- 
terest of  plaintiff's  co-owner  would  not 
sustain  the  action.  Schenck  v.  Long, 
67  Ind.  579. 

A  purchaser  at  the  sale  upon  an  ejje- 
cution  against  one  partner,  levied  upon 
his  interest  in  partnership  property, 
does  not  acquire  any  title  to  the  prop- 
erty entitling  him  to  delivery  of  it,  nor, 
if  it  be  a  debt,  entitUng  hun  to  collect 
it.  The  title  to  the  propei-ty  or  the  debt 
still  remains  in  the  partnership,  and  the 
purchaser  acquu-es  only  a  right  to  call 
the  partnership  to  an  .iccounting.  Bar- 
rett &  McKenzie,  24  Minn.  20;  Lothrop 
V.  Wightman,  41  Pa.  St.  297;  Deal  r. 
Bogue,  20  id.  228;  Reinheimer  v.  Hem- 
ingway, 35  id.  432;  Smith  v.  Emerson, 
43  Id.  456;  Wilson  v.  Strobach,  59  Ala. 
488;  note  (1)  supra.  See,  however, 
Phillips  V.  Cook,  Carillon  v.  Thomas, 
sup. 


CHAT,  v.] 


SALE    OF    SHARKS    IX    PAKTNKU SHIPS. 


*G90 


of  tlie  proceeds  of  tlie  sale  as  is  ])!•(. portioiial  to  their  sliarc  in  the 
])artiierslii]).  {ff 


if)  Maybew  v.  Hon-ick,  7  C.  B.  229. 

*In  Walsh  v.  Adams,  o  Den.  125,  it 
was  held  that  where  a  shoritf  sells  the 
property  of  a  partnership,  as  the  indi- 
vidual property  of  one  partner,  on  an 
ex?oution  against  such  partner  indi- 
vidually, he  is  liable  in  trover  to  another 
partner  tlierefor;  and  the  plaintitf  is  en- 
titled to  recover  his  undivided  share  in 
the  property  so  sold,  without  regard  to 
the  state  of  the  partnership  accounts. 
8ee,  also,  Atkins  v.  Saxton,  infra. 

So,  in  Spalding  v.  Black,  22  Kan.  55, 
it  was  held  that  whore  an  officer  with 
an  execution  against  one  member  of  any 
juirtnership,  general  or  limited,  levies 
upon  the  partnership  property,  and  sells 
the  whole  property  mstead  of  the  exe- 
cution debtor's  interest  therein,  the  re- 
maining partners  may  treat  him  as  a 
trespasser  ab  initio,  and  bring  their  ac- 
tion against  him  therefor,  and  to  such 
action  the  execution  debtor  is  not  a  nec- 
essary party.  Spalding  v.  Black,  22 
Kan.  55. 

See,  however.  White  v.  Woodward,  8 
B.  Mon.  484,  where  it  is  said  that  the 
only  remedy  for  the  other  partner  is  in 
equity. 

Where  a  partnership  had  failed,  and 
was  in  a  condition  necessarih^  to  be  im- 
mediately jvound  up,  which  the  defend- 
ant must  have  known,  but  nevertheless 
attached  the  goods  of  the  partnership, 
sold  them,  and  applied  them  to  his  own 
debt  against  one  of  the  partnei-s  mdi- 
vidually :  Held,  that  the  defendant  was 
bound,  under  the  cii'cumstances  dis- 
closed, to  take  notice  of  the  rights  of  a 
partner  who  was  a  creditor  living  in 
another  town,  and  that  he  would  be 
held  to  account  for  the  value  of  the 
goods,  notwithstanding  the  partner  did 
not  interfere  and  prevent  the  sale. 
Miner  v.  Pierce,  38  Vt,  610. 


It  seems  that  a  seizure  and  le\^  by  a 
sheriff  under  an  attachment  or  execution 
against  one  person  upon  the  entire  prop- 
erty of  a  firm,  as  the  sole  property  of 
the  debtor,  is  not  justified  by  sho\\nng 
that  the  debtor  has  an  uiterest  in  the 
property  as  a  co-partner.  Atkins  v. 
Saxton,  77  N.  Y.  195. 

In  an  action  against  a  sheriff  to  re- 
cover the  possession  of  certain  property, 
defendant  justified  under  two  attach- 
ments agauist  B.  The  property  formerly 
belonged  to  a  firm  composed  of  plaintift' 
and  B.  Plaintiff's  evidence  was  to  the 
cfiect  that  prior  to  the  seizure  the  firm 
was  dissolved  and  the  personal  propertj- 
divided  between  the  partners;  that  B. 
sold  his  portion  to  third  persons,  and  all 
had  been  removed  save  a  small  poiiion 
left  by  one  of  the  purchaser's  in  plain- 
tiifs  care.  Defendant  seized  all  the 
goods  of  the  late  firm  in  plaintiii's  pos- 
session as  the  sole  property  of  B.  De- 
fendant conceded  the  partnership,  but 
controverted  the  dissolution  and  divis- 
ion. The  court  charged  that  if  the  juiy 
believed  there  was  a  nominal  assign- 
ment by  B.  of  his  interest  m  the  prop- 
erty seized  to  plaintiti',  ■with  intent  to 
defraud  B.'s  creditoi-s,  and  with  knowl- 
edge on  plaintiff's  part,  then  the  prop- 
erty was  liable  to  the  attachments: 
Ilchl,  enor.  Even  if  a  fraud  is  perpre- 
trated.  the  whole  property  do  s  not  be- 
come liable  to  seizure  upon  attachments 
at  the  suit  of  an  indi\ndual  creditor  ; 
nothmg  more  than  the  debtor's  interest 
in  the  property  can  in  any  event  be 
lialjle.  When,  therefore,  the  sheriff  ex- 
ceeds this  limit,  and  insteail  of  levjiug 
upon  the  debtor's  interest,  levies  upon 
and  seizes  the  property  as  the  sole  prop- 
erty of  the  debtor,  he  is  a  trespasser.  At- 
kins V.  Saxton,  supra. 

935 


*690 


SAI.E   OF   SHAKES   IN   PAETNEKSHIPS. 


[book  III. 


2.  Of  the  position  of  the  purchaser  from  the  sheriff. 

If  the  purchaser  is  a  stranger  unconnected  with  the  firm,  he  ac- 
2.  Of  the  pur-  quires  for  his  own  benefit  all  the  judgment  debtor's  in- 
thesherifff  tcrcst  in  the  property  comprised  in  the  bill  of  sale,  and 
becomes,  as  regards  such  property,  tenant  in  common  with  the 
judgment  debtor's  co-partners.'  The  next  step,  therefore,  is  to 
adjust  the  conflicting  rights  of  the  purchaser,  and  these  partners. 
Now  it  is  clear  from  the  nature  of  the  lien  which  each  partner  has 
on  the  partnership  property,  that  a  partner  holds  a  partnership 
chattel  with  his  co-partner,  subject  to  all  the  equities  which  that 
co-partner  has  upon  it  {g\  and  subject  therefore  to  his  right  to  have 
all  the  creditors  of  the  firm  paid  out  of  the  assets  of  the  firm,  and 
consequently,  pro  ianto,  out  of  the  chattels  seized  by  the  sheriflf.  (A) 
It  is  equally  clear  that  in  this  respect  the  purchaser  from  the  sheriff 
is  in  no  better  position  than  the  partner  whose  undivided  share 
has  been  sold.  (^)*  Before  the  Judicature  acts,  therefore,  a  suit  in 
equity  became  necessary,  in  order  that  the  partnership  accounts 
might  be  taken,  and  the  partnership  property  duly  applied,  {kf 


'Latliani  r.  Simmons,  3  Jcnes  L. 
27;  United  States  v.  Williams,  4  McLean, 
236;  C4ilmore  v.  N.  A.  Land  Co.  Pet.  C. 
C.  460,  where  the  thing  sold  was  an  un- 
divided share  in  Land ;  Williams  v. 
Gage,  49  Miss.  777;  Knight  v.  Ogden, 
2  Tenn.  Ch.  473. 

If  such  purchaser  sells  the  goods  en- 
tire, he  is  liable  in  assumpsit  to  a  sub- 
sequent trustee  of  the  firm  for  a  moiety 
of  the  goods  so  sold.  Latham  v.  Sim- 
mons, 3  Jones  L.  27. 

{g)  Barker  v.  Goodair,  11  Ves.  85. 
{h)  See  the  next  note. 
(i)  Skipp  V.  Harwood,  2  Swanst.  586; 
Taylor  v.  Fields,  4  Ves.  396;  Young  v. 
Keighly,  15  Ves.  557;  Button  r.  Mom- 
son,  17  Ves.  205-6  ;  Ex  parte  Hamper, 
ib.  404-5;  Re  Wait,  IJ.  &  W.  608. 

*See  Renton  v.  Chaplain,  9  N.  J.  Eq. 
62;  Tredwell  v.  Roscoe,  3  Dev.  L.  50; 
Menagh  v.  WhitweU,  52  N.  Y.  146; 
People's  Bank  v.  Shryock,  48  Md.  427. 
(k)  See  Park:r  v.  Pistor,  2  Bcs.  & 
Pul.  288. 

936 


^  Under  the  common  law,  a  creditor 
may  seize  his  debtor's  interest  in  the 
partnership  propsrty,  subject  to  the  prior 
rights  of  the  other  partners  and  part- 
nership creditors;  and  may,  after  the 
seizure  and  before  the  sale,  sue  the  oth?r 
partners  to  ascertain  the  amomit  of  the 
interest  seized;  or  may  sell  and  leave  it 
to  the  poi-chaser  to  ascertain  it.  Broad- 
nax  V.  Thomason,  1  La.  Ami. -384.  See, 
also,  Knight  v.  Ogden,  2  Tenn.  Ch.  473. 
The  judgment  debtor  may  elect  to 
have  an  account  taken  before  the  sale, 
by  applying  to  a  court  of  equity  there- 
for.    Hacker  v.  Johnson,  66  Me.  21. 

If  a  sale  of  partnership  property, 
under  a  separate  execution  against  one 
partner,  be  fraudulent,  and  there  be 
coUusion  between  the  purchaser  and  the 
insolvent  partner,  in  order  to  deprive  the 
other  partner  of  his  rights  under  articles 
of  co-partnership,  the  court  will  lend  no 
aid  to  the  purchaser.  Renton  v.  Chap- 
lain, 9  N.  J.  Eq.  62. 


CIIAI'.  v.] 


UNDER   FIERI    FACIAS. 


*691 


f 


The   ri^ht  of  the  partners  of  the  judgment 
debtor    being  of^tlie  nature  described,  and   it     "^'(JOl   injunction, 
being    ijicunipatiblc   with    that    riglit    tliat  the 
piirtiRr.^bi])   ]»roperty   seized   by  the  sheriff  should  be  removed  or 
suki  by  him,  the  Court  of  C h an cer}'- would,  before  the  Judicature 
acts,  on  a  bill  filed  by  the  judgment  debtor's  co-partners  against 
the    judgment  debtor  and  his   creditor  and   the  slieriff,  direct  the 
partnership  accounts  to   be   taken,  and    restrain   the   sheriff  from 
selling  the  prui)erty  and  a])point  a  receiver,  {ly 

(l)  See  Bevan  t'.  Lewis,  1  Sim.  376. 
As  to  an  injunction  against  the  sheriff, 
compare  Newell  v.  Townsend,  6  Sim. 
419,  with  Garstin  v.  Asplin,  1  Matld. 
150,  and  Jackson  v.  Stanhope,  10  Jur. 
676  ;  and  see  Story  on  Tartn.  §  264  ; 
and  as  to  making  the  sheriff  a  party, 
see  Lord  Eldon's  obs.  in  Franklyn  v. 
Thomas,  3  Mer.  235,  and  Hawkshaw  v. 
Parkins,  2  Swanst.  549. 
»See  Place  v.  Sweetzer,  16  Ohio,  142. 
If  one  of  several  partners  has  an  in- 
terest in  the  assets  of  the  partnership 
over  and  above  the  claims  of  his  co- 
partners and  those  of  the  creditors  of 
the  partnership,  there  is  no  reason  for 
the  court  to  interfere  by  injunction  to 
restrain  a  sale  of  his  interest  in    the 

partnership    property,  upon    execution 

on  a  judgment  against   such  partner 

individually.      Mowbray   v.   Lawrence, 

13  Abb.  Pr.  317;  22  How.  Pr.  107.    See, 

also,  Hardy  r.  Donellan,  33  Ind.  501. 
It  has  been  held  that  an  action  will 

lie  by  a  partner  to  enjoin  an  individual 

judgment  creditor  of  the  co-partner  of 

the  plaintifl'  from  selling  upon  execution 

the  interest  of  the  co-partner    in    the 

partnership  assets,  whore  it  is  made  to 

appeftr  by  the  complaint  that  the  co- 
partner whose  interest  has  been  seized, 

has  in  fact  no  interest  in  the  assets,  and 

the  plaintiff'  offers  to  submit  to  an  ac- 
counting to  show  this  to  be  the  case. 

Turner  r.  Smith,  1  Abb.  Pr.  N.  S.  304. 
In  Massachusetts,    a  court  of  equity 

will  not,  on  a  bill  of  the  ni'^mbers  of  a 

partiier.ship,  decree  the   return  of  part- 


nership property  attached  in  a  suit  of  a 
creditor  of  one  of  the  partners  against 
him,  and  en.join  the  attaching  offi- 
cer from  further  interfering  with  the 
property,  unless  it  appeara  that  it  is 
needed  to  satisfy  the  claims  of  the  part- 
nership creditoi-8,  or  that  the  partner 
sued  has  not  an  interest  in  the  surplus 
which  may  remain  after  payment  of  the 
partnership  debts.  A  bill  which  does 
not  show  this  is  bad  upon  demurrer. 
Peek  V.  Schultze,  1  Holmes,  28 

It  is  held,  however,  in  Minnesota,  that 
where  an  execution  in  favor  of  an  indi- 
vidual creditor  of  one  of  the  members 
of  any  insolvent  ixirtnership  is  levied 
upon  his  interest  in  certain  goods  be- 
longing to  the  firm,  by  taking  possession 
of  such  goods,  and  threatening  to  sell 
such  interest,  an  action  will  not  He  at 
the  suit  of  the  other  partner  or  partners 
for  a  p?rpetual  injunction  restraining 
any  further  proceedings  under  the  levy, 
even  though  the  officer  making  the  levy 
and  the  creditor  directing  it  have  notice 
of  such  insolvency.  Wickham  i;.  Davis, 
24  Minn.  107. 

In  Brewster  v.  Hammett,  4  Conn.  540, 
A  and  B  being  partners,  C  l)rought 
an  action  against  A  for  a  debt  due  from 
him  individually,  and  attached  an  un- 
divided moiety  of  the  partnership  stock. 
A  having  no  interest  therein  except  an 
a  partner.  At  tliis  time  A  was  insolv- 
ent; the  partnei-ship  also  was  insolvent. 
A  and  B  claiming  that  the  creditors 
of  the  partnership  had  a  priority  of 
right  to  the  partnership  funds,  and  that 

937 


*691 


UNDER   FIEKI    FACIAS. 


[book  in. 


5.     Of  the  2)osi(!on  of  the  execution  debtor. 

With  respect  to  the  execution  debtor,  it  is  to  be  observed  that,  in 
3.  Of  the  exe-  the  lirst  phice,  the  execution  operates  as  a  dissohition 
cution  debtor.  -^^^  ^j^^  partnership,  (y/iy  In  the  next  phice,  the  assign- 
ment by  the  sheriff  to  the  purchaser  transfers  to  the  pnrcliaser 
whatev^er  the  sheriff  had  power  to  assign,  and  did  assign,  bnt  no 
more;  and  as,  \\ndev  n  Ji.  /a.  the  sheriff  may  not  have  power  to 
sell  everytliing  which,  as  Ijetween  the  partners,  is  to  be  considered 
partnersliip  property,  it  by  no  means  follows  that  the  assignment 
has  transferred  to  the  creditor  all  the  judgment  debtor's  share  and 
interest  in  the  partnership.  In  a  case,  therefore,  where  a  stranger 
purchased  from  the  sheriff  the  execution  debtor's  interest,  and  then 
assigned  it  to  the  other  partners,  it  was  held  that  the  execution 
debtor  was  still  entitled  to  an  account  from  them;  the  sale  by  the 
sheriff  not  having  divested  him  of  all  his  interest  in  the  concern,  (n) 

Upon  a  sale  by  the  sheriff"  of  the  interest  of  one  partner,  there 
Purchase  of       is  nothing  to  prevent  a  purchase  of  that  interest  by  his 

his  interest  by  t->  i  i        •  •       ^ 

his  co-partuers    co-j^artncrs.     But  the  co-partners  purchasing    ot    the 


they  ought  not  to  be  taken  for  the  pay- 
ment of  A's  mdividual  debt,  then 
brought  a  bill  in  chancery  to  restrain 
proceedings  in  the  action  brought  by  C 
and  for  a  restoration  of  the  property  at- 
tached: Held,  that  the  plaintiifs  were 
not  entitled  to  the  relief  sought,  as  they 
were  not  invested  with  the  lights  of  the 
partnership  creditors;  and  as  the  effect 
of  a  decree  in  their  favor  would  be  to 
leave  the  partnership  funds  so  protected 
from  the  claims  of  the  attaching  credi- 
tors, subject  to  the  disposition  of  the  in- 
solvent partner — a  result  from  which 
the  creditors  of  the  partnership  would 
derive  no  benefit. 

And  in  Sitter  v.  Walker,  1  Freem. 
Ch.  (Miss.)  77,  it  was  held  that  equity 
would  not  restrain  the  sale  of  the  inter- 
est of  one  partner  on  execution  for  his 
separate  debt  until  the  partnership  ac- 
counts were  taken. 

Partnership  creditors,  whose  demands 
are  not  due,  have  no  equity  to  enjoin 

938 


separate  and  individual  creditors  of  a 
partner  from  attaching  his  individual 
property.  Henderson  v.  Haddon,  12 
Rich.  Eq.  393. 

(m)  AspmaU  v.  The  Lond.  and 
North- West.  Eail.  Co.  11  Ha.  325; 
Haberslion  v.  Blurton,  1  DeG.  &  Sm. 
121  ;  Skipp  V.  Harwood,  2  Swanst.  587. 

^  A  levy  of  an  execution  upon  the  inter- 
est of  an  insolvent  partner  and  a  sale 
thereunder  operate  as  a  dissolution. 
Renton  v.  Chapman,  9  N.  J.  Eq.  62. 
See  Choppin  v.  Wilson,  27  La.  Ann. 
444;  ante  230. 

A  mere  attachment  or  mesne  process 
does  not,  however,  dissolve  the  partner- 
ship.    Arnold  v.  Brown,  24  Pick.  38. 

The  mere  levy  of  an  execution  neither 
dissolves  the  partnership  nor  authorizes 
the  appointment  of  a  receiver  with  pow- 
er to  liquidate  the  partnership  affairs. 
Choppin  V.  Wilson,  27  La.  Ann.  •114. 

(?0  Habershon  v.  Blurton,  1  DeG.  & 
Sm.  121. 


ClIAl'.   v.]  SALE    OF    SHARES    IN    PAnTNKnSIlIl'S.  ^002 

slieriff  must  act  witli  perfect  fairness.     If  they  do  anything  to  con- 
ceal tlie  true  value  of  the  share,  so  as  to  enable  themselves  to  buy 
it  for  less  than  it  would  otherwise  have  fetched,   the  sale 
*will  not  be  allowed  to*  stand.      In  Perens  v.  Johnson  (o),     *G92 
the  share  of  a  partner  in  a  leasehold  colliery  was  sold  by  the 
eherilf  under  aji.fa.     The  sale  was  by  auction.     The   pcrcns  r. 
other  partners  bought  the  share;  the  execution  creditor 
was  paid  off ;  and  a  balance  was  handed  over  by  the  sheriff  to  the 
execution  debtor.     It  a])peared,  however,  that  before  the  sale  took 
])hice,  it  was  expected    that  a  valuable    seam  of    coal    would    be 
reached  ;  that  the  solvent  partners  had  removed  the  gear  so  as  to 
prevent  any  one  going  down  the  mine;   that  they  had  also  removed 
some  ironstone  recently  raised,  so  as  to  lead  persons  visiting  the 
mine  to  believe  that  coal  was  not  so  nearly  within  reach  as  it  was; 
and  that  a  few  days  after  the  sale,  and  after  only  one  day's  working, 
a  rich  seam  of  coal  was  actually  discovered.     The  execution  debtor 
thereupon  filed  a  bill  against  his  late  co-partners,  praying  that  the 
sale  might  be  set  aside,  on  the  ground  that  the  purchase  from   the 
sheriff  was  contrary  to  that  good  faith  which  should  be  observed 
by  one  partner  towards  another;  and  a  decree  was  made  in  his 
favor    setting    the  sale    aside  upon    repayment  of  the  purchase- 
money,  with  interest  at  51.  per  cent. 

The  execution  creditor  has  no  title  to  goods  seized  under  a  Jz-.  fa. 
issued  by  him,  unless  he  purchases  them  from  the  sher-  Right  of  the 
iff.  Consequently  where,  under  aji.  fa.  issued  against  creditor, 
one  partner  for  a  private  debt,  the  sheriff  seized  the  goods  of  the 
firm,  which  afterwards  became  bankrupt,  and  the  assignees  sold 
the  goods  seized,  it  was  held  that  an  action  by  the  execution  credi- 
tor against  the  assignees  for  money  had  and  received  to  his  use, 
would  not  lie;  first,  because //«  had  no  title  to  the  goods;  and  sec- 
ondly, because  if  he  had,  his  interest  in  them  could  not  be  ascer- 
tained without  taking  the  accounts  of  the  partnership.  (^>) 


i.    3fo(JiJ!cations  introduced  hij  the  Judicature  acts. 

The  Judicature  acts  and  rules  promulgated   under  them  do  not 
unfortunately  contain  any  directions  aj-tplicable  to  the  subject  now 

(o)  Perens  v.  Johnson,   and  Johnson      C.  W.,  where  a  sale  by  the  sheriff  \va- 
r.  Perens,  3  Sm.  &  G.  419.      See.  also.       also  set  a-siile. 
Smith  V.  Harrison,  26  L.  J.  Ch.  412.  V.-  (p)  Garbett  r.  Vcale,  5  Q.  B.  408. 

939 


*694  CHARGING    ORDERS    ON    SHARES   IN    COMPANIES.        [bOOK  III. 

*693     under  consideration.     Nor  has  the  new  ])ractice  under  -tlieni 
yet  been  reduced  to  shape.     The  writer  can  only,  therefore, 
offer  the  following  suggestions  with  reference  to  their  combined 
effect. 

1.  The  practice  must  be  the  same  in  all  divisions  of  the  High 
Court. 

2.  The  old  practice  must  be  adhered  to  so  far  as  it  is  consistent 
with  the  modern  procedure. 

3.  Some  form  of  procedure  must  be  adopted  which  shall  have 
the  effect  of  a  suit  for  an  account,  and  an  injunction,  and  a  receiver. 

4.  There  appears  to  be  no  reason  why  the  sheriff  should  not 
proceed  to  seize  and  sell  the  execution  debtor's  share  as  before  ; 
and  there  is  in  strictness  no  more  necessity  for  him  to  interplead 
now  than  before  {q);  and  yet  as  no  order  for  his  withdrawal  can 
be  made  in  his  absence,  a  proceeding  by  him  in  the  nature  of  an 
interpleader  summons,  bringing  all  parties  interested  before  the 
Court,  would  probably  be  the  most  convenient  course  to  adopt. 

5.  Upon  a  seizure  by  the  sheriff  the  partners  of  the  execution 
debtor  should  obtain  an  order  dissolving  the  partnership,  directing 
the  sheriff  to  withdraw,  and  directing  the  accounts  of  the  partner- 
ship to  be  taken,  and  the  value  of  the  execution  debtor's  interest  in 
the  property  seized  by  the  sheriff  to  be  ascertained,  and  appointing 
a  receiver. 

6.  After  the  accounts  have  been  taken,  and  the  above  value  as- 
certained, the  I'eceiver  should  be  directed  to  pay  the  amount  of 
such  value  to  the  purchaser  from  the  sheriff,  if  any,  and  the  rest  of 
the  share  of  the  execution  debtor  in  the  assets  of  the  partnership  to 
him.  If  the  share  has  not  been  sold  the  execution  creditor  must 
be  paid  out  of,  or  to  the  extent  of  the  above  value.  The  receiver 
can  then  be  discharged. 

7.  Whether  all  this  can  be  done  without  a  transfer  to  the  Chan- 
cery Division  is  not  clear;  but  probably  it  very  often  may  be  done  ; 
and  practically  a  sale  by  the  sheriff  will  probably  be  frequently  dis- 
pensed with.  A  sale  usually  produces  great  hardsliip,  as  the  value 
of  the  share  sold  is  unknown;  and  its  sale  seldom  answers  any  useful 
g  purpose  except  that  of  getting  rid  of  tlie  shei-iff. 
alteration          *QQ4.         *xhe  truth,  howovcr,  is  that  the  whole  of  this 

of  the  law.  '  ' 

branch  of  the  law  is  in  a  most  unsatisfactory 
condition,  and  requires  to  be  put  on  an  entireh'-  new  footing.     The 

(q)  See  ace.  W.  N.  1875.  p.  204. 

940 


I 


CIIAr.  v.]  CIIARGIXG    ORDERS.  *695 

statutory  enactments  relating  to  cliari^ing  orders  glioiild  be  extended 
to  all  cases  in  which  the  share  of  a  partner  is  sought  to  be  taken  in 
execution  for  a  separate  debt  of  his  own. 


2.     In  the  case  of  companies. 

Shares  in  public  companies  are  rendered    available   for  the  pay- 
ment of  the  separate  debts  of  their  holders  by  a  very  f^xwution  fo^ 
ditforent  method  from  that  to  which  recourse  must  be  fiimruhoider. 
had  in  the  case  of  partnerships,  as  explained  in  the  preceding  pages. 
There  is  no  interference  with  the  company  or  its  property  by  the 
sheriff;  but  the  judgment  creditor  applies  to  one  of   charcing 
the  judges  of  the  superior  courts  for  an  order  charging  *''"'^*-'''- 
the  shares  of  the  judgment  debtor  with  payment  of  the  debt  for 
whicli  judgment  has  been  recovered.     Such  an  order  has  the  effect 
of  a  charge  made  by  the  debtor  himself  in  favor  of  the  creditor  (/•), 
subject,  however,  to  this  qualification,  that  no  proceedings  can  be 
taken  to  have  the  benefit  of  the  charge  created  by  the  order  until 
the  expiration  of  six  calendar  months  from  its  date  {s).      An  order 
nisi  may  be  obtained  ex  parte ^  and  without  notice  to  the  debtor  ; 
and  it  restrains  the  company  from  permitting  a    transfer  of  the 
shares  held  by  the  debtor,  or  by  any  person  in  trust  for  him,  until 
the  order  is  made  absolute  or  discharged  ;  and  if  the  company  per- 
mits a  transfer  of  the  debtor's  shares  during  the  continuance  of  the 
order,  the  company  becomes  liable  to  the  creditor  to  the  extent  of 
the  value  of  the  shares  transferred,  {t) 

*In  form,  an  order  nisi  is,  that  unless  cause  be  shown  to     *C95 
the  contrary  by  the  judgment  debtor  within  a  given  time, 

the  shares  in  the company,  standing  in  the  name  order  nisi. 

of ,  shall  be,  and  shall  in  the  meantime  stand, 

charged  with  the  payment  of  the  amount  for  which  judgment  has 


(r)  Where  shares  are  held  by  A.   in  hand,  B.'s  interest  may  be  charged  in  an 

trust  for  B.,  an  order  charging  thera  order  in  a  proper  fonn,  Cragg  r.  Taylor, 

niay  be  obtained  by  a  creditor  of  A.,  No.  2,  L.  R.  2  Ex.  1:51;  but  not  if  his 

Cragg  V.  Taylor,  L.  R.  1.  Ex.  148  ;  but,  interest  is  only  in  the  produce  of  their 

asin  the  case  supposed,  A.   has  no  in-  sale.    Dixon  i\  Wrench,  L.  R.  4  Ex.  154. 
terest  in  the  shares,  the  creditor  cannot  [s)  See,  as  to  this,  Bristed  r.  Wilkins, 

maintain  an  action  against  the  com-  3  Ha.  235;  Reece  r.  Taylor.  5  DeG.  it  S. 

pany    if   it  allows  A.  to  transfer  the  480. 

shares.    GiU  v.  Continental  Union  Gas  (0  1  &  2  Vict.  c.  110,  §§  14  to   16;  3 

Co.  L.  R.   7  Ex.  332.    On  the    other  &  4  Vict.  c.  82. 

941 


■^696  CHAEGING    OKDERS    ON    SHARES    IN    COMPANIES.        [coOK  III. 

been  recovered,  and  costs  and  interest  thereon,  pursuant  to  tlie 
statute  1  &  2  Vict.  c.  110.  (a?)  The  order  nisi  prevents  the  shares 
from  being  transferred  or  dealt  with,  but  tlie  charge  created  by  the 
order  dates  from  the  time  the  order  is  made  absohite.  {y)  For  the 
purpose  of  obtaining  the  benefit  of  the  order,  application  must  be 
made  to  the  court  for  a  foreclosure  or  sale,  {z) 

If  the  creditor  causfes  the  debtor  to  be  arrested  before  the  shares 
^^  .  ,       ,    have  been  applied  in  satisfaction  of  the  debt,  the  benefit 

Effect  of  arrest-  '  i  ' 

ing  debtor.         of  the  charging  order  is  lost.  («) 

The  statute  which  enables   shares  to  be  charged  in  the  manner 
above  explained,  applies  only  to  "  public  companies;" 

What  are  pub-  ^  'ji  ^  i  l  ^     ^ 

lie  companies,  jj^-j^  there  is  uo  Statutory  or  other  authoritative  defini- 
tion of  this  phrase;  and  questions  of  considerable  difficulty  may 
consequently  arise  with  relerence  to  many  companies,  as  to  whether 
they  are  "public"  or  not. 

In  Macintyre  v.  Connell  {1j\  the  only  case  in  which  the  meaning 
,,    .  of  the  expression  ''public  companies"  has  been  as  yet 

Macnitvre  v.  >■  ^  ^  "^ 

Connell  mucli  discusscd,  the  Court  came  to  the  conclusion,  1, 

that  transferability  of  shares  was  not  the  test  of  publicity;  2,  that 
the  attribute  of  publicity  could  not  be  denied  in  the  case  of  a  com- 
pany empowered  to  sue  and  be  sued  by  a  public  officer,  and  re- 
quired to  keep  a  register  of  its  shareholders  and  to  make  official 
returns  of  their  names  and  addresses. 

Taking  tliis  decision  as  a  guide,  and  having  regard  to  the  law 
What  shares  relating  to  companies  at  the  time  of  the  passing  of  the 
SfiJge^d  under  1  &  2  Yict.  c.  110,  the  following  companies  must  be 
110."       ■  ■       considered  as  public  companies  within  the  meaning  of 

that  act. 
*696         *1.    Joint-stock  banking  companies  governed  by  the   7 

Geo.  4,  c.  46.  (c) 

{x)  See  Fowler  v.  Churchill,  11  M.  &  [a)  1  &  2  Vict.  c.  110,  §  16.     But  ar- 

W.  57;  Robinson  v.  Burbridge,  9  C.  B.  rest  for  debt  is  now  only  possible  incases 

289.  excepted  by  32  &  33  Vict.  c.  62.  §  4. 

(!/)  See  Warburton  r.  Hill,  Kay,  470;  (h)  1  Sim.  N.  S.  225. 

Scott  V.  Lord  Hastings,  4  K.  &  J.  633;  (c)  Macintyre  v.  Connell,  1  Sim.  N. 

Watts  V.  Porter,  3  E.  &  B.  743,  as  to  the  S.  225,  related  to  a  joint-stock  banking 

priorities  of  creditors.     See,  also,  ante,  company  governed  by  7  Geo.  4,  c.  46, 

note  (r).  and  7  &  8  Vict.  c.  113,  and  removes  the 

{z)  As  in  Bristed  v.  Wilkins,  3  Ha.  doubts  formerly  entertained  respecting 

235,  and  Macintyre  v.  Connell,  1  Sim.  such  companies.     See  Graham  v.  Con- 

N.  S.  225,  252.  nell,  19  L.  J.  Ex.  361. 

942 


CllAI'.  v.]         CIIAKGIXG    ORDKPwS    ON    SHARES    IX    (  OMI'ANIES.  '■'(jUl 

2.  Joint-stock  companies  governed  by  the  Lettei-s  Patent  act,  7 
Wm.  4  &  1  Vict.  c.  73.  {d) 

3.  Incorporated  joint-stock  companies  generally.  Incorporation 
itself  makes  a  company  a  public  C!)mp-iny;  for  its  existence  is  au- 
thorized by  public  authority,  viz.,  the  Crown  or  the  legislature,  and 
is  re(iuired  by  the  same  authority  to  he  pul>licly  recognized. 

Unincor])oratcd  companies,  not  being  hanking  companies,  gov- 
erned by  the  7  Geo.  4,  c.  4(5,  or  com])aMies  governed  by  the  Letters 
Patent  act,  arc  j>r/'m  a  facie  not  public  c(jm)>anies.  {e) 

This  last  conclusion,  if  correct,  is  of  great  im]>ortance  to  raining 
companies  formed  on  the  cost-book  ]>rincij)le;  for  if  ^s to  cost-book 
these  companies  are  not  public  com]ianies  within  the  ccuipani*-^- 
meaning  of  1  ife  2  Yict.  c.  110,  it  follows  that  their  mines  and  plant 
mav  1)0  seized  nnder  writs  issued  against  individual  shareholders 
for  their  separate  debts.  And  this  appears  to  be  the  case;  for  al- 
thouuh  the  writer  is  not  aware  that  the  propriety  of  such  a  seizure 
has  been  actually  decided  (/"),  he  is  enabled  to  state  of  his  own 
knowledge  that  if  judgment  is  recovered  against  a  shareholder  in  a 
Cornish  cost-book  mining  company  for  a  ])rivate  debt  owing  by 
him,  and  wfi.fn.  upon  such  judgment  is  delivered  for  execution  to 
the  sheriff  of  Cornwall,  he  treats  the  company  as  a  mere  partner- 
ship, and  seizes  its  property  and  sells  the  share  and  interest  of  the 
judgment  debtor  therein  in  the  ordinary  way.  This  is  not  so  well 
known  as  it  deserves  to  be.  (y) 

*"\Vhether  shares  can  be  attuclud  in  the  Lord  Mayors  697* 
court  a]ipears  doubtful.  (A) 

In  connection  with  the  subject  of  execution,  it  should  be  observed 
that  the  Court  has  ])0wer,  upon  the  application  of  any  attachment  of 
partv  interested,  by  motion  or  lietition,  in  a  summary   ^hares. 

'         -  "'  '  .     .    •'     Restraining 

way,  to  restrain  any  pidjlic  conqiaiiy  from  permitting   orders, 
the  transfer  of  any  stock  or  shares  standing  in  the  name  of  any  per- 
son in  the  books  of  such  company,  or  from   paying  any   dividend 

((T)  See  Macintyrc  r.  Council,  1  Sliu.  (fj\  The  writor  is  enalilod  to  mako  tlio 

N.  S.  2'2">.  aViove  stat<^>inent    as   to  the  prartitp  of 

(f )  See  the  judgiiicnt  of  Miicintyre  r.  the  sheriff  of  Cornwall,  by  having  him- 

Connell,  1  Sim.  N.  S.  2'25.  self  (as  tnistee)  issued  execution  against 

(/)  In  Nichols  v.  Rosewani\  7  W.  a  person  who  was  a  shareholder  in  sfv- 

R.  612.  the  question  whether  shares  in  eral  Cornish  cost-book  mines, 

cost-book  min-'s  can  b)  charsrHl  under  1  (h)  See  Tredinnick  r.  Oliver,  5  H.    A: 

k  2  Vict.  c.  ll'J,  was  m.otoi  but  not  X.  TSO. 
decIJod. 

IM3 


•^QQJ  TRANSFER    OF    SHARES.  [];0«jK  III. 

thereon,  (i)  An  application  for  such  an  order  may  be  made  ex 
parte,  but  must  be  supported  by  an  affidavit  showing  the  title  of 
the  applicant,  and  the  necessity  for  the  interference  of  the  Court 
{k)\  and  unless  an  action  is  commenced  within  a  reasonal)le  time 
after  the  order  is  made  it  will  be  discharged  (Z);  as  it  will,  also, 
after  action,  if  no  sufficient  grounds  for  the  order  are  shown,  {m) 


SECTION  v.— OF  THE  TRANSFER  OF  SHARES. 
1.  In  ordinary  j^di^tnei'shijys. 

"When  persons  enter  into  a  contract  of  partnership,  their  intention 
ordinarily  U,  that  apartnership  shall  exist  between  them- 

TrsLiisfsr  of  ./        ?  i  ■•■ 

shares  in  ordi-    gelves  and  thcmsclves  alone.     The  mutual  confidence  re- 

narj'  partner-  .  . 

ships.  posed  by  each  in  the  other  is  one  oi  the  mam  elements  in 

the  contract,  and  it  is  obvious  that  persons  may  be  willing  enough  to 
trust  each  other,  and  yet  be  unwilling  to  place  the  same  trust  in  any 
one  else.  Hence  it  is  one  of  the  fundamental  principles  of  partnership 
law  that  no  person  can  be  introduced  as  a  partner  without  the  consent 
of  all  those  who  for  the  time  being  are  members  of  the  firm."  If, 
therefore,  a  partner  dies,  his  executors  or  devisees  have  no  right  to  in- 
sist on  being  admitted  into  partnership  M-ith  the  surviving  partners, 
unless  some  agreement  to  that  effect  has  been  entered  into  by  them,  (w) 

(i)  5  Vict.  c.  5,  §  4.  ^  member  of  a  new  firm,  but  his  express 

{k)  Re  Field,  1  Y.  &  C.  C.  1 ;  East  of  assent  need  not  be  proved,  to  b^nd  him  ; 

Eno-land  Bank,  6  N.  R.  81.  itissufficienttoshovvthatheknewofsuch 

(l)  i?e  Marquis  of  Hertford,  1  Ha.  584.  new    arranoenient,  and  made  no  ob.iec- 

im)  S.  C.  1  Ph.  203.  lion i hereto.    Tabb.  v.  Gist.  1  Brock.:].). 

/      1 A  partner  cannot  introduce  a  new  Where  one  buys  a  stranded  vessel, 

member  into  the  firm  without  the  con-  and  agi-ees  to  give  another  an  mterest 

sent  of  the  other  members,  nor  make  therein,  tlie  latter  has  no  interest  he  can 

them  members  of  another  firm.    When  transfer  without  the  former's  consent, 

made  acquaninted  with  the  facts,  the  It  is  an  agreement  to  take  m  a  partner, 

members  should  dissent,  or  they  will  be  and  gives  the  second  party  no  right  to 

bound.     Mason  v.   ConneU,  1   Whart.  impose.an  unknown  partner  on  the  first. 

381-   Murray  v.  Bogert,  14  Johns.  318;  Taylor  v.  Penny,  5  La.  Ann.  7. 

Freligh  v.   Miller,   16    La.   Ann.   418;  («)  Pearce  v.  Chamberlam,  2  Ves.  S. 

Channel  v.  Fassitt,  16  Ohio,  166;  Free-  33;  Crawford  v.  Hamilton,  3Madd.  2.j4; 

man  v.  Bloomfield,  43  Mo.  391;  Bennett  Bray  v.  Fromont,  6  ib.  5;  Crawshay  v. 

\         V.  Snyder,  76  N.  T.  344.  Maule,^l  Swanst.  495;  Tatam  v.  Wil- 

The  assent  of  each  member  of  a  co-  liams,  3  Ha.  347. 
partnership  is  necessary  to  bind  him  as 

944 


CHAP,  v.] 


TRANSFER   OF   SHARES. 


^698 


■"Still  less  can  a  partner  by  assigning;  his  share  entitle  his     *098 
assignee  to  take  his  ])hice  in  the  partnership  against  the  will  of 
the  other  members,  (o)'    The  assignment,  however,  is  by   Eflect  oftraas- 
no  means  inoperative;  on  the  contrary,  it  involves  several    "^ 

r  y  J'>  Effect  of  as- 

important  consequences,  more  especially  as  regards  the  sigmiu'iu- 
dissoliition  of  the  firm  and  the  right  of  the  assignee  to  an  account. 
As  regards  dissolution,  it  is  remarkable  that  there  should  be  so 
little  authority  to  be  found.     It  is  generally  stated,  tliat  i.  as  r.^ards 

•  <>  1  (>  T  i.  1  •        i  i-  1  •       dissolution. 

IT  a  member  oi  an  ordinary  partnersliip  translers  Ins 
share,  he  thereby  dissolves  the  partnershij);  but  this  i)roposition  re- 
quires qualification.  Tlie  true  doctrine,  it  is  submitted,  is  th.at  if 
the  partnershi])  is  at  will,  the  assignment  dissolves  it  (/>);"  and  if 
the  partnership  is  iu)t  at  will,  the  other  members  are  entitled  to  treat 
the  assignment  as  a  cause  of  dissolution.  It  can  hardly  be  that  a 
])artner,  who  has  himself  no  right  to  dissolve  or  to  introduce  a  new 
partner,  can,  by  assigning  his  share,  confer  on  the  assignee  a  light  to 
have  the  accounts  of  the  firm  taken,  and  the  affairs  thereof  wound 
up,  in  order  that  he  may  obtain  the  benefit  of  his  assignment. 

Although  a  partner  caimot,  b}^  transferring  his  share,  force  a  new 
partner  on  the  other  members  of  the  firm  without  their  ,  j^^  regards 
consent,  there  is  nothing  to  prevent  a  partner  from  as-   "(-'^"""t- 
siffuino^  or  mortoraijing  his  share  without  consultinij  his  co-part- 
ners;'    and  if  a  partner  does  assign  or  mortgage  his  share,  he  there- 


(o)  See  Jefferys  v.  Smith.  3  Russ. 
158. 

'  Merrick  r.  Brainard,  38  Barb.  574. 
See  cases  cited  on  the  next  page,  aitfe. 

The  purchaser  of  an  interest  of  one 
of  several  partnei-s  has  no  right  to  inter- 
fere personally  in  the  affairs  of  the  part- 
nership, and  a  refusal  of  the  remaining 
partners  to  permit  him  to  do  so,  will  not 
entitle  him  to  the  interference  of  a  court 
of  equitj'  by  injunction,  or  the  app:)int- 
ment  of  a  receiver.  McGlensey  r.  Cox, 
5  Pa.  Law  J.  Rep.  203. 

Where  one  of  two  partners  sells  to  a 
third  person  his  interest  in  the  goods 
owned  by  the  partnership,  the  purchaser 
cannot  maintain  an  action  to  recover 
his  intei-est  in  the  goods,  but  must  sue 
for  an  accounting,  and  will  recover 
whatever  his  assignor  would  have  been 


entitled  to  upon  a  settlement  of  the  part- 
nership accounts;  and.  until  the  attairs 
of  the  partnei-ship  are  thus  wound  up, 
the  partner  who  did  not  sell  is  entitled 
to  the  possession  of  the  property.  Miller 
V.  Brigham,  oO  Cal.  fil'i. 

ip)  See  Heath  v.  Sansom,  4  B.  &  Ad. 
17J. 

-See  ante,  230  and  note. 

'  One  partner  maj'  sell  his  interest  in 
the  partnership  propertj'  to  his  co-part- 
ner; and  if  the  sale  be  fair,  he  will  take 
the  exclusive  title  thereto.  Reese  r. 
Bradford,  13  Ala.  837. 

One  partner  may  purchase,  on  his  own 
account,  at  a  public  sale,  the  interest  of 
his  co-partner  in  real  estate,  and  will 
hold  the  purchased  property  as  a 
stranger  might.  Bradbury  r.  Barnes, 
19  Cal.  120. 

«^  945 


'6dS 


TRANSFER   OF    SHARES. 


[book  III. 


by  confers  upon  the  assignee  or  mortgagee  a  riglit  to  payment  of 
what,  npon  taking  tlie  aeconnts  of  the  partnership,  may  he  due  to 
the  assignor  or  niortgagor.  {qf     But  the  assignee  or  mortgagee  ae- 


A  bona  fide  mortgage,  given  by  a 
member  of  a  firm  to  the  firm,  is  valid, 
and  in  no  sense  a  mortgage  to  the 
grantor  himself.  Galway  v.  Fullerton, 
17  N.  J.  Eq.  389. 

An  assignment  by  a  member  of  a  firm 
of  all  his  property  to  an  assignee,  for 
the  benefit  of  his  creditors,  will  convey 
not  only  all  his  individual  property,  but 
his  interest  in  the  company  property. 
Fellows  i\  Greenleaf,  43  N.  H.  421. 

iq)  Glyn  v.  Hood,  1  Gifl'.  328,  and  1 
DeG.  F.  &  J.  334. 

*See  Rodriguez  v.  Heffernan,  5  John. 
Ch.  417;  NicoU  v.  Mumford,  4  id.  522; 
Miller  v.  Brigham,  50  Cal.  615;  Menagh 
V.  Whitwell,  52  N.  Y.  146. 

Four  persons  entered  into  co-pamer- 
ship  in  1832,  in  the  business  of  manfac- 
turing  cotton  cloths,  for  the  term  of  five 
years,  and,  in  1833,  the  partnership  was 
dissolved,  and  afterwards,  by  their  deed 
they  assigned  to  A  "  all  their  right  and 
title  to  all  and  singular  the  rights,  priv- 
ileges, and  interest  secured  "to  them 
by  the  articles  of  co-partnership.  A 
part  of  the  property  taken  was  the  prop- 
erty of  the  partners,  and  a  part  of  the 
partnership  stock  when  the  partnership 
was  formed,  and  the  residue  was  after- 
wards purchased  by  the  partners  with 
the  general  partnership  funds  :  Held, 
that  all  the  property  passed  which,  at 
the  time  of  the  transfer,  was  partner- 
ship property,  to  be  held  and  used  by 
A  for  the  residue  of  the  five  years,  and 
that  the  operation  of  the  assignment 
was  not  effected  by  the  dissolution,  it 
being  made  by  all.  Caswell  v.  Howard, 
16  Pick.  562. 

By  the  terms  of  a  contract  dissolving 
a  partnership  between  A  and  B  in  a 
certain  store,  the  former  sold  the  latter 
"  all  the  right,  title  and  interest  of  said 
A  "  in  said  store,  with  all  the  notes  and 

946 


accounts  due,  the  latter  assuming  the 
payment  of  all  debts  and  claims  against 
said  firm :  Held,  that  the  contract  raised 
the  presumption  that  the  parties  intend- 
ed a  complete  settlement  of  all  the  part- 
nership affairs;  that  a  balance  standing 
to  the  credit  of  the  firm  in  a  bank  was 
embraced  in  the  "  accounts  due  the 
firm,"  and  that  there  was  no  latent  am- 
biguity in  the  contract.  Burress  v. 
Blair,  61  Mo.  133. 

W.  bought  all  the  interest  of  M.  in 
the  property  of  the  firm  of  R.  &  M.,  and 
then  fonned  a  partnership  with  R., 
agreeing  to  put  in  all  the  property  he 
received  from  M.:  Held,  that  a  bank 
deposit  in  the  name  of  R.  &  M.,  of 
which  both  parties  were  ignorant  at  the 
time,  became  the  partnership  property 
of  the  new  firm,  W.  &  R.  Cram  v. 
Union  Bank,  1  Abb.  App.  Dec.  461. 

In  an  agreement  between  partners  it 
was  agreed  that  for  the  purpos?  of  dis- 
posing of  the  joint  stock  of  the  firm, 
"as  detailed  in"  a  prior  mventory 
thereof,  all  the  property  of  the  firm  ex- 
cepting certain  spocified  items,  and  ex- 
cepting "  the  book  accounts  and  receiv- 
ables," should  be  put  up  and  bid  upon 
by  the  partners;  this  was  done,  ami 
plaintiff  became  the  purchaser.  In  an 
action  for  an  accounting  it  appeared 
that  after  the  inventory  and  prior  to  the 
bidding,  certain  chattels  of  the  firm  had 
been  sold :  Held,  that  the  sale  did  not  in- 
clude said  chattels  or  the  money  or  debts 
obtained  therefor ;  that  the  state m?nt 
as  to  the  inventory  was  s'mply  by  way 
of  reference,  and  in  the  nature  of  a  re- 
cital or  matter  of  inducement.  Deering 
t\  Metcalf,  74  N.  Y.  501. 

A  sale  by  a  partner  to  his  co-partner 
of  all  his  interest  in  the  property,  effects, 
claims,  assets  and  debts  of  a  firm,  does 
not  pass  to  the  purchaser  an  account 


CHAP,  v.] 


TRANSFER  OF  SHARES. 


*60S 


quires  no  other  right  than  this  (?);  and  he  takes  subject  to  tlic 


standing  upon  the  books  of  the  firm 
against  the  pai-tner  making  the  sale, 
nor,  as  it  has  been  held,  the  seller's  in- 
terest in  the  capital  originally  conti'i- 
buted  by  him  to  the  firm.  Coding  v. 
Taylor,  16  111.  457.  See,  also,  Hassel- 
man  i'.  Douglass,  52  Ind.  252;  Owen  v. 
Hetherington,  66  Ind.  365. 

In  Owen  v.  Hetherington,  supra,  in  a 
suit  upon  a  promissoiy  note,  the  defend- 
ant answered  that  himself,  B  and  C 
were  partners;  that  B  and  defendant 
bought  out  C's  interest  in  the  concern, 
each  to  pay  one-half  of  the  amount 
agreed  upon;  that  the  note  in  suit  was 
executed  by  defendant  to  C  in  discharge 
of  his  half;  that  when  C  retired  from 
the  fiiTn  he  was  indebted  to  it  in  a  cer- 
tain sum,  on  his  individual  account, 
which  indebtedness  C  had  fraudulently 
concealed  from  the  defendant;  that  de- 
fendant subsequently  bought  out  B,  and 
became  thereby  the  owner  of  the  entire 
claim  against  C,  and  asked  that  such 
claim  be  allowed  as  a  set-off  against  the 
note:  Held,  that  such  claim  did  not 
constitute  a  set-off.  When  a  partner 
sells  his  "  interest  in  the  concern,"  it 
must  be  presumed  that  he  sells  only  his 
legal  interest  in  the  firm;  and  it  cannot 
be  assumed,  in  the  absence  of  any  stip- 
ulation to  that  effect,  that  such  partner 
sold  or  intended  to  sell  his  indebtedness 
to  the  firm :  Held,  also,  that  it  would 
be  assumed  that  C's  indebtedness  to  the 
firm  appeared  upon  its  books,  and  that 
such  books  were  open  to  the  examina- 
tion of  the  defendant,  and  his  alleged 
ignorance  of  the  existence  of  such  in- 
debtedness was  the  result  of  his  own  m- 
excusable  negligence. 

But  where  by  the  articles  of  partner- 
ship it  was  provided  that  the  accounts 
of  each  partner  to  the  firm  "  shall  stand 
due  to  the  concern  in  the  same  manner 
as  any  other  account  due  by  a  party  un- 


connected with  the  business."  Upon 
the  dissolution  of  the  firm,  under  the 
written  terms  thereof,  one  of  the  partners 
"  agreed  to  purchase  all  right  and  inter- 
est of  the  other  partner  in  the  stock, 
cash,  notes,  bcok-accounts,  and  ever>- 
thing  connected  with  the  firm : ' '  Held, 
that  the  account  of  the  firm  against  tht- 
partner  selling  out  was  cancelled  and 
extinguished  in  the  agreemi:'nt  of  diss<r- 
lution  and  purcha.se.  Murdock  r.  Melil- 
hop,  26  Iowa,  21.1 

So,  where  one  partner,  having  a  large 
pecuniary  interest  in  the  firm,  but  being 
individually  a  debtor  thereto,  for  a  cer- 
tain amount,  as  appeared  by  entries  on 
their  books,  sold  and  conveyed  to  the 
other  partner,  "all  his  right,  title,  and 
interest  in  and  to  all  the  property  and 
estate,  real,  personal,  and  mixed,  he- 
longing  to,  or  which  of  right  ought  to 
belong  to,  said  finn:  "  Held,  that  such 
conveyance  transferred  to  the  oth^r 
partner  only  his  interest  in  the  concern, 
which  remained  after  deducting  such 
indebtedness,  and  that  the  amount  so 
charg3d  to  him  individually  could  not 
thereafter  be  collected  of  him.  Bockley 
r.  Munson.  22  Conn.  299 ;  S.  P.  Fmlay 
V.  Fay,  17  Hun,  67. 

Where  one  of  two  partner  sold  out 
to  the  other,  the  purchaser  taking  all 
the  assets,  and  assuming  the  payment 
of  all  the  liabilities;  and  where  in  pro- 
ceedings between  the  two.  under  a  sub- 
mission to  arbitrators,  the  arbitrators 
found  that  in  the  keeping  of  the  books 
of  the  firm  there  had  been  mistakes, 
and  that  the  vendor  had  received  credits 
and  cash  with  which  he  wa.s  not  charged, 
amounting  to  the  sum  of  $1900 — among 
which  Wii>^  the  following  item:  "For 
credits  entered,  which  he  is  not  entitled 
to,  $14:'>1.S4," — which  sum  was  award- 
ed to  the  vendee  of  the  p:ii-tnership  in- 
terest; and  where  it  was  claimed  that 


(r)  SraiUi  r.  Parkes,  16  Beav.  115. 


947 


•"•698 


TRANSFER    OF    SHARES. 


[book  III 


I] '2 


lits  or  the  other  partners;*    and  will  be  affected  by  equities  aris- 


the  vendee  was  entitled  to  recover  for 
only  one-half  of  the  said  sum  of 
$1431.84:  Held,  that  the  vendee  was 
substituted  to  all  the  rights  of  the  part- 
nership, and  whatever  either  was  owing 
to  the  firm  belonged  to  him.  Tomlm- 
son  V.  Hammond,  8  Iowa,  40. 

A  partnership  was  dissolved  by  arti- 
cles of  dissolution,  dated  9th  of  Febru- 
arj',  1839,  by  which  the  complainants, 
were  to  become  possessed  of  all  the 
stock,  debts  and  assets  of  the  firm,  and 
pay  to  defendant  a  certain  sum,  and 
these  conditions  being  complied  with, 
the  parties  were  mutually  to  release 
all  claims  against  each  other.  An  ac- 
count was  found  on  the  books  charg- 
ing defendant  with  $2100  for  vari- 
ous items,  balanced  by  an  entry  of  credit 
for  that  sum  "for  expenses"  dated 
the  1st  of  February,  1839,  upon  a  bill 
attacking  this  entry  as  unauthorized  by 
the  terms  of  the  partnership,  and 
fraudulently  made  pending  the  negotia- 
tion for  a  dissolution:  Held,  1.  If  the 
defendant  had  stood  charged  on  the 
books  with  the  $2100  at  the  time  the 
terms  of  the  dissolution  were  agreed 
upon,  the  settlement  would  have  re- 
leased the  indebtedness.  2.  But  if  the 
terms  of  dissolution  were  settled  on  the 


*  Where  the  interest  of  one  partner  in 
the  partnership  property  passes  to  an- 
other person,  it  is  immaterial  whether 
that  transfer  be  effected  by  a  sale  by  the 
partner  himself  for  a  valuable  consider- 
ation, by  a  sale  of  his  interest  on  execu- 
tion, by  his  death  and  the  succession  of 
his  executor  or  administrator,  or  by  as- 
signment under  the  bankrupt  or  insolv- 
ent laws.  In  all  these  cases  the  party 
comuig  into  the  right  of  the  partner, 
comes  into  nothing  more  than  an  inter- 
est in  the  partnership  which  cannot  be 
tangible,  made  available,  or  delivered, 
except  under  an  account  between  the 
partner  and  the  partnership;  and  it  is 

948 


supposition  that  defendant's  account 
had  been  properly  balanced  when  in 
fact  the  credits  had  been  improperly 
and  fraudulently  entered,  the  com- 
plainants were  entitled  to  recover  the 
amount  of  the  debit  in  defendant's  ac- 
count. 3.  In  the  absence  of  all  proof 
on  the  subject  it  must  be  assumed,  that 
complainants  dealt  with  defendant  un- 
der the  belief  that  the  books  had  been 
fairly  and  correctly  kept,  and  the  credit 
being  proved  improper,  they  were  enti- 
tled to  relief  against  it.  Trump  r.  Balt- 
zell,  3  Md.  295. 

Where  a  partner  sells  his  interest  in 
his  firm,  including  the  stock  and  ex- 
cepting the  accounts  and  indebtedness 
due  it,  to  his  co-partners,  the  sale  cov- 
ers amounts  which  the  vendees  have 
failed  to  pay  m  as  partners  to  make 
their  respective  shares  of  the  capital 
stock  equal  to  the  capital  paid  in  by 
him,  as  well  as  their  liability  for  mon- 
eys withdrawn  from  the  firm  by  them. 
Flynn  v.  Fish,  7  Lans.  117. 

Where  certain  persons  by  a  writing 
signed  by  them,  formed  an  association 
for  publishing  a  daily  and  weekly  news- 
paper and  therein  and  thereby  agreed 
that  said  newspaper,  and  the  good  will 
thereof,  and  all  the  other  goods,  etc,  of 


an  item  in  the  account  that  enough 
must  be  left  for  the  partnership  debts. 
Baker's  Appeal,  21  Pa.  St.  76:  Fourth 
Nat'l  Bank  v.  (Jarrolton  Railroad,  11 
Wall.  624;  Mords  v.  Gleason,  64  N.  Y. 
204  ;   Miller  v.  Brigham,  50  Cal.  615. 

Where  real  estate  held  by  the  mem- 
bers of  a  partnership  as  a  partnership 
property  is  mortgaged  by  one  of  the 
partners  to  secure  his  individual  debt, 
the  mortgagee  only  acquires  a  lien  upon 
what  may  be  the  share  of  the  mort- 
gagor after  settlement  of  the  partner- 
ship accounts  and  the  payment  of  all 
partnership  debts.  Conant  v.  Frary,  49 
Ind.  530. 


CUAP.  v.] 


TRANSFER  OF  SHARES. 


*698 


ing  between  the  assignor  and  his  co-partners  subsequently  to  the 


the  association  "  as  thoy  shall  from  time 
to  time  exist,  shall  be  divided  into,  and 
shall  always  consist  of  100  equal  shares 
to  be  called  capital  stock;  "  and  in  what 
proportions  such  stock  should  belonj,'  to 
them  in  severalty;  and  thereby  l)y  the 
6th  article  thereof  also  apn"e<?d  that  each 
paiiy  should  have  the  right  to  sell  any  of 
his  said  stock,  but  before  doing-  so,  should 
offer  the  same  to  the  association,  and  give 
it  the  refusal  thereof  for  10  days;  and 
that  no  "purchaser  shall  acquire  any 
interest  whatever  in  the  profits  of  said 
papers,  till  he  shall  receive  a  certificate 
or  scrip  for  his  said  shares,  signed  by 
all  the  parties  hereto,  and  duly  registered 
in  a  book  to  be  kept  for  that  pui-pose," 
wliich  scrip  shall  certify  that  the 
holder  of  it  "  is  entitled  to  participate, 
in  proportion  to  his  shares,  only  in  that 
portion  of  the  profits  which  may  be 
assigned  to  the  party  selling  to  such 
purchaser,  and  shall  not  be  entitled  to 
any  voice  or  agency  whatever  in  the 
conduct,  control,  management  or  affairs 
of  saidcompany,  or  of  said  newspapers:" 
Held,  1.  That  the  plaintiff  who  pur- 
chased 30  shares  of  the  stock  from  a 
prior  and  registered  purchaser  thereof, 
was,  as  between  him  and  his  vendor, 
the  owner  thereof,  and  as  such  equitr 
ably  entitled  to  any  dividends  of  profits 
asceiiained  and  declared  while  he  was 
such  o\STier,  and  credited  on  the  books 
of  the  association  to  such  stock  as  its 
just  proportion  of  such  ascertained 
profits,  although  such  stock  was  so  pur- 
chased by  the  plaintiff  without  a  pre- 
vious of!er  of  it  by  his  vendor  to  the  asso- 
tion  or  to  either  of  his  associates. 

2.  A  sale  and  assignment  by  the 
plaintiff  after  such  a  dividend  of  profits, 
of  the  said  "30  shares  of  ciipital  stock," 
"  and  all  future  benefits  and  dividends 
thereof,"  with  full  authority,  as  the  at- 
torney of  the  plaintiff  and  of  his  v(Mulor, 
to  sell  for  them  "  all  or  any  part  of  said 
stock  "  did  not  pass  to  the  plaintiff's 


vendee  any  right  to  the  dividend  so 
previously  declared  and  credited  to  the 
said  30  shares. 

3.  A  written  notice  signed  by  one  of 
the  associates  and  served  (on  all  persons 
interested  in  the  capital  stock  i  after 
such  a  dividend  of  profits  had  b"en 
made,  declaring  the  association  dis- 
solved ;  and  the  institution  by  him  of  a 
suit  to  obtain  a  judgment  declaring  it 
to  be  dissolved,  &,;•.,  operated  as  a  disso- 
lution of  the  association,  and  made 
plaintifi"8  legal  title  to  the  profits  so 
allotted  and  credited  to  his  30  shares 
perfect  and  absolute,  and  completed  his 
right  to  sue  the  associates  and  recover 
from  them  such  ascertained  and  de- 
clared profits,  unembarrassed  by  any  of 
the  conditions  and  proHsions  contained 
in  the  6th  article  of  association. 

4.  But  there  would  be  deducted  from 
such  declared  profits  3-10  of  a  debt 
owing  by  the  association  when  the  divi- 
dend was  declared  and  subsequently 
paid  by  it,  but  not  then  considered,  be- 
cause its  amount  was  not  then  known 
or  capable  of  l>oing  asc  ^rtained.  Harp  ^r 
t'.  RiijTuond,  3  Duer.  29. 

A  and  B,  partners  in  trade,  made  a 
written  agreement  whereby  the  former, 
in  consideration  of  a  certain  sum  of 
money  to  be  paid  him,  and  of  a  wrtain 
amount  of  goods  to  be  withdrawn  by 
him  from  the  stock  of  the  firm,  and  of 
the  assumption  by  the  latter  of  all  con- 
tracts and  debts  of  the  firm,  sold  and 
transferred  to  B  all  the  interest  of  A 
in  the  assets  of  the  firm,  including 
money  on  hand,  notes,  accounts,  stock, 
mi\chmer>'  and  material;  the  instru- 
ment i-eciting  that  the  object  and  pur- 
port of  the  contract  was  the  withdrawal 
of  A  from  the  firm,  and  the  release  of 
A  by  B  "  from  any  and  all  liabilities  on 
account  thereof,"  and  that  if  B  should 
fully  pedbnn  the  agreement,  and  re- 
lease A  in  accordance  with  the  provi- 
sions of  the  contract,  the  sale  should  be 
949 


*698 


TRANSFER    OF   SHARES. 


[book  III. 


assignment,  (s)     Even  if  the  assignee  gives  notice  of  tlie  assign- 
ment, he  cannot  (if  the  partnership  is  for  a  term)  acqnire  a  right 


valid  in  law,  else  void  and  of  no  effect: 
Held,  in  an  action  by  A  against  B  on  said 
contract,  to  recover  said  sum  of  money 
as  stipulated  therein,  that  A  was  re- 
li'ased  from  all  liability  on  account  of 
any  claim  against  hmi  or  debt  due  from 
him  in  favor  of  said  firm,  as  well  as  re- 
leased from,  and  secured  against  any 
liability  of  the  firm  to  any  other  person. 
Hcadley  v.  Shelton,  51  Ind.  388. 

Where  one  partner  purchases  of  his  co- 
partner his  interest  in  the  partnership 
property,  under  a  mistake  as  to  the  true 
condition  of  the  partnership  accounts, 
but  without  fraud  in  the  partner  selling, 
there  is  no  legal  consideration  for  a 
promise  of  the  latter  to  make  up  the 
amount  of  the  mistake.  Eakin  v.  Fen- 
ton,  15  Ind.  59. 

One  partner  sold  to  his  co-partner  his 
interostin  the  partnership  effects,  and 
afterwards  it  was  discovered  that  the 
inventory  and  estimate  of  the  effects 
v.'hich  the  parties  had  before  them  at  the 
time  of  the  sale  was  erroneous,  and  that 
the  effects  were  in  fact  less  than  ap- 
peared from  the  inventory.  The  sum 
paid  for  the  selling  partner's  interest 
was,  however,  considerably  less  than  his 
share  of  the  amount  of  the  inventory  : 
Held,  that,  while  the  sale  remained  in 
force,  an  action  could  not  be  maintained 
to  recover  the  difference  between  the  ac- 
tual amount  of  the  effects  and  the 
amount  stated  in  the  inventoiy.  Wood 
r.  Johnson,  13  Vt.  191. 

One  of  two  co-partners,  without  the 
laiowledge  of  the  other,  mortgaged  an 
undivided  half  of  partnership  property 
to  secure  his  private  debt.  A  thu-d 
party  bought  the  property,  promising 
to  pay  the  mortgagee  one-half  its  value  ; 
but  being  garnished  by  a  firm  creditor, 
he  was  obliged  to  pay  over  the  entire 
value  :  Held,  that  his  promise  to  pay 
the  mortgagee  could  not  be  enforced,  the 

950 


consideration  having  failed.      Sauntry 
V.  Dunlap,  12  Wis.  364. 

A  hond  fide  transfer  of  an  interest  in 
a  partnership  may  be  made  without 
wi-itings  or  vouchers.  Be  Great  West- 
ern Tel.  Co.  5  Biss.  363. 

A  notice  to  one  paiiner  in  possession 
of  the  partnership  property,  of  the  pur- 
chase of  another  partner's  interest,  is  a 
sufficient  delivery  to  constitute  a  valid 
sale.  Whigham's  Appeal,  63  Pa.  St. 
194. 

A  partner  sold  his  interest,  which  was 
one-half,  in  the  business  to  his  co-part- 
ners for  a  given  sum;  providing  further 
that  when  the  indebtedness  of  the  firm 
was  ascertained,  if  it  did  not  amount  to 
over  $9,000,  they  were  to  execute  to  him 
then-  note  for  $1,500;  or  if  the  debts  of 
said  finn  should  amount  to  over  $9,000, 
then  the  said  note  to  be  propoiiionately 
less  according  to  the  increase  in  the 
amount  of  said  indebtedness.  It  being 
ascertamed  that  the  indebtedness  was 
in  excess  of  $9,000:  Held,  that  the  ex- 
cess should  reduce  the  amount  of  the 
note  in  the  one-half  amount  of  such  ex- 
cess.    Murchison  v.  Warren,  50  Tex.  27. 

One  of  the  partners  in  the  business  of 
brewers  executed  an  agreement  for  the 
sale  of  "  his  whole  interest  in  the  brew- 
ery at,"  etc.,  "consisting  of  stock  on 
hand,  personal  property,  real  estate," 
etc.,  describing  certain  town  lots,  '  for 
the  sum  of,"  etc.:  Held,  that  this  agree- 
ment, taken  according  to  its  terms,  did 
not  dispose  of  moneys  on  hand  or  on  de- 
posit belonging  to  the  partnershiij,  or 
of  bills  receivable  or  accounts  in  favor 
of  the  firm.  Gamier  v.  Gebhard,  33 
Ind.  225. 

(s)  See  Cavander  v.  Bulteel,  9  Ch.  78; 
Lindsay  v.  Gibbs,  3  DeG.  &  J.  690; 
Guion  V.  Trask,  1  DeG.  F.  &  J.  379,  ^er 
Turner,  L.  J. 


ciiAr.  V 


.] 


IN   rARTNERSIIIPS. 


*C09 


to  tlie  assignor's  share  as  it  stands  *ut  the  time  of  the  as-  G'JO* 
signnient  or  notice,  discharf^ed  from  subsequently  arisin*^ 
claims  of  the  other  partners,  {ty  The  assignment  cannot  deprive 
them  of  their  right  to  continne  the  partnership,  and  consequently 
to  bring  subsequent  dealings  and  transactions  into  acconnt- 
"Whether  an  assignee  of  a  share  in  a  partnership  can  compel  the 
otlier  partners  to  come  to  an  account  ivith  him  is  apparently  open 
to  some  doubt,  although  there  are  instances  in  which  suits  with 
that  object  have  been  sustained  {2t\  yet  the  analogy  furnished  by 
sub-partnerships  leads  to  the  inference  that  the  assignee  must,  to 
use  Lord  Eldon's  language,  be  satisfied  with  the  share  of  the  profits 
arising  and  given  to  the  assignor,  (x) 

If  partners  choose  to  agree  that  any  of  them  shall  be  at  liberty  to 
Transfer  allow-   introduce  any  other  person  into  the  partnershij),  there 

ed  by  agree-  •  1^1111,  11. 

mem.  IS  no  reason  wliy  they  sliould  not;  nor  why,  having  so 

agreed,  they  should  not  be  bound  by  the  agreement,  (y)'     Persons 

(0  See  Cavander  v.  Bulteel,  9  Ch. 
78;  Kelly  v.  Hutton,  3  Ch.  703;  Red- 
mayne  v.  Forster,  2  Eq.  4G7. 

'  See,  however,  Moscly  r.  Garrett,  1 
J.  J.  Marsh.  212,  where  it  was  held 
that  if  a  partner  mortgage  his  interest 
in  partnership  property,  the  other  part- 
ner cannot  apply  it  in  discharge  of  the 
firm  debts. 

Where  the  interest  of  one  of  the 
partners,  in  the  property  of  a  partner- 
ship, is  assij;ned  by  him  as  security  for 
his  individuid  debts,  and  such  assignee 
permits  the  business  to  go  on  in  its  or- 
dinaiy  course,  such  security  becomes 
subject  to  the  fluctuations  of  the  busi- 
ness, and  upon  the  subsequent  dissolu- 
tion is  only  entitled  to  what  remains  to 
.uch  partner  after  the  payment  of  the 
d  bts  of  the  firm.  Bank  v.  Fowle,  4 
Jones   Eq.  8. 

ill)  See  Glyn  r.  Hood  and  Kelly  r. 
Hutton,  iibi  supra.  But  Kelley  v.  Hut- 
ton  appears  to  have  been  a  case  of  co- 
ownership  in  the  newspaper  and  a  part- 
nership in  its  profits. 

(x)  See  ante  p.  54;  and  Brown  r.  De 
Tastet,  Jac.  284,  where  the  bill  was  dis 
missed  against  the  other  partners. 


{1/)  Lovegrove  v.  Nelson,  3  M.  &  K. 
20. 

^  It  was  agreed,  by  articles  of  co-part- 
nersliip,  that  any  pai-tner  might  transfer 
his  share  by  a  written  certificate,  which, 
when  lodged  with  the  clerk,  should  give 
the  assignee  all  the  privilege.s,  and  sub- 
ject him  to  all  the  liabiUties,  of  an  orig- 
inal pai-tner:  Held,  that  such  certifi- 
cate was  not  material  to  a  sale.  Alvord 
V.  Smith,  5  Tick.  232. 

The  members  of  a  paiinership  received 
from  their  treasurer  certificates  of  stock, 
containing  the  provision  that  no  shares 
should  be  transferred  without  consent  of 
the  treasurer  and  directors.  A  share 
was  assigned  to  the  plaintiff  ^\^thout 
such  consent,  and  he  brought  a  bill  to 
compel  the  company  to  account,  siUeg- 
ing  himself  to  be  a  partner:  Hvlil,  that 
he  was  not  a  partner,  and  that  the  bill 
must  be  dismissed.  Kingman  v.  Spurr, 
7  Pick.  23.5. 

Relief  in  equity  may  be  had  by  A 
against  Band  C,  fornon-pcrfonnance  of 
an  agi-eement  in  writing  by  which  A, 
with  B's  consent,  a.ssigned  to  C  all  A"s 
share  in  a  partnership  Ixuwcen  A  and  B, 
and  B  and  C  covenanted  to  assume  the 

9ol 


*700  TKANSFKK    OF    SHARES.  [boOK  III. 

who  enter  into  sucli  an  agreement  consent  prospectively  and  once 
for  all  to  admit  into  partnership  any  person  who  is  willing  to  take 
adv^antage  of  their  agreement,  and  to  observe  those  stipulations,  if 
any,  which  may  be  made  conditions  of  his  admission.  Siicli  an 
agreement  as  this  is  the  basis  of  every  partnership  the  shares  in 
which  are  transferable  from  one  person  to  tlie  other.  Those  who 
form  such  partnerships,  and  those  who  join  them  after  they  are 
formed,  assent  to  become  partners  with  anyone  who  is  willing  to 
comply  with  certain  conditions,  (s) 

As  observed  in  Lovegrove  v.  Nelson  {a)  "  to  make  a  person  a  part- 
Lovegrovev.  ^^^  \f\t\\  two  otlicrs  their  consent  must  clearly  be  had. 
Nelson.  \y^^  there  is  no   particular  mode  or  time  required  for 

giving  that  consent;  and  if  three  enter  into  partnership  by  a  con- 
tract which  provides  that  on  one  retiring,  one  of  the  remaining 
two,  or  even  a  fourth  person  who  is  no  partner  at  all,  shall  name 

the  successor  to  take  the  share  of  the  one  retirinff,  it  is  clear 
700*     "^'that  this   would  be  a  valid  contract  which  the  Court  must 

perform,  and  that  the  new  partner  would  come  in  as  entirely 
by  the  consent  of  the  other  two  as  if  they  had  adopted  him  by 
name. 

Where  a  partner  has  an  unconditional  right  to  transfer  his 
Eifect  of  trans-  ^liare,  lie  may  transfer  it  to  a  pauper,  and  thus  get  rid 
isa^Mitto'lfs^  of  all  liability  as  between  himself  and  his  co-partners 
^^^°-  in  respect  of  transactions    subsequent  to  the  transfer 

and  notice  thereof  given    to  them,  {h)     But  even  in   this  case  the 

debts  of  that  finn,  and  A  and  B  agreed  by  the  other  members,  who  ceased  to  re- 
with  C  that  such  debts  should  not  ex-  gard  the  assignors  as  partners.  In  an 
ceed  a  certain  amount.  Scovill  v.  Kins-  action,  more  than  four  years,  later,  to 
ley,  13  Gray,  5.  compel  the  assignors  to  share  a  com- 
The  articles  of  a  joint-stock  company  pany  loss:  Held,  that  they  were  not 
provided  that  a  partner  wishing  to  dis-  liable  and  that  the  stock  was  assigned 
pose  of  his  interest  should  first  offer  his  so  as  to  discharge  the  assignors  from 
stock  to  the  company,  and  second,  pay  liability  for  the  debts  of  the  company, 
up  so  much  of  it  as  should  have  been  although  the  mode  prescribed  by  the 
called  for,  after  which  he  might  abso-  articles  was  not  pursued,  the  comj;)any 
lutely  transfer  the  stock  on  the  company  having  recognized  the  assignees  as  part- 
books  and  the  company  were  bound  to  ners,  and  having  ceased  to  regard  the 
receive  his  assignee  and  look  to  him  for  assignors  as  such.  Wells  v.  Wilson,  3 
all  subsequent  liabilities.     Certain  part-  Ohio,  425. 

ners  assigned  their  stock  but  did  not  {z)  See  Fox  v.  Clifton,  9  Bing.  119. 

transfer  it  in  the  manner  prescribed  by  (a)  3  M.  &  K.  1. 

the  articles.  Their  assignees  were,  how-  {b)  JefFerj's  v.  Smith,  3Russ.  158. 
ever,  received  and  treated  as  partners 
952 


CHAP.V.]  I>    COMPANIES.  *T01 

transfer  alone  does  not  render  the  transferee  a  member  of  tlie  ]iart- 
nersliip,  and  liable  as  between  himself  and  the  other  members  to 
any  of  the  debts  of  the  firm,  (c)  In  order  to  render  him  a  i)artncr 
with  the  other  members,  they  must  acknowledge  him  to  be  a  part- 
ner, or  permit  him  to  act  as  such,  {d) 

As  an  ordinary'  partnership  is  not  distinguishable  from  the  per- 
sons composing  it,  and  as  every  change  amongst  those  Eff,,f,t  of  oon- 
persons  creates  a  new  partnershij),  it  follows  that  every  ""»>'>''''"  '"■™- 
time  a  partner  transfers  his  share  to  a  non-]iartner  the  C(jntinuity 
of  the  firm  is  broken.'  In  this  rc5])cct  such  com])anies  as  are  fiot 
mere  jiartnerships  on  a  large  scale  differ  from  ordinary  firms,  their 
continuance  not  being  interrupted  by  changes  amongst  tlieir  mem- 
bers, ie) 

An  apparent  exception  to  the  rule  that  a  share  in  a  partnership 
cannot  be  transferred  without  the  consent  of  all    the  ,,.  , 

Mining  part- 

partners,  exists   in  the   case  of  mining  partnerships,   "lerships. 
Mines  are  a  peculiar  species  of  property,  and  are  in  some  respects 
governed  by  the  doctrines  of  real  propert\'  law,  and  in  others  by  the 
doctrines  which  regulate  trading  concerns.     Kcirardinor  them  as  real 
property,  and  their  owners  as  joint  tenants  or  tenants  in  common, 
each  partner  is  held  to  be  at  liberty  to  dispose  of  his  interest  in  the 
land  without  consulting  his  co-owners;  and  a  transfer  of  this  interest 
confers  u})on  the  transferee  all  the  rights  of  a  part-owner,  including 
a  right  to  an  account  against  the  other  owners,  (^f)     But  even  here 
if  the  persons  originally  interested  in  the  mine  are  not  only 
■'^part-owners  but  also  partners,  a  transferee  of  the  share   of    *T01 
one  of  them,  although  he  would  become  a  ]iart-owner  with 
the  others,  would  not  become  a  partner  with  tliem  in  the  proper 
sense  of  the  word,  unless  by  agreement  express  or  tacit,  {g) 
Similar  observations  apply  to  transfers  of  shares  in  ships,   ships. 

(c)  JefFerys  v.  Smith,  3  Russ.  158.  proportions  of  their  interests.      Freder- 

(d)  Ibid.  ickr.  Cooper,  3  Iowa,  171. 

^Where  one  partner  sells  out  to  an-  {e)  See  Mayhew's  case,  5  DeG.  M.  it 

other,  and  the  remaining  ones  continue  G.  8)^7. 

the  business,  it  will  be  presumed,  in  the  [f]  See  Bentley  r.  Bates,  4  Y.   &,  C. 

absence  of  proof  to  the  contrarj',  that  182;  Redmayne  r.  Foi-stor,  "1  Kq.467. 

as  between  themselves  the  partnersliip  (7)  As  in  JoftVeys  v.  Smith,  o  Russ. 

continues,  with  only  a  change  in  the  158;  Crawshay  r.  Maule,  1  Swan  !:.  518. 

953 


*702  TRANSFER    OF    SHARES.  [boOK  III. 


2.     Transfer  of  shares  in  companies. 

One  of  the  most  important  distinctions  between  partncrsliips 
and  companies  is  the  comparatively  unlimited  ri;>lit  of 

Eight  to  1  ^  ,.         1      •        1  /i\       T 

transfer.  members  of  the  hitter  to  transfer  their  shares.  (A)     In 

wliat  are  called  scrip  companies  this  right  is  wholly  unlimited;  the 
right  to  the  shares  passing  by  the  delivery  of  the  scrip  certificate,  {i) 
In  other  companies,  also,  the  right  to  transfer  is  frequently  unfet- 
tered. 

Whether  a  share  in  a  company  is  transferable  at  the  will  of  its 
owner  for   the  time  being,  or  whether  its   transfer  re- 

Consent  to  i  i     i  n  r>      i 

transfer.  qnircs  the  consent  of  the  other  shareholders,  or  ot   the 

directors  of  the  company,  depends  upon  the  constitution  of  eacli 
company. 

Speaking  generally,  if  shares  are  transferable,  and  no  restriction 
on  the  right  to  transfer  them  is  imposed  by  the  regu- 

No  consent  "  i  i  i 

requisite.  latious  of  tlic  Company,  or  by  the  statute  or  charter  by 

which  it  is  governed,  the  right  to  transfer  is  absolute,  and  the 
directors  cannot  lawfully  prevent  a  transfer,  even  if  they  are  hona 
fide  of  opinion  that  it  is  for  the  interest  of  the  company  that  they 
should  do  so.  (Z,-)  It  follows  from  this,  that  where  no  restriction 
on  the  riiiht  to  transfer  exists,  a  transfer  to  a  pauper,  in  order  to 
escape  from  liability,  is  valid,  and  cannot  be  prevented.  (Z)  This 
is  certainly  going  very  far;  and  in  cost-book  mining  companies 
the  legislature  has  thought  fit  to  interfere,  by  declaring  such  trans- 
fers fraudulent  and  void.  (???) 

But  notwithstanding  the  length  to  which  the 
frSi^fers!''^  *702  courts  have  *gone  in  holding  the  right  to  trans- 
fer to  be  free  from  all  implied  restriction,  a 
transfer  which  is  fraudulent  in  the  sense  of  not  being  a  real 
transfer  out  and  out,  or  a  transfer  made  for  a  fraudulent  pur- 
pose, can   be  lawfully  objected   to  by  the  directors,  {ii)      But  a 


(7i)  See  ante,  p.  5.  (0  ^-  ^i^<^  ^^^  Jefferj's  v.  Smith,  3 

(0  See  Ex  imrte  Barclay,  26  Beav.  Russ.  158,  and  infra,  book  iv.  under  the 

177 ;  Ex  iwrte  Grisewood,  and  Ex  parte  head  Contributories. 

DePass,  4  DeG.  &  J.  544.  («0  3-2  &  33  Vict.  c.  19,  §  35. 

[k)  Stranton  Iron,  kc.  Co.  16  Eq.  559;  (>?)  This  is  admitted  in  Weston's  cas". 

Weston's  case,  4  Ch.  20,  reversuig  6  Eq.  4  Ch.  20.     See  further  under  the  head 

246.     Compare  Ex  parte  Parker.  2  Ch.  Contiibutones  in  book  iv. 

685;  MofFatt  v.  Farquhar,  7  Ch.  D.  591. 

954 


CHAP,  v.]  IN    C0MPANIE8.  *T03 

transfer  to  avoid  liability  or  to  multiply  votes  is  held  not  to  be 
fraudulent,  (c) 

AVliere,  by  the  constitution  of  a  coni])any  certain  definite  restric- 
tions are  placed  on  the  right  to  transfer  its  shares,  the  f.o„„^.nt 
directors   have   no  implied   authority  to  ini])ose  any  ""^^MH'sue. 
other  restrictions  on  the  exercise  of  that  right  (^/).  e.ij.^  if  the  only 
restriction  is  that  no  calls  shall  be  in  arrear,  the  directors  cannot 
refuse  to  ])ei-nilt  a  transfer,  if  all  calls  made  have  been  ])aid.     So, 
a^ain,  a  riglit  to  object  to  a.  transferee  does  not  entitle  them  to 
object  to  a  transfer  to  an  unobjectionable  person,  although  made  for 
a  purpose  the  directors  may  disapprove,  e.g.^  to  multiply  votes,  (y) 
^Moreover,  where,  as  frequently  happens,  the  restriction  is  that  the 
directors  shall  consent  to  the  transfer,  their  consent  is  regarded  so 
much  as  a  mere  matter  of  form,  that  the  necessity  for  it  does  not  prac- 
ticali}'  affect  the  marketable  value  of  the  shares.     Kor  can  directors 
withhold  their  consent  to  a  transfer  without  good  reason;    fur  the 
■|)ower  of  assenting  or  dissenting  to  a  transfer  is  reposed  in  them  as 
trustees,  and  they  must  exercise  that  power  accordingly,  and  not 
capriciously,  (r)     At  the  same  time,  if  their  consent  to  a  transfer 
is  necessary,  and  in  refusing  their  consent  to  a  transfer,  they  act 
londjlde^  with  a  view  to  the  protection  of  the  interests  of  the  com- 
pany, the  exercise  of  their  discretion  will  not  be  interfered 
with  (s);  and,  in  such  *a  case,  it  is  competent  for  them,  if    *703 
the  company    is  in  embarrassed  circumstances,  to   resolve 
not  to  allow  any  transfers  at  all.  {t)     A  director  may  consent  to  a 
transfer  of  his  own  shares,  {u) 

A  consent  to  a  transfer  given  and  acted  upon  is  not  invalid  on  the 

(o)  See  the  last  four  notes.  29  Beav.   646;   Robinson  v.  Cliartt'ivd 

{}))  This  follows  from  Weston's  case,  Hank,  1  Eq.  32;   Pinkett  v.  "Wriyht,  2 

vhl  sujyra.     See,  also,  Chappell's  case,  Ha.  120. 

6  Ch.  902;  Gilbert's  ease,  5  Ch.  559,  and  [s)  Taft  v.  Hamson,  10  Ha.  4S9;  K. 

the  next  note.  v.  Liverpool  and  Manchester  Rail.  Co. 

{q)  Pender  v.  Lushington,  6  Ch.  D.  21  L.  J.  Q.  B.  2<S4;  and  see  Berniing- 

70;  Stranton  Iron  Co.  16  Eq.  559.  ham  v.  Sheridan,  3:3  Beav.  600.     But 

{}•)  In  Ex  parte  Penney,  8  Ch.  446,  compare  Stranton  Iron  Co.  16  Eq.  559, 

it  was  held  that  they  need  give  no  rea-  and',  note  (</). 

sons  for  their  refusal;  but  that  whether  (0  Shepherd's  case,  2  Eq.  564,  and  2 

they  give  reasons  or  not,  the  Court  will  Ch.  16. 

interfere  if  it  is  proved  that  they  are  not  in)  Bush's  case,  6  Ch.  246,  and  see 

acting  honestly  in  the  discharge  of  their  Gilburt's  case,  5  Ch.  558. 
duty.    See  ib.  and  Poole  v.  Middleton, 

955 


^704:  TRANSFER    OF    SHARES.  [bOOK  III. 

m-ound  that  it  has  been   <i;iven   iiiforraally  (a?)':  but  a 

Informal  con-       fc  ,  ,       .        -i  i  i    i  i 

sent.  .  consent  fraudulently  obtained  can  be  treated  bv  the 
company  as  invalid,  (y) 

In  most  companies  payment  of  calls  is  a  condition  precedent  to 
the  exercise  of  a  right  of  transferring  shares.  (2)  A  call  must  be 
actually  made  before  its  non-payment  can  justify  a  refusal  to  per- 
mit a  transfer,  {a)  If  calls  are  due  on  some  only  of  the  shares  held 
by  a  shareholder  he  cannot  be  prevented  from  transferring  other 
shares  on  which  no  arrears  are  due,  unless  the  statutory  or  other 
regulations  of  the  company  clearly  go  to  that  extent,  {h)  The 
rio-ht,  however,  to  prevent  a  transfer  of  shares  on  which  calls  are 
due  may  be  waived,  e.g.,  by  registering  the  transfer  (c);  and  it 
waived  a  transfer  of  them  cannot  be  afterwards  impeached,  {d) 

Whether  upon  the  sale  of  shares  it  is  the  business  of  the  buyer 
Procuring  con-  or  of  the  seller  to  procure  the  consent  of  the  directors 
sent  to  transfer.  ^^  ^  transfer  will  be  examined  hereafter,  (e) 

Shares  in  companies  are  not  all  legally  transferable  in  the  same 
Mode  of  trans-  Way  I  somc  are  transferable  by  deed  only,  some  by  writing 
ferring  shares.  ^^^^  under  seal,  somc  apparently  by  parol.  The  mode  in 
which  the  shares  of  a  given  company  are  transferable,  depends  on  the 
constitution  of  the  company,  and  on  the  statute,  if  any,  by 
*7U4  which  it  is  governed  (/);  but  acceptance  in  some  ^manner  of 
the  transfer  by  the  transferee  is  essential  in  all  cases,  (g) 

Shares  in  Companies  governed  by  the  Companies  clauses  consoli- 
in  companies     datiou  act,  are  transferable  by  deed  only;  and  a  form 

governed by8&        „  „       .         .  i        .i  i.    / 1\ 

9  Vict.  c.  16.        of  transier  is  given  by  tne  act.  (A) 

(x)  Bargate  v.  Shortridge,  5  H.  L.  C.  S.  615. 

297;  Taylor  t'.  Hughes,  2  Jo.  &  Lat.  24.  (e)  See  Stray  v.  Russell.    1  E.   &  E. 

See  on  this  subject,  ante,  pp.  137,  138.  888  ;  and  compare  Wilkinson  v.  Lloyd, 

1  See  ante,  699,  note  (2).  7  Q.  B.  27,  post,  p.  712. 

(y)  See  Payne's  case,  9  Eq.  223;  Kin-  (/)  In  Ex  parte  Sargent,  17  Eq.  273, 

treats  case,  5  Ch.  95,  and  others  of  that  a  deed  was    held  not    necessary,     al- 

class.  though  the  practice  was  to  have  one. 

{z}  See  ante,  p.  686.  The  articles   only  requu-ed  an    instru- 

(a)  R.  V.  Inns  of  Court  Hotel  Co.     2  ment  in  writing. 

N.  R.  397.      Compare  Gilbert's  case,  5  (g)  See  Cartmell's  case,  9  Ch.  691. 

Ch.  559.  ih)  8  &  9  Vict.  c.  16,  §  14.     Railway 

(b)  Hubbersty  v.  Manchester  Rail.  stock  belonging  to  a  lunatic  may  be 
Co.  L.  R.  2  Q.  B.  59  and  471,  decided  transferred  without  a  deed,  under  an 
upon  the  8  &  9  Vict.  c.  16,  §  16.  order  obtained  in  lunacy.     See  16  &  17 

(c)  Ex  parte  Littledale,  9  Ch.  257,  Vict.  c.  70,  §§141,  142,  and  Be  Ives,  9 
and  the  case  in  the  next  note.  Jur.  N.  S.  611. 

td)  Ibid,  and  Orpen's  case,  9  Jur.  N. 
956 


CHAP,  v.]  IN   COMrANTES.  "^"05 

The  companies  act,  1^02,  declares  that  shares  in  companies 
formed  and  reiristered  nnder  that  act  shall  be  capable  in  companies 
of  being  transferred  in  manner  provided  by  the  regula-  the  act  of  iso2. 
tions  of  the  company  (§  22).  (/')  Table  A.  contains  a  form  of  trans- 
fer, and  reqnires  it  to  be  executed  both  by  the  transferrer  and  the 
transferee  {see  Nos.  8  and  9).  AVHiether  executed  means  sealed  and 
delivered  is,  however,  left  in  obscurity,  {k)  Shares  in  these  com- 
panies cannot,  however,  be  made  transferable  by  mere  delivery  {I), 
except  nnder  the  provisions  of  the  Companies  act,  1807,  which  only 
applies  to  fully  ])aid-up  shares  in  limited  companies,  (m) 

Execntors  or  administrators  of  members  of  companies  governed 
by  the  act  and  table  in  question  may,  at  their  option,  either  register 
themselves  as  members  (Table  A.,  ^o.  13\  or  transfer  the  shares 
which  have  devolved  upon  them,  without  becoming  members 
themselves  (Nos.  U  to  10,  and  see  §  2-l:of  the  act).  The  same  ob- 
servation applies  to  trustees  of  bankrupt  members,  and  to  ]>er3ons 
marrying  female  members  (see  Table  A.,  Xos.  13 — 16.) 

The  transfer  cf  shares  in  other  companies  is  not  regulated  by 
any  general  act  of  Parliament  now  in  force,  {n)     Siiares  in  other  com- 

.  ,1  .     •  •  I,.!  1  11        panies. 

in    cost-book    mining    companies,     altliougli     nsualiy 
transferred    by    some  written  document,  appear  to  be  ti-ans- 
ferable  by  parol  only,  (n)     ^Shares  in  what  are  called  scrip     ••705 
companies-are  apparently  transferable  by  the  delivery  of  the 
scrip  certificate,  (o) 

Comi)anies  formed  under  the  repealed  acts  of  1856-8,  may  cause 
their  shares  to  be  tranferred  in  manner  in  use  before  November, 
1862,  or  in  such  other  manner  as  such  companies  may  direct,  {j)) 

The  forms  of  transfer  given  by  the  various  acts  are  short,  and 
are  framed  with  a  view  to  convenient  registration;  and  p^rmsof 
allliough  shares  may  be  transferred  by  instruments  in 


trans  t'er. 


()•)  The  repealed  acts  7  &  8  Vict.  c.  (m)  See  30  &  31  Vict.  c.  1^1,  §  27  et 

110,  §  54,  and  c.  113,  §   23,   both  re-  scq. 

quh-ed  transfers  to  be  by  deed.      See  as  {n)  Ante,  p.  Ud.     As  to  agrr<^ements 

to  scrip,   etc.   transferable    to    bearer,  for  the  transfer  of  shares  in  bankincr 

infra.  companies,  see  30  Vict.  c.  29,  noticed 

(k)  Ex  parte   Sargent,   17  Eq.  273,  infra. 

tends  to  show  that  a  deed  is  not  neces-  (o)  Ex  parte  BaR-lay.  26  Beav.  177  ; 

sary.  Grisewood,  7  DeG.  <fe'J.  544  ;   DePass, 

(/)  See  General  Co.  for  the  Promotion  ib. 

of  Land  Credit,  5  Ch.   363;   Reuss  v.  (i>)  25  &  2G  Vict.  c.  89,  §  178. 
Bos,  L.  R.  5  H.  L.  176. 

957 


*706  .  BLANK    TKAKSFKES.  [boOK  IIU 

Other  forms,  still,  if  they  are  complicated,  and  diifer  substantially 
from  those  prescribed,  the  company  need  not  register  them,  {q) 

Shares  standin<^  in  the  names  of  trustees  or  lunatics  may  be  trans- 
shares  of  ferrcd  in.  proper  cases  under  an  order  of  the  Chancery 

trustees  and         ^-w    •    •  j        •      i  ^i  i        /    n 

lunatics.  JDivisiou,  or  an  order  m  lunacy  as  the  case  may  be.  (r) 

Shares  are  held  not  to  be  goods,  ware^,  or  merchandise  within  the 

clause  in  the  Stamp  act,  exempting  contracts  for  the  sale 

of  goods  from  stamp  duty  (s);    and  written  agreements 

for  their  sale  must  therefore  be  stamped,  {t)     Shares,  moreover,  are 

property  within  the  meaning  of  the  Stamp  acts;  and  instruments  of 

transfer  must  therefore  have  the  true  consideration  for  the  transfer 

expressed    upon   them,  and    be  stamped  accordingly,  {u)     Several 

shareholders,  however,  may  join  in  one  transfer,  and  if  the  stamp 

covers  the  total  consideration  money  it  is  sufficient,  {x)     Where 

shares  are  themselves  the  consideration  for  a  purchase,  the  stamp  is 

regulated  by  their  market  value  at  the  time  of  sale,  (y) 

Whatever  may   be  the  legal   method  of  transferring  shares,  and 
.     .         whether   a   formal  deed   is  or  is  not  requisite,  it  is  a 

Transfers  m  -••  ' 

blank.  common  practice  in  the  share  market  for  a  seller  of 
shares  to  sign  a  deed  or  instrument  of  transfer  with  the 
*T06  name  of  the  *transferee  in  bhmk.  The  buyer  then  inserts 
his  own  name,  or  without  doing  so  resells,  and  hands  the 
blank  transfer  to  the  new  purchaser,  who  again  either  inserts  his 
own  name  as  the  transferee,  or  resells  and  delivers  the  transfer,  still 
in  blank,  to  the  purchaser  from  him,  and  so  on.  The  effect  of  ex- 
ecuting transfers  in  blank,  and  handing  them  from  one  person  to 
another,  is  very  different  with  respect  to  different  classes  of  shares. 
Binnk  deeds  of  "^  ^^'^^^  cxecutcd  by  A.,  and  purporting  to  transfer 
transfer.  property  to ,  ^.«s.,  to  uobody,  is  altogether  inopera- 

tive as  a  deed  ;  and  consequently,  if  a  shareholder  in  a  company 
the  shares  in  which  are  transferable  by  deed  only,  executes  a  trans- 
fer of  his  shares  in  blank,  he  still  remains  legal  owner  of  the  shares 
and  the  holders  of  the  deed  acquire  no  other  title  to  tlie  shares  than 

{q)  Copeland  v.  Nortli-Eastem  Rail.  {t)  lb. 

Co.  6  E.  &  B.  277;  R.  v.  General  Cem-  0<)  See  33  &  34  Vict.  c.  97,  under  the 

etery  Co.  ib.  415.  head  conveyance. 

(r)  See  Re  Angelo,   5  DeG.  &  Sm.  {x)  Wills  v.  Bridge,  4  Ex.  193. 

278;  Re  Ives,  9  Jur.  N.  S.  611;  ante,  p.  (?/)  See  33  &  34  Vict.  c.  97,  tit.     Con- 

704,  note  {h).  veyance;  and  Ulverstone   Rail.    Co.   i\ 

(.s)  Knight  V.  Barber,  16.  M.  &  W.  The  Commissioners  of  InlanI  Reveuu3 

66.  2  H.  &  C.  855. 

958 


CHAP.  V.J  TRANSFER    OF    SHARKS.  ^"707 

a  right  to  liave  tliem  pnjjiorly  transferred,  or  to  luive  tlie  transferrer 
declared  a  trustee  fur  them.  (.?)     IJiit  althoiigli  h  blank   otii.ri.iunk 
deed  is  invalid  as  a  deed,  it  by  no  means  folh^ws  that   «™'"''^''^- 
all  transfers  in  blank  are  worthless. 

In  tlie  first  place  there  arc  shares, «?.|/.,  shares  incost-book  niiiiin<r 
companies,  which  are  transferable  without  the  intervention  of  any 
formal  document;  and  a  letter  signed  l^v  a  shareholder,  and  trans- 
ferring liis  shares  to ,  amounts,  if  delivered  to  a  purchaser,  to 

a  transfer  to  him,  and  anthorizes  him  to  fill  U]t  the  blank  with  any 
name  lie  likes,  (a) 

In  the  next  place,  the  equitable  ownership  in  shares  agreed  to  be 
sold  depends  on  the  contract  of  sale  and  not  on  the  Em.ct  in  equity 

r,  jy    .  n  1  ,1  •  1  .    .  of  tniuslcr.s  in 

lorm  01  transier;  and  as  there  is  no  law  requiring  a  biunk. 
contract  for  the  sale  of  shares  to  be  by  deed  or  even  in  writing, 
there  is  nothing  to  prevent  a  purchaser  of  shares  from  being  held 
to  his  bargain,  nor  from  being  ordered  to  accept  the  shares  he  has 
agreed  to  buy,  and  with  them  all  the  liabilities  incident  thereto. 
Consequently,  where  there  is  a  binding  agreement  for  the  sale  and 
transfer  of  shares,  it  is  immaterial  wliether  a  transfer  in  blank  has 
been  executed  or  not.  The  purchaser  can  be  compelled  at  the 
instance  of  the  seller  to  take  his  ])lace  *as  from  the  time  of  ■•wo7 
the  making  of  the  contract;  in  other  words,  the  purchaser 
will  be  compelled  to  accept  a  proper  transfer  of  the  shares,  to  pro- 
cure himself  to  be  registei-ed  as  a  shareholder  in  respect  of  them, 
and  to  indemnity  the  seller  h\)\\\  all  liabilities  accruing  in  respect 
of  the  same  shares  since  the  time  when  they  were. agreed  to  be 
sold,  {b)  So  the  purchaser  can  compel  the  seller  to  execute  a 
proper  transfer  and  to  account  for  all  dividends  received  hy  him 
since  he  ceased  to  be  the  equitable  owner  of  the  shares. 

Where,  however,  there  is  no  valid  contract  of  sale,  a  blank  trans- 
fer is  as  worthless  in  equitv  as  at  law.     Tiiis  is  well  ^ 
illustiated  by  the  case  of  Tayler  v.  Great  Indian  Ten-   f^'~*- 

(.-)  Ilibblewhite  v.  McMorino,  6  M.  &  &  J.  27;  Wynne  v.  Price,  3  DoG.  k  S. 

W.  2n0;  Humble  v.  Langston,  7  M.  &  310;  Shaw  r.  Fisher,  5  DeG.   M.   A:  G. 

W.  517;  Sayles  v.  Blane,  14  Q.  B.  205,  596,  affirming  S.  C.  1  Jur.  N.  971,  and  2 

and  6  Ka.  Ga.  79.     See,  too.  Consols  In-  DeG.  and  Sm.  11.     Sec,  also.  Contract 

sur.  Assoc.  V.  Newall,  3  Fos.  &  Fin.  Corporation,  3  Ch.  105.     In  Jackson  r. 

130,  and  Swan's  case,  infra,  p.  707.  Cocker,  4  Beav.  59,  a  purchaser  of  scrip 

(<t)  See  Walker  r.  Bartlett,  18  C.  B.  was  held  to  be  under  no  such  obK^ra- 

845,  tions;   but  see  Beckitt  v    Bilbrough,  8 

{b)  Morris  v.  Cannan,  4  DoG.  F.  &  J.  Ha.  188. 
581.    See  Cheale  r.  Kenward,  3  DeG. 

959 


*708  FORGED    TRANSFERS.  [hoOK  III. 

insula  Railway  Corapanj.  (c)  In  that  case  the  plaintiff,  who  was 
Tayierr.  Great  entitled  to  sonie  20Z.  and  some  21.  shares  in  a  company, 

Indian  Railway  a   ^  •      i       ■>  hit  miii 

Company.  directed  his  broker  to  sell  the  latter.     Ihe  broker  ob- 

tained forms  of  transfer,  stamped  sufficiently  to  pass  the  20^. 
shares;  and  the  ])laintiff  executed  these  forms,  leaving  the  blanks 
to  be  filled  in  by  the  broker.  The  broker  inserted  the  description 
of  the  20/.  shares,  but  left  the  names  of  the  transferees  still  in 
blank.  The  shares  were  then  sold,  and  the  names  of  the  purchas- 
ers were  ultimately  filled  in,  they  knowing  that  the  transfers  had 
been  previously  executed  in  blank.  The  plaintiff  having  discov- 
ered that  the  wrong  shares  had  been  sold,  filed  a  bill  to  set  aside 
the  sale,  and  to  have  the  transfers  delivered  up,  and  to  restrain 
their  registration.  A  decree  was  made  in  his  favor  by  the  V.-C. 
"VYood,  and  an  appeal  from  this  decision  was  dismissed. 

A  somewhat  similar  case  arose  at  law;  but  here  the  transfers  had 
been  actually  reiristered,  and  the  vendor  sought  to  have 

Swan's  case.  ,  .  •        ^  n     i        mi  "?>  i      • 

the  registration  cancelled,  ihe  case  came  first  before 
the  Common  Pleas  (d),  and  then  before  the  Exchequer  (e), 
*708  and  lastly  before  *the  Exchequer  Chamber.  (/)  All  the 
judges  agreed  that  the  transfers  were  wholly  void,  and  con- 
ferred no  title  on  the  transferee,  although  he  was  a  hand  fide  pur- 
cliaser;  and  it  was  also  held  by  the  Exchequer  Chamber  that  the 
vendor  was  not  estopped,  by  his  own  negligence  in  signing  the 
blank  transfers,  from  asserting  his  title  to  the  shares.  On  this 
point  the  judges  in  the  courts  below  had  been  equally  divided,  {(f) 
A  transferee  of  a  share  does  not  become  a  shareholder,  nor  does 
When  transfer  ^  transferrer  of  a  share  cease  to  be  a  shareholder,  until 
is  complete.  those  forms  and  ceremonies  which  by  the  constitution 
of  each  company  are  necessary  to  be  observed,  have  been  either  duly 
complied  with  or  waived  by  competent  authority.  The  decisions 
on  this  subject  having  been  alreadj'^  examined,  need  not  be  again 
adverted  to.  (A)  The  transferrer  must  ascertain  by  inquiry  whether 
his  transfer  has  been  accej)ted  by  the  company  or  not;  it  is  not  the 

(c)  4    DeO.    &    J.    559.     See,    also,  Co.  7  H.  &  N.  603. 

Johnston  v.  Renton,  9  Eq.  181,  and  as  (/)  2  H.  &  C.  175. 

to  the  liabihty  of  the  company  in  re-  {g)  See  some  obs.  on  this  case  in  11 

spect  of  forged  transfers,  see  that  case,  Eq.  319. 

and  ante,  p.  301.  (/«)  Ante,  p.  136  et  seq.,  and  i^ee  post, 

{d)  Ex  parte   Swan,  7  C.  B.  N.  S.  book  iv.  ch.  3,  under  the  head  Coutribu- 

400.  tories. 

(e)  Swan  v.  North  Biitish  Australian 

960 


CHAP,  v.]  TRANSFER  OF  SRARES.  *709 

iliity  of  the  company  to  give  Liiii  tin's  infoniuitioii  if  lie  does  not 
;i.sk  for  it.  (/) 

The  transferee  of  a  sliare  in  a  company  acquires,  as  between  him- 
self and  the  company,  no  i^reater  rights  than  the  trans-  „.  ,,    .., 
ferrer;  and  this  doctrine  has  been  carried  so  far  that  it  fi'isreree. 
has  been  held  that  a  transferee  is  precluded  from  objecting  to  con- 
duct which  has  been  sanctioned   or  acquiesced  in  by   his  trans- 
ferrer. (1*)     The  extent  to  which  a  transferee  of  shares  takes  upon 
himself  the  liabilities  of  the  transferrer,  is  examined  in  other  parts 
of  the  treatise  (1);  it  may,  however,  be  observed  generally,  that  the 
transferee,  as  between  himt^elf  and  his  transferrer,  takes  the  place 
of  the  latter,  not  only  as  regards  what  is  past,  but  also  as  regards 
what  is  to  come.  (?/?)     With  respect,  however,  to  the  title  of  a  trans- 
feree, it  must  be  remembered  that  a  hond  Jide  purchaser  of  shares 
for  value  without  notice  of  any  invalidity  in  the  title  of  his  trans- 
ferrer, acquires  a  title  which  cannot  be  impeached  by  persons 
claiming  a  prior  equitable  *interest  {n)\   moreover,  if  the     *709 
company  has  actually  registered  such  a  purchaser,  in  igno- 
rance of  material  facts,  the  company  cannot  lawfully  afterwards  re- 
move his  name  from  the  register,  {p) 

Moreover,  it  has  recently  been  decided   that  scrip  certificates 
may  be  shown  to  be  transferable  to  bearer  bv  jreneral  ^   .    . 

"  ./ft  Scrip.  &c., 

usage,  where  there  is  no  enactment  or  airreement  to  trimsfembi^ 

"    '  n  "    to  bearer 

the  contrary;  and  where  this  is  shown  the  title  of  a  ^^y  i^sa&e. 
hond  jide  purchaser  for  value  of  the  scrip  without  notice  of  any 
infirmity  in  the  title  of  the  seller,  will  be  unimpeachable,  even  al- 
though the  seller  himself  may  have  had  no  title,  {p)  There  is  as 
yet  no  decision  to  this  effect  with  respect  to  shares,  but  if  a  similar 
usage  as  to  them  can  be  proved,  such  usage  will  ])robably  be  op- 
held,  {q) 

(0  See  Gustard's  case,  8  Eq.  438.  (h)  Aute,  pp.  663.  664. 

(k)  Ffooks  V.  Southwestern  Rail.  Co.  {o)  Wartl  r.  South-Easteni  Rail.  Co. 

1  Sm.    &  G.   168.    See,  also.  Peek  v.  2  E.  &  E.  812,  where  a  fraud  had  been 

Gumey,  13  Eq.  79.  committed  on  the  company. 

(/)  See  as  to  creditors,  ante,  p.  460,  (js)  Rumball  r.   Metropolitan  Bank, 

and  book  ii.  ch.  3,  §  4  :  as  to  calls,  ante,  2  Q.  B.   D.   194,   a  case  of  a  limitod 

p.  637,  and  post,  book  iv.  ch.  3,  under  company, 

the  head  Contributories.  {q)  See  the  la-st  case,  and  Goodwin  v. 

{m)  See  Mayhew's  case,  5  DeG.  M  &  Roberts,  1  App.  Ca.  476,  and  L.  R.  10 

G-  837.  Ex.  337. 


n 


961 


"710  SALE    OF    SHAKES    IN    COMPANIES.  [bOOK  TIT. 

"Where  any  company  is  being  wound  up  by  the  Court,  or  snb- 
Transferswhen  ject  to  the  supervisioii  of  the  Conrt,  all  transfers  of 
ingwoundup."  shares  in  it  subsequent  to  the  presentation  of  the  peti- 
tion, and  prior  to  the  winding-up  order,  are  invalid  unless  other- 
wise ordered  by  the  Court,  (r)  Transfers  after  the  winding-up  or- 
der are  not  expressly  prohibited,  but  such  a  transfer  does  not  dis- 
charge the  transferrer  from  liability  to  be  put  on  tlie  list  of  con- 
tributories.  {s)  After  a  resolution  to  wind  up  voluntarily,  transfers 
of  shares,  unless  to,  or  witii  tlie  sanction  of,  the  liquidators,  are 
also  invalid,  {t)  The  effect  of  these  provisions  upon  the  question 
whethea  a  buyer  or  seller  ought  to  be  put  on  the  list  of  contribu- 
tories,  will  be  examined  hereafter  {u). 


*riO    *SECTION  VI.— OF  SALES  OF  SHARES  AND  QUESTIONS  ARISING 

THEREON. 

There  is  nothing  illegal  at  common  law  in  the  sale  of  shares  or 
scrip.  («)     At  the  same  time,  if  a  company  or  projected 

ega  saes.  company  is  itself  illegal,  the  sale  of  its  shares  or  scrip 
is  illegal  also,  (y)  There  is  nothing  illeo^al  in  the  sale  of  shares  in 
companies  which  are  being  wound  up.  {s) 

A  botid  fide  contract  by  a  person  to  deliver  shares  which  he  has 
Gaming  an.i  not  got,  is  legal.  («)  But  a  contract  for  their  purchase 
simre"°^"^       and  Sale,  where  neither  party  intends  to  accept  or  de- 

(r)  25  &  26  Vict.  c.  89.  §  153.  not  registered   as  a  shareholder,  §  26; 

(s)  See  ib.  §§  38,  74,  and  84  Ex  iwrie  Neilson,  3  DeG.  M.  &  G.  5-56; 

(0  Ib.  §  131.  \Iorris  r.  Caiman,  4  DeG.  F.  k  .1.  581. 

{u)  See  \nfra,  book  iv.  ch.  3,  the  sec-  But  the  statute  is  now  repealed;  and  the 

tion  on  Contributories.  prohibitions  in  question  never  extended 

{x)  See  Ex  parte  Barclay,  26  Beav.  to  companies  the  formation  of  which 

177;  Ex  jMrte  Aston,  4  DeG.  &  J.  320,  was  commenced  before  the  1st  Nov.  1844 

and  27    Beav.  474  ;  Ex   parte  Grise-  (as  to  which  see  Baker  v.  Plaslitt,  5  0. 

wood,  4  DeG.  &  J.  544;  Bagge's  case,  13  B.  262;  Aston's  case,  27  Beav.  474,  and 

Beav.  162.  4  DeG.  &  J.  320) ;  nor  to  railway  or  other 

iy)  Josephs  v.  Pebrer,  3  B.  &  C.  639;  companies  requiring  the  authority  of 

Buck  V.  Buck,  1  Camp.  547.      The  stat-  Parliament,  Young  v.  Smith,   15  M.  & 

ute  of  7  &  8  Vict.  c.  110,  prohibited  the  W.  121;  Bousfield  v.  WDson,  15  ib.  185; 

sale  of  shares  in  a  company  governed  Lawton  v.  Hickman,  9  Q.  B.  563. 

by  it,  until  after  the  company  had  ob-  {z)  See  Rudge  v.  Bowman,  L.  R.  3  Q. 

tained  a  certificate  of  complete  registra-  B.  689. 

tion,  and  even  then  by  any  subscriber  («)  Hibblev.h'.te  r.  McMorine,  5  M.  & 

962 


CIIAl'.  v.]  SALE    OF    SllAUES    IN    COMPANIES.  »  *7  1  1 

liver  tliom,  and  the}'  only  intend  to  pcay  "differences,"  accordini; 
to  the  rise  or  fall  of  the  market,  is  void  as  a  framing  or  wagerin;: 
contract  within  8  &  9  A^ict.  c.  lOf),  §  18.  (i)  Nevertheless  a  broker 
who  pays  differences  for  his  princi]<al  can  recover  them  from 
him.  (c)  A  consjMracy  to  obtain  a  settling  day  by  frandnlent 
means  in  order  to  defraud  buyers  of  shares  or  a  conspiracy 
*by  fraudulent  means  to  raise  or  lower  the  price  of  shares  *711 
with  intent  to  defraud  buyers  or  sellers  is  an  indictable  of- 
fense. (rZ) 

By  30  Vict.  c.  20,  ^1,  it  is  enacted  that  all  contracts  made  after 
the  1st  of  July,  18<!7,  for  the  sale  or  transfer  of  any  p„nijin„ 
shares,  stock,  or  interest  in  any  Joint  stock  Hanking  t;ompanies. 
Company  in  England  or  Ireland,  constituted  under  or  regulated  by 
any  act  of  Parliament,  royal  charter,  or  letters  patent,  issuing  shares 
or  stock  transferable  by  any  written  instrument,  shall  be  void  unless 
such  contract  sets  forth  in  writing  the  distinguishing  numbers  of 
such  shares,  stock,  or  interest  on  the  register,  or  if  there  is  no  reg- 
ister, the  person  in  whose  name  such  shares,  stock,  or  interest  shall 
at  the  time  of  making  such  contract  stand  in  the  books  of  the  com- 
pany. The  ol)jcct  of  this  enactment  is  to  prevent  runs  on  banks 
which  may  be  occasioned  by  a  fall  in  the  price  of  their  shares  re- 
sulting from  gambling  transactioHS.  (e) 

Neither  scriji  nor  shares  are  goods  or  chattels    or  interests   in 
land    within  the    Statute  of  Frauds  :  and  (snbiect  to   Auroomcuts 

■;  for  sale  of 

the  qualification  inti'oduced  by  the  act  just  Jioticed)  a  simros. 
contract  for  the  sale  of  them  is  therefore  valid,  althongli  not  reduced 
into  writing  and  signed   by  either  buyer  or  seller  or  V)y  any  agent 
of  either  of  them.  {/)     At  the  same  time,  if  a   contract  for  the 
sale  of  shares  is  reduced  into  writing,  that  writing  is  the  pnijtcr 

W.  402  :  Bam-  v.  Croskey,  2  J.  <t  H.  1 ;  3  DeG.  &  J.   40.  and   the  oases  there 

Ex  parte  Phillips,  and  Ex  i)a)ie  Mam-  cited. 

ham,  2  DoG.  F.  &  J.  634.  (r)  Rosewarne  r.  Billinpr.  l'>  C.  B.  N. 

(fc)  Grisewood  v.  Blane,  11  C.  B.  5.39;  S.  316. 

Reesr.  Fernie,  4  N.  R.  539,  and  the  {d)  See  R.   r.   Aspinall,  1   Q.   B.  I>. 

cases  in  the  la.st  note.     The  old  Stock-  730,  and  2  ib.  48;  R.  r.  Berenger,  3  >[. 

jobbing  act  (Sir  John  Barnard's  act).  7  k  S.  67;  R.  r.  Esihiile,  1   Fos.    iV    Fin. 

Geo.  2,  c.  8,  was  repealed  by  23  &  24  213. 

Vict.  c.  28.       It  did  not  apply  to  shares  (f)  See,  as  to  numbering  shares,  ante, 

in  companies.     See  Hewitt  v.  Price,  4  p.  132. 

Man.  &  Gr.  355;  Williams  r.  Trye.  18  (/)  Ante,  pp.  674,  675. 
Beav.  366.     See,  too.  Ex  jiarte  Turner, 

963 


*712  SALE   OF    SHARES    IN    COMPANIES.  [UOOK  III. 

evidence  of  the  contract,  and  must  tlierefore  be  produced  properly 
stamped,  (g) 

As  reo-ards  delivery  it  is  to  be  observed  that  shares  and  certifi- 
cates  are  different  thing's :  and  an  aojreement  to  deliver 

Delivery  of  o    7  o  ^ 

the  shares.  shai'ss  is  performed  by  the  execution  and  delivery  of  a 
proper  transfer.  Actual  delivery  of  the  share  certificates  is  not  es- 
sential to  the  performance  of  the  contract.  (A) 


*712  *1.  Sales  not  on  Stock  Exchange. 

„  .      ,  ,  A  contract  for  the  sale  of  shares,  although  usually 

stockEx-^  made  through  members  of  the  Stock  Exchange,  may  be 
change.  made  without  their  intervention. 

A  simple  contract  for  tlie  sale  of  shares  imposes  on  the  vendor 
,  , ,.  the  obligation  of  delivering  to  the  purchaser  on  the  day 
gations.  fixed,  or  if  no  time  be  fixed  within  a  reasonable  time 

after  the  date  of  the  contract,  the  number  of  shares  agreed  to  be 
sold.  But,  except  in  cases  to  which  30  Yict.  c.  29  is  applicable  (^), 
or  unless  there  be  some  special  stipulation  to  that  eftect,  the  vendor 
is  not  bound  to  deliver  any  particular  shares;  nor  is  it  important 
whether  when  he  agreed  to  sell  he  actually  had  any  shares  or 
not  {Tc)\  it  is  sufficient  if  he  procures  them  in  time.  Neither  is  it 
necessary  that  the  shares  should  be  actually  vested  in  him,  or  that 
he  should  be  the  actual  transferrer;  it  being  immaterial  to  the  pur- 
chaser by  whom  the  transfer  to  him  is  made,  provided  only  the 
transferrer's  title  is  good.  {I) 

It  has  been  said  that  it  is  the  vendor's  duty  to  procure  the  regis- 
tration of  the  shares  in  the  name  of  the  purchaser,  (//i) 

Duty  to  pro-  . 

cure  transfer,  j^^jt  this  is  probably  going  too  lar;  and  it  appears  more 
correct  to  say  that  the  purchaser  takes  the  risk  of  any  objection 
being  made  by  the  company  to  himself  as  the  transferee;  and  also 
the  risk  of  all  other  objections  not  based  on  the  right  of  the  trans- 

{g)  Knight  v.  Barber,  16  M.  &  W.  66,  (J)  See  the  judgment  of  Lord  Black- 

and  ante,  pp.  674,  705.    33  &  84  Vict.  bum  in  Maxted  v.  Paine,  No.  2,  L.  R. 

c.  97,  §  69  et  seq.  6  Ex.  132. 

[h)  Hunt  V.  Gunn,  13  C.  B.  N.  S.  26,  [m)  Wilkinson  v.  Lloyd,  7  Q.  B.  27; 

and  3  Fos.  &  Fin.  223.  Lloyd  v.  Crispe,   5  Taunt.   249.     See, 

(?)  Ante,  p.  711.  also,  Bermiagham  v.  Sheridan,  33  Beav. 

{k)  Ante,  p.  710,  note  (a),  660. 

964 


CHAP,  v.]  SALES   KOT   ON    STOCK    EXCHANGE.  *71:> 

ferrer  to  transfer  his  shares,  (n)  Tlie  vendor,  however,  must  do 
whatever  is  necessary  to  perfect  his  riglit  to  transfer,  e.  g.,  pay  all 
calls  which  become  due  before  the  purchaser  becuines  in  equity  the 
owner  of  the  shares. 

With  respect  to  the  title  which  a  vendor  of  shares  can  be  re- 
quired to  show,  the  distinction  between  incorporated 

1         •  .     ,  .        .         ^  .  Vendor's  UUe. 

ana  unincorporated  companies  is  oi  great  iinj^ortance. 
A  vendor  of  a  share  in  an  incorporated  company  has  only  to 
show  a  title  *to  the  shares  he  proposes  to  transfer;    and  he     *713 
cannot  be  required  to  show  any  title  in  the  com])any  to  its 
landed  property  or  other  assets,  {o)     But  the  title  of  a  vendor  of  a 
share  in  an  unincorporated  company  is  not    so  clearly  separable 
from  the  title  of  the  company;  and  a  vendor  who  sells  a  share  in 
such  a  company  without  special  conditions  runs  the  serious  risk  of 
finding  himself  embarrassed  by  requisitions  respecting  the  title  of 
the  company  to  its  landed  property,  (j?) 

The  cases  referred  to  below  are  quite  sufficient  to  render  it  pru- 
dent for  a  vendor  of  shares  in  an  unincorporated  company  to  stipu- 
late that  he  shall  not  be  required  to  adduce  any  evidence  of  the  title 
of  the  company  to  any  property  whatever;  and  for  a  vendor  of 
shares  in  any  company  to  stipulate  that  he  shall  not  be  required  to 
adduce  any  evidence  of  his  own  title,  except  the  registry  of  him- 
self as  a  shareholder  in  respect  of  the  shares  offered  for  sale,  {q) 

The  obligation  of  the  purchaser  is  to  pay  the  price  agreed  upon, 
and  to  accept  a  transfer  of  the  shares,  and  to  indemnify  Purrimsers ob- 
the  vendor  from  all  liability  in  respect  of  them  accru-  ^'B'^^'^^'s. 
ing  after  the  purchaser  has  become  their  equitable  owner,  {r)  It 
has  long  been  established  that  a  contract  for  the  sale  and  purchase 
of  shares  is  one  of  which  specific  performance  will  be  enforced  (r): 
whence  it  follows  that  from  the  time  when  his  contract  ouo-ht  to 
have  been  performed  the  purchaser  becomes  in  equity  the  owner  of 

(h)  See  Sfa-ay  v.  Russell,  1  E.  &  E.  (p'  See  Curling  r.  Flight,  G   Ha.  41. 

888,   and  Lord  Blackburn's  judgniont  and  2  Ph.  613;    Stevens  r.    Guppy,   :! 

in  Maxted  v.  Paine,  No.  2,  L.  R.  6  Ex.  Russ.  171;  Morris  r.  Kearsley,  2   Y.   A: 

132,  and  the  cases  Evans  v.  Wood,  5  C.  Ex.  139. 

Eq.  9;  Hodgkinson  r.  Kelly,  6  Eq.  496,  ((/)  See  Hare  r.  Waring,  3  i\l.  ^li:  W. 

which,  however,  are  all  Stock  Exchange  362;  as  to  evidence  of  title  by  entries  in 

cases.  a  company's  books. 

(o)  See  Shaw  r.  Fisher,  2DeG.  &  Sm.  (;•)  Cheale  r.  Kenward,  3  DeG.  &   J. 

11,  and  5  DeG.  M.  &  G.  596,  as  to  the  27;  Dnncnft  r.  Albrecht,  12    Sim.    189; 

title  which  can  be  required  in  these  Shaw  v.  Fisher,  2  DoG.  &S.  11,  and  5 

cases.  DeG.  M.  &  G.  569. 

965 


*714:  SALE    OF    SHARES    IN    COMPANIES.  [booK  III. 

the  shares;  and  all  the  rights  and  obligations  incidental  to  sucli 
ownership  attacli  to  him.  Moreover,  this  relation sliip  of  trustee 
and  cestui  que  trust  may  be  created,  not  only  bv  a  direct  contract 
between  the  parties,  but  in  other  ways — e.  ^.,  if  there  is  a  series  of 
assignments  by  equitable  owners,  the  ultimate  assignee  will  be  the 
cestui  que  trust  oi  t\\e  legal  owner,  and  be  bound  to  indemnify 
him  accordingly.  Kuinerous  authorities  illustrate  these 
714*  principles;  *but  as  they  relate  to  purchases  and  sales  through 
brokers  they  will  be  noticed  hereafter,  {s) 

The  obligation  of  a  purchaser  to  pay  the  price,  accept  the  shares, 
and  indemnify  the  vendor  against  liability  in  respect  of  them,  was 
recognized  at  law  even  before  the  Judicature  acts;  and  for  a  breach 
of  such  an  obligation  an  action  will  lie.  {t)  Moreover  this  obliga- 
tion exists  and  will  be  enforced  notwithstanding  the  shares  may 
have  become  valueless  since  the  date  of  the  contract  by  reason  of 
the  stoppage  of  the  company  or  otherwise  {it),  and  notwithstanding 
they  cannot  be  registered  in  the  name  of  the  purchaser,  {v)  The 
risk  is  on  the  purchaser,  and  as  he  benefits  by  a  rise  in  the  value  of 
the  shares,  so  he  suffers  if  they  become  worthless  or  worse. 

Further,  a  contract  for  the  sale  of  shai-es  in  a  company  being 
wound  up  under  the  act  of  1SG2  is  perfectlv  valid,  al- 

Sales  of  shares  ^  r  -  ' 

'".companies      thouffh  made  durino;  the  liquidation  of  the   company. 

being  wound        •^'^  ^"^  &i  i        j 

"P-  The  provisions  of  the  Companies  act,  1862,  §§  131-153, 

declaring  certain  transfers  made  after  the  commencement  of  the 
winding  up  to  be  void,  operate  only  to  prevent  the  registry  of 
shareholders  or  the  list  of  contributories  from  being  altered  by  rea- 
son of  such  transfer  (v);  and  such  a  contract  is  binding  upon  a  pur- 

(s)  See  «?fer  aha  Shepherd  «;.   Gilles-  Hutchmson,  ?.  Eq.  257,  and  3  Ch.  388; 

pie,  5  Eq.  293;  Evans  v.  Wood,   ib.  9;  Evans  v.  Wood,  5  Eq.  9;  Hodgkinson  v. 

Pauie  V.  Hutchinson,  3  Eq.  257,  where  Kelly,  6  Eq.  496;  Hawkins  v.  Maltby,  6 

forms  of  decree  are  given.  Eq.    505,  and  4  Ch.  200,    which,  how- 

{t)  See  KeUock  v.  Enthoven,  L.  R.  9  ever,  were  all  cases  in  which  the  de- 

Q.  B.  241;  affirming  S.  C.  8  Q.   B.  458,  fendant    had    accepted  the    transfers, 

where  the  vendor  was  made  a  coutribu-  Compare  Bermingham  v.  Sheridan,   33 

tory  as  a  past  member;  Walker  v.  Bart-  Beav.  660,  which,  however,  cannot  now 

lett,  18  C.  B.  845,  and  Humble  v.  Lang-  be  relied  on,  as  was  admitted  by  the  M. 

ston,  7  M.  &  W.  517.  R.  in  Fenwick  v.  Wood,  6  June,    1870, 

(»)  See,  at  law,  mter  alia,  Chapman  and  see  3  Ch.  393. 

r.  Shepherd,  L.  R.  2  C.  P.  228;    Bow-  {v)  Biederman  r.  Stone,  L.   R.   2  C. 

i-ing  V.  Shepherd,  L.  R.  6  Q.   B.   309;  P.  504;  Rudge  v.  Bowman,  L.  R.  3  Q, 

and  in    equity,   inter  alia,    Paine    v.  B.  689. 

966 


CIlAl".  v.]  SALES    NOT    ON    STdClC    KXCilA  NOi:.  *T15 

chaser  althoni^h  he  can  show  that  ho  was  iL;;noraiit  of  the  fact  of  the 
eumijaiiy  having  gone  into  liquidation,  (x) 

•'•On  the  other  hand,  a  contract  for  tlie  sale  *715  j;;!^';*';,'l.r'![t1>T 
and  jiurchase  of  shares  does  not   bind  the  pur-  unTsl'.iIruro^" 

chaser  to  accept  what  does  not  answer  the  description   n^^i  »J<-nt'cai. 
of  the  shares  wliich  he  agreed  to  buy.     If,  therefore,  such  shares 
do  not  exist,  he  is  not  comi)ellable  to  pay  the  price  agreed  upon; 
and  if  he  has  paid   it  in  ignorance  of  the  facts,  he  can  recover  it 
back  as  money  paid  for  a  consideration  which  has  failed,  (y) 

In  Kenipson  v.  Saunders  (2)  it  was  held  that  a  purchaser  of  shares 
in  a  projected  coni])any  which  was  never  formed,  was  Kcmpjon «. 
entitled  to  recover  back  his  money  from  the  vendor,  '^'^u^Jers. 
although  the  vendor  was  not  an  original  subscriber,  and  had  him- 
self purchased  the  shares  from  other  persons.  This  case  was  de- 
cided upon  the  ground  that  the  subject-matter  of  the  contract  had 
no  existence,  there  being  no  company,  and  conse(|uently  no  shares 
in  it  to  buy  or  sell.  Had  the  contract  been  for  the  sale  and  pur- 
chase of  the  right  of  the  vendor  to  shares  in  the  company  when  it 
should  be  formed,  it  could  hardly  have  been  held  that  there  was 
nothinir  to  buy  or  sell,  or  that  the  purchaser  could  have  recovered 
back  his  money,  although  he  might  not  in  fiact  have  got  anything 
of  the  slightest  value  for  it. 

Again,  w4iere  shares  are  apparently  bought,  and  the  certificates 
for  them  proved  to  be  forged,  the  purchaser  can  recover  their  price 
from  the  vendor,  (a.) 

Strictly  speaking,  it  is  the  purchaser's  duty  to  prepare  the  trans- 
fer,  and  to  tender  it  to  the  transferrer  for  execution  {b);   preparation 
but  the  form  of  transfer  is  so  simple  that  in  practice  «» "•'"'sier. 
the  vendor  fills  it  up  and  sends  it  to  the  purchaser  to  execute.    The 
effect  of  a  transfer  in  blank  has  been  already  considered  (c),  as  has 
the  question  whose  duty  it  is  to  procure  it  to  be  registered.  {(7) 

An  important  question  connected  with  the  transfer  is,  whether 

ix)  Riulge  V.  Bowman,  L.  R.  3  Q.  B.  is,  2  P.  W.  217. 

6S9,  697.     See,  as  to  enforcing  such  a  (a)  Royal  Exchange   Assur.    Co.    r. 

contract  in  equity,  Emmerson's  case,    1  Moore,  2  N.  K.  60,  Q.   B.,   a  ciise  of 

Ch,  433,  explained  by  Wood,   L.   J.   in  forg.;-d  debentures. 

Paine  v.  Hutcliinson,  3  Ch.  388,  391.  (b)  Humble  r.  Langston.  7  ^^I.  S:  W. 

((/)  Watkins  v.  Huntley,  2  Car.  &  P.  517,  and  per  Lord  Blackburn,  in  Miu\- 

410,  note;  Westropp  v.  Solomon,  8  C.  ted  i'.  Paine,  No.  2,  L.  R.  6  Ex.  132. 

B.  345.  i^)  -^^"fc,  P-  '^'^5,  pf.scq. 

(z)  4  Bing.  5.    Compare  Stent  v.  Bail-  {d)  Ante,  p.  712. 

9G7 


*716  SALE    OF   SHARES   IN    COMPANIES.  [bOOK  III. 

the  vendor  is  bound  to  transfer  to  any  person  nominated  W  the 
Transfer  to  purchaser,  or  can  insist  on  transferring  to  the 

nomS"'"  *716  purchaser  *himself.  As  wi-U  he  seen  hereafter, 
a  purchaser  of  shares  sold  on  the  Stock  Ex- 
change is  entitled  to  require  a  ti-ansfer  to  himself  or  his  nomi- 
nee, (e)  Lord  Blackburn  has  stated  liis  opinion  to  be  that  any 
other  purchaser  has  the  same  right.  (/")  But  it  must  be  borne  in 
mind  that  a  transfer  does  not  always  relieve  a  transfei-rer  from  all 
liability  (g),  and  that  it  is  ofen  a  matter  of  great  importance  to  a 
transferrer  that  his  transferee  shall  be  a  person  of  substance.  What- 
ever, therefore,  the  rule  may  be  in  cases  where  the  transferor  is  un- 
der no  liability,  or  where  by  his  transfer  he  frees  himself  from  all 
liability,  it  is  very  questionable  whether  a  vendor  of  shares  who  has 
not  agreed  expressly  or  impliedly  (by  selling  on  the  Stock  Ex- 
change) to  transfer  to  the  nominee  of  the  person  with  whom  he  has 
contracted,  is  under  any  obligation  to  transfer  to  such  nominee.  (A) 
A  vendor  of  a  leasehold  estate  who  has  himself  entered  into  oner- 
ous covenants,  is  surely  not  under  any  obligation  to  assign  to  a 
pauper  at  tlie  request  of  the  purchaser,  unless  indeed  the  purchaser 
enters  into  a  covenant  for  indemnity  which  would  obviously  re- 
move the  vendor's  objections. 

A  partner  who  sells  his  share  of  partnership  real  estate  is  appar- 
Lien  of  vendor  ently  entitled  to  the  ordinary  lien  of  a  vendor  of  real 

for  unpaid  pur-  ,,  ^  •  ■,  i  /  ■\       t>    .     .-i 

chase-money,  estate  lor  the  unpaid  purchase-money,  [t)  I>ut  there 
is  no  sufficient  analogy  between  a  sale  of  real  property  and  a  sale 
of  a  share  in  an  incoporated  company  to  warrant  any  such  lien 
upon  the  sale  of  such  a  share.  It  is  conceived,  however,  that  an 
unpaid  vendor  of  a  share  in  a  company  has  the  same  right  of  stop- 
ping the  delivery  to  an  insolvent  purchaser  that  a  seller  of  ordinary 
goods  has  in  similar  cases. 

(e)  Maxted  v.  Paine,  No.  2,  L.  R.  6  452.     In  tliis  case  the  lien  contended  for 

Ex.  132.  '  was  held  to  have  been  excluded  by  the 

(/)  See  his  judgment  in  the  case  last  vendor's  agreement  to  let  the  purchase- 
cited,  money  remain  in  the  concern  at  a  high 

{g)  E.  g.,  in  companies  formed  and  rate  of  interest.  Moreover,eveniftheIien 

registered    under   the  Companies    act,  had  ever  existed,  there  was  evidence  to 

1862,  from  liability  as  a  past  member.  show  that  it  had  been  discharged.     Had 

{h)  Coles  V.  Bristowe,  4  Ch.  3,  is  in  it  not  been  for  these  circumstances,  the 

authority  to  the  effect  that  he  is  not.  existence  of  the  lien  contended  for  would 

(i)  Stuart  v.  Ferguson,  Hayes,  Ir.  Ex.  apparently  hiive  been  established. 

968 


CHAP,  v.]  FRAUDULENT   SALES.  "^71 7 

A  person  M'ho  sells  shares  in  a  company  which  he  knows  has  no 
existence,  is  guilty  of  a  fraud  for  which  he  is 

II  u.  Ml         /   -N         i>     i.      ii  1  *-i~    Fraudulent 

cnnimally    *respon8ible.    {j)      13ut    tlie    rule     *ii<    sale. 
caveat  emptor  renders    it  lawful    for   a  person 
holding  shares  in  an  insolvent  company  to  sell  them  to  any  one 
willing  to  buy  them;  and  in  the  absence  of  misrepresentation  by 
the  seller,  the  buyer  is  apparently  without  remedy  against  him.  (k) 

A  person  who  has  been  induced  to  purchase  shares  by  fraud  on 
the  part  of  the  seller,  can,  at  his  option,  either  keep  Fraud  by  the 
the  shares  and  sue  for  the  damage  he  has  sustained  by  '*'''^*^'"- 
the  faud,  or  repudiate  the  contract,  and  recover  the  money  paid 
under  it.  But  he  cannot  adopt  the  latter  alternative  unless  he  can, 
when  the  action  is  brought,  restore  the  shares  in  the  same  state  in 
which  he  took  them,  and  place  the  seller  in  the  same  position  in 
which  he  stood  before  the  sale.  (Z)  The  purchaser  can  also  main- 
tain an  action  to  rescind  the  contract,  and  to  compel  the  vendor  to 
indemnify  him.  And  the  fact  that  the  plaintiff  sold  some  of  the 
shares  before  he  knew  of  the  fraud,  will  not  disentitle  him  to  re- 
lief, if  the  contract  is  severable;  and  this  it  has  been  held  to  be, 
where  all  the  shares  bought  are  shares  in  the  same  company,  (m) 
Nor  will  the  forfeiture  of  the  shares  after  the  commencement  of 
the  action  affect  his  rights,  {n)  Unless,  however,  the  company  is 
implicated  in  the  fraud,  the  purchaser,  if  he  has  become  a  share- 
holder, cannot,  it  is  conceived,  prevent  calls  being  made  upon 
him.  (o) 

If  a  person  is  induced  to  sell  shares  by  the  fraud  of  the  pur- 
chaser, the  vendor  has  similar  rights  to  those  which  a  yxkv\^  on 
purchaser  has  in  the  converse  case  already  considered.   ^^^^^'■• 
But  where  the  purchaser  is  innocent  of  the  fraud,  and  a  person's 
shares   have  been    fraudulently   sold   and   transferred   by  others, 

{j)  See  Maccallum  v.  Turton,  2  Y.  &  Davidson  v.  Tulloch,  3  Macqueen.  783; 

J.  183.  Twycross  v.  Grant,  2  C.  P.  D.  469. 

(fc)  See  Remfrey  v.  Butler,  E.  B.  &  (»«)  Maturin  v.  Trediiinick,  2  N.  R. 

E.  887;  Stray  v.  RusseU,  1  E.  &  E.  888,  514,  and  4  ib.  15. 

and  ante,  p.  714.  (n)  Ibid. 

(/)  Clarke  r.  Dickson,  E.  B.  &  E.  148;  (o)  See  hxfra,  book  iii:  ch.  10.  §3, 
and  see  Maturin  r.  Tredinnick,  cited  in  and  book  iv.,  under  the  h<>ad  Con- 
the  next  note.  As  to  actions  for  dam-  tributones.  Bloxam  v.  ^Metropolitan 
ages  sustained  by  taking  shares  on  the  Cab.  Co.,  4  N.  B.  51.  V.  C.  W.,  where 
faith  of  fraudulent  statements,  see  an  injunction  was  granted  is,  it  is  con- 
Clarke  V.  Dickson,  6  0.  B.  N.  S.  453;  ceived.  not  opposed  to  this,  as  the  plain- 
Bedford  I'.  Bagshaw,  4  H.  k  N.  538;  tiff  was  not  a  shareholder. 

0G9 


■•'719  ACTIONS   BETWEEN    BUYER   AND   SELLER.  [bOOK  HI, 

*T18     *liis  rights  against  tlie  transferee  will  depend  njion  wlietlier 

the  latter  has  acquired   the  legal  ownership   or  the  rigiit  to 

Effect  of  fraud  Call  for  the  legal  ownership,  hond  Jide,  for  value,  and 

chaser!  °^^^'^'    without  notice  of  the  fraud.     If  he  has,  his  title  cannot 

he  impeached  (7;);  hut  if  he  lias  not,  the  shares  may  be  recovere.l 

from  him,  unless  tlie  claimant  has  lost  his  right  to  relief  by  his  own 

negligence,  lapse  of  time,  or  some  other  special  circumstance,  (q) 

Shares  are  not  unfrequently  sold  by  auction.     If  an  auctioneer 

sells  shares,  without  disclosing  the  persons   on  whose 

Sales  of  shares  i         f>         i 

by  auction.  behalf  he  sells,  he  will  he  personally  responsible  for  the 
due  completion  of  the  sale,  and  will  be  liable  to  the  purchaser  in 
damages  for  the  non -transfer  of  the  shares  to  him.  (r)  Moreover,  if 
in  such  a  case  the  auctioneer,  when  called  upon  to  transfer  the  shares, 
refers  the  purchaser  to  the  owners,  it  becomes  unnecessary  for  the 
purchaser  to  tender  a  deed  of  transfer  to  the  auctioneer  before  suing 
him,  for  by  such  a  reference  tlie  auctioneer  discharges  the  ])urchaser 
from  tendering  any  deed  of  transfer  to  him.  {s)  If  shares  are  sold 
subject  to  a  condition  that  if  they  are  not  paid  for  by  a  certain  time, 
the  seller  shall  be  at  liberty  to  resell  them,  and  shall  be  entitled  to 
recover  from  the  purchaser  any  loss  sustained  by  the  resale,  and  the 
shares  are  sold  and  resold  under  this  condition,  the  first  ])urchaser 
can  be  sued  on  the  special  contract  entered  into  by  liim.  {t) 

In  an  action  by  a  purchaser  of  shares  against  a  seller,  for  wot 
Actions  by         transferring    the   shares   bought,   the    purchaser    must 

purchaser  ,    ."",.    ,t  .    •    ^  .  i  ^     ii      *. 

against  seller,  avor,  and  it  the  averment  is  traversed,  prove — 1,  that 
he  was  ready  and  willing  to  pay  for  the  shares  {u\  and  2,  that  he 
tendered    to  the  seller  for   his  execution  a  proper  instrument  of 

transfer,  {v)  The  necessity  for  such  tender,  however,  only 
*T19     exists  upon  the  ^supposition  that  some  formal  document  is 

required  to  render  the  transfer  of  the  shares  complete,  and 
upon  the  further  supi)osition  that  the  seller  has  not  discharged  the 
purchaser  from  making  the  tender,  (x) 

(p)  See  Doclds  v.  HiUs,  2  Hem.  &  M.  (/)  Lamond  v.  Davall,  9  Q.  B.  1030. 

424;   Donaldson  v.  Gillot,   3  Eq.  274;  (?<)  Lawrence  v.  Knowles,  5  Bin^.  N. 

RumbaU  v.  Metropolitan  Bank,  2  Q.  B.  C.  399.     In  Tempest  v.  Kilner,  2  C.  B. 

D.  194,  ante,  pp.  663,  664.  300,  the  averment  of  readiness  and  wil- 

iq)  See  Taylor  v.  Great  Indian  Rail.  lingness  was  traversed  too  largely. 

Co.  4  DeG.  &  J.  559,  and  other  cases  (v)  Stephens  v.  DeMedina,   4  Q.   B. 

cited,  ante,  p.  707.  422;  Bowlbyv.  Bell,  3  C.  B.  284;  Green 

(r)  Franklyn  v.  Lamond,  4  C,  B,  637,  v.  Mmi-ay.  6  .lur.  728,  Q.  B. 

(s)  lb.  {x)  Franklyn  v.  Lamond,  4  C.  B.  637. 
970 


CHAP,  v.]  SALE    OF    SIIAT.KS.  ■''•-O 

Again,  a  seller  suing  a  purcliuscr  for  not  accepting  shares  must 
aver,  and  if  necessary  prove,  readiness  and  willingness  j^';'!;^',^^;,';^ '^^■'• 
on  his,  the  seller's  part  to  transfer  those  shares  to  the  purcim.sLr. 
purchaser,  {y)  The  circuinstanCL'S  that  a  call  is  due  upon  shares 
agreed  to  he  sold,  and  that  they  are  not  transferahle  so  long  as  the 
call  remains  unpaid,  do  not  disprove  readiness  and  willingness  on 
the  part  of  the  seller  to  transfer,  if  he  was  in  fact  ready  and  able 
to  pay  the  call  in  question,  (s) 

Theeftect  of  transfers  in  blank  has  been   already  considered  {a). 
The  decisions  at  law  on  this  subject  must  now  be  taken  Tmnsfcrs  in 
with  the  qualifications  rendered  necessary  by   the  de-  ^^^"^• 
cisions  in  equity.  (J) 

In  an  action  by  the  seller  of  shares  against  the  purchaser  for  not 
accepting  them,  the  damages  are  measured  by  the  dif-  p,in,„^,, ^ rcov- 
ference  between  the  contract  price  and  the  market  price  coiumct'fo" 
at  the  time  of  the  purchaser's  breach  of  contract  (c);    sale  k  broken, 
and  it  is  for  the  jury  to  determine  when   this  time  was,   {d)     So, 
in  an  action  by  the  pui-chaser  of  shares  against  the  seller  for  not 
delivering  them,  the  damages  are  measured  by  the  difference  be- 
tween the  contract  price  and  the  market  price  at  the  time  when  they 
ought  to  have  been   delivered,  {e)     Where,  however,  an   action  is 
brought  for  not  re-delivering  shares  lent  and  agreed  to  be  returned 
on  a  given  day,  the  damages  are  measured  by  the  market  price  of 
the  shares  at  the  time  of  the  trial  (/);  and  the  same  rule  is 
adopt«'.d    in   estimating   damages  *in  actions   against  com-     *72(> 
panies  for  not  delivering  shares  at  the  time  they  ought,  {g) 

An  action  will  lie  for  specific  performance  of  a  contract  for  the 
purhase  and  sale  of  shares  (A)  if  it  is  capable  of  being  |P';j;',f,^,,P<^^'",: 
])erformed  {i)\  and  the  purchaser  will  be  compelled  to  contract oisaie. 

(y)  Hannuic  v.  Goldner,  11  M.  &  W.  (e)  Tempest  v.  Kilner,  3  C.  B.  253. 

849.     As  to  the  duty  to  procure  a  trans-  (/)  Owen  v.  Routh,  14  C.  B.  o'27.    If 

fer,  see  ante,  p.  712,  and  uifru  p.  726.  the  shares  have  been  returned,  the  dam- 

(r)  Shaw  v.  Rowley,  16  M.  &  W.  810.  ages  must  be  limited  to  the  loss  caused 

(«)  Ante,  p.  705.  hy  their  detention.   Williams  v.  Archer, 

{h)  See  Ilibblewhite  v.  McMorine,   6  6  C.  B.  318. 

M.  &  W.  200,   and  the  cases  ante,   p.  (g)  Cockerell  r.  Van  Difm  mi's  Land 

706.  Co.  18  C.  B.  454.  and  1  C.  B.  N.  S.  732. 

(c)  Shaw  r.  Holland,  15  M.  &  W.  136;  (/')  Ante,  p.  714. 

Stewart  v.  Cauty,  8  M.  &  W.  160  ;  Bott  ((')  See,    as  to   this,   Bermingham  r. 

V.  Flather,  5  Ra.  Ca.  85.  SheridiUi,   33  Beav.  660,  and  compare 

[d)  Ibid.,  and  see  Earned  v.  Hamil-  Toole  c.  Middleton,  29  Beav.  64(5;    and 
ton,  2  Ra.  Ca.  624.  see  ante,  pp.   713,   714,   from  which  it 

971 


*721  SALES    ON    STOCK   EXCHANGE.  [bOOK  III. 

pay  the  price,  altliougli  it  may  have  been  expressed  to  be  paid  in 
the  deed  of  transfer,  if,  in  fact,  it  was  not  thus  paid  (;);  and  will 
be  compelled  to  accept  a  transfer  of  the  shares  he  has  bought,  and 
to  idemnifj  the  seller  from  all  liabilities  accruing  subsequently  to 
the  sale  (^);  and  the  seller  will  be  compelled  to  account  for  any 
monies  he  may  liave  received  from  an  improper  subsequent  sale  to 
another  person,  (l)  The  Court  has,  however,  refused  to  compel  a 
purchaser  of  script  to  accept  shares,  and  indemnify  the  seller  from 
calls  upon  them  (m);  and  to  compel  an  allottee  of  shares  to  accept 
them,  and  to  execute  the  company's  deed  in  respect  of  them  [n)  ; 
and  to  compel  the  promoters  of  a  company  to  deliver  shares  to  a 
subscriber  to  the  company,  {o)  Neither  will  the  Court  interfere  to 
compel  the  completion  of  a  gratuitous  and  intended  transfer,  (p) 

In  Poole  V.  Middleton,  {q)  a  purchaser  of  shares  obtained  a  decree 
against  the  seller  for  the  specific  performance  of  the  contract  of 
„  ,.  ^   ,  sale,  although  the  directors  refused  to  allow  the 

Relief  where  '  o 

directors  refuse  *72l     ^defendant  to  transfer  his  sharcs.     The  contract 

to  allow  a 

transfer.  .^fig  valid  without  their  consent;  and  they  could 

not  prevent  the  defendant  from  completing  it,  nor  object  to  that  mode 
of  transfer  which  they  were  in  the  habit  of  allowing  in  other  cases. 


2.  Sales  on  the  Stock  Exchange. 

Having  now  alluded  to  contracts  for  the  sale  of  shares  otherwise 
Sales  of  shares    than  ou  the  Stock  Exchange,  it  is  proposed  to  notice 

on  the  Stock  ,  ^  „  •  •    ^  V  i  i 

Exchange.         the  eiiect  01  entering  into  such  contracts  through  mem- 
bers of  that  body.     In  practice  scrip  and  shares  are  usually  bought 

appears,  that  altliougli  registration  in  714.     As  to  the  right  of  a  mortgagee  of 

the  purchaser's  name  may  be  impossi-  shares    to    an    indemnity      from     his 

ble,  he  can  be  compelled  in  equity  to  mortgagor,  see  Phene  v.  Gillan,  5  Ha.  1. 

indemify  the  vendor.  {I)  Beckitt  v.  Bilbrough,  8  Ha.  188. 

(j)  Wilson  V.  Keating,  27  Beav.  121,  (w)  Jackson  v.   Cocker,   4  Beav.  59. 

and  4  DeG.  &  J.  588.     The  case  seems,  Compare  this  with  the  last  case, 

at  first  sight,  to  have  been  a  hard  one  (n)  Sheffield,  &c.,  Gas  Co.  v.  Harri- 

upon  the  defendant ;  but  the  deed  stated  son,  17  Beav.  294. 

that  he  had  paid  the  money,  and  this  he  (o)  Columbine  v.  Chichester,  2  Ph.  27. 

knew  was  not  the  fact.      He  could  not,  In  this  case,  however,  the  promoters  did 

therefore,   be    treated  as  having  been  not  appear  to  have  any  shares  which 

misled  by  the  plaintiff  or  by  the  contents  they  could  allot, 

of  the  deed.  (^j)  See  Milroyy.  Lord,  8  Jur.  N.  S. 

{k)  Wynne  v.  Price,  3  DeG.  &  S.  310-  806.  L.  J. 

and  other  cases  cited,   ante,  pp.   713,  {q)  29  Beav.  646, 

972 


CHAr.  v.]  SALE    OF    SHARES. 


*700 


and  sold  through  johbcrs  and  hrokers  (r);  and  a  person  emphn'inf^ 
a  broker  to  buy  or  sell  is,  in  the  absence  of  evidence  to  brokers  and 
the  contrary,  presumed  to  authorize  him  to  buy  or  sell  J"'''J^''=- 
according  to  the  rules  and  usages  prevailing  in  the  market  where 
the  commodity  is  to  be  bought  or  sold  (s);  and  persons  employing 
members  of  the  Stock  Exchange  as  their  brokers  are  bound  by  the 
rules  and  usages  -which  govern  that  body  {t)\  provided  they  are  not 
unreasonable,  or  on  some  other  ground  illegal.  What  these  rules 
and  usages  are  is  a  question  of  fact  to  be  proved  by  the  person  who 
relies  on  them;  and  in  considering  the  cases  it  is  im])ortant  to  bear 
in  mind  that  the  decisions  are  made  only  with  reference  to  the  cus- 
tom as  proved  or  admitted  in  the  particular  case  under  consideration, 
and  do  not  conclude  the  question  as  to  what  the  custom  really  is. 

Besides  the  printed  rules  of  the  Stock  Exchange  there  are 
*certain  established  practices  observed  by  its  members,  and     '•72'2 
which  are  as  binding  upon  them  as  the  printed  rules  them- 
selves.    Both  the  rules  and   unwritten  ])ractices  are  altered  from 
time  to   time,  but  a  contract  must  be  interj)reted  according  to  the 
custom  as  it  existed  at  the  date  of  tlie  contract,  (w) 

The  rules  and  practices  of  the  Stock  Exchange  respecting  the 
sale  and  purchase  of  shares  will  be  found  stated  in  courseofasaie 
Maxtcd  V.  Paine  {v),  Bowring  v.  Shepherd  {vj),  Grissell  Exchange. 
V.   Bristowe  {x),   Coles  v.   Bristowe  (y),  Bennie  v.   Morris  (2),  and 
Merry  v.  Nickalls(«);  and  from  those  cases  it  ap]:)ears  that  in  the 

(r)  Brokers  buy  and  sell  for  principals,  cases  there  refen-ed  to. 

jobbers  for  themselves  ;  but  as  between  {t)  Stray  v.   Russell,  1  A.  &  E.  880; 

all  members  of  the  Stock  Exchange  bro-  Biederman  v.  Stone,  L.  R.  2  0.  P.  504; 

kers  are  always  regarded  as  principals;  GrisseU  r.   Bristowe,  L.   R.  4  C.  P.  36; 

and  for  the  purposes  of  the  text  there  is  Coles  V.  Bristowe,  4  Ch.  3;  Bowring  r. 

no  material  distinction  between  brokers  Shepherd,  h.  R.  6  Q.  B.  oOi);  Duncan  r. 

and  jobbers.     That  their  liabilities  on  Hill,  L.  R.  6  Ex.  255,  reversed  in  part, 

these  contracts  are  alike,  see  Lord  Black-  L.  R.  8  Ex.  242. 

bum's  judgment  in  Maxtedr.  Paine,  No.  {u)  Per  Lord  Blackburn,    !^^axted  r. 

2,  L.  R.  6  Ex.  132.    See,  as  to  brokers  Paine,  2nd  action,  L.   R.   6  Ex.  132, 

ante,  p.  187,  and  Bai'ing  v.  Conie,  2  B  160. 

&  A.  137.    In  this  case  it  is  said  brokei-s  (r)  L.  R.  4  Ex.  203,  and  6  Ex.  132. 

have  no  business  to  contract  as  princi-  {ir)  L.  R.  6  Q.  B.  309. 

pals;    but  this  has    no  application    to  (.r)  L.  R.  4  C.  P.  36,  and  3  C.  P.  112. 

sharebrokers,  as  is  evident  from  the  cases  (//)  4  Ch.  3,  and  6  Eq.  149. 

alluded  to  in  the  text.  (-)  13  Eq.  203,  overruled  by  Merry  r. 

(s)  See  Fleet  v.  Murton,  L.  R.  7  Q.  B.  Nickalls. 

126;  MoUett  v.  Robinson,  L.  R.  5  C.  P.  («)  7  Ch.  733,  and  L.  R.  7  IL  L.  5:50 


646,  affirmed  L.  R.  7  C.  P.  84,  and  Uie 


973 


*723  SALES    ON    STOCK    EXCIIAXGE.  [l^OOK  III. 

ordinary  conrse  of  events  a  sale  of  shares  on  the  Stock  Exchange  is 
essentially  a  transaction  of  the  followini^  description: — 

1.  There  is  a  contract  between  the  sellin.o-  and  buying  broker  or 
jobber,  to  the  effect  that  on  a  given  day,  called  the  account  day, 
the  shares  shall  be  deliverable  and  the  price  payable. 

2.  That  on  the  day  before  the  account  day  (called  tlie  name  day) 
the  buying  broker  or  jobber  gives  or  passes  to  the  selling  broker  a 
ticket  containing  the  name  of  the  person  to  whom  the  shares  are  to 
be  transferred,  and  the  price  wliicli  that  person  has  agreed  to  pay 
for  them. 

3.  Tliat  the  name  so  passed  can  be  objected  to  within  a  limited 
time  (10  days);  and  if  objected  to  on  reasonable  grounds,  must  be 
replaced  by  another  name  ;  the  committee  of  the  Stock  Exchange 
deciding,  in  case  of  dispute,  whether  another  name  is  to  be  given 
or  not. 

4.  That  the  above-mentioned  ticket  is  prepared  by  the  broker 
of  the  ultinuite  purchaser,  and  is  passed  (between  12  and  2  o'clock 
on  the  name  day)  by  such  broker  to  his  immediate  vendor,  and 
by  him  to  his  vendor,  and  so  on,  until  it  reaches  the  broker 
of  the  original  seller.  The  ticket  is  endorsed  by  each  member 
of  the  Stock  Exchange,  with  his  own  name,  as  it  passes  through 
his  hands. 

5.  That  tlie  original  seller  executes  a  transfer  (prepared  by  his 

broker)  to    the   ultimate   purchaser  ;   the   consideration  for 
*723     *such  transfer  being  usually  stated  to  be  the  price  agreed  to 
be  paid  by  such  purchaser,  (h) 

6.  That  the  selling  broker  looks  for  paj^ment  of  the  price  at 
which  he  sold  to  the  broker  or  jobber  who  bought  of  him;  but 
usually  takes  from  the  broker  of  the  ultimate  purchaser  the  money 
he  has  agreed  to  pay,  and  then  settles  for  the  difference,  if  any, 
with  tlie  broker  or  jobber  with  whom  he,  the  selling  broker,  origi- 
nally contracted. 

From  this  statement  it  is  apparent  that  important  and  difficult 
questions  of  law  are  likely  to  arise,  and,  in  order  to  solve  them,  it 
is  proposed  to  consider  the  position  — 

1.  Of  the  vendor  and  of  the  broker  or  jobber  who  agrees  to  buy 
from  him. 

ih)  The  confusion  introdiiced  by  this  Hawkins  v.  Maltby,  3  Ch.  188.  which, 
c.rcLimstance  led  to  a  variance  between  however,  was  put  rig-ht  in  th?  2nd  suit, 
the    pleading-s    and     the    evidence   in      6  Eq.  505,  and  4  Ch.  200. 

071 


CHAP,  v.]  SALE    OF    SHAKES.  ""- i 

2.  Of  the  vendor  and  the  ultimate  purchaser. 

3.  Of  the  vendor  and  tlie  undisclosed  and  intermediate  purchasers. 

4.  Of  the  vendor  and  purchaser  as  regards  their  respective  brokers. 


1.  As  to  tJie 2)Osliion  of  the  vendor  and  ofilw  hrolir  or  jobber  uho  agrees  to  bit;/ 

from  hint. 

There  is  a  clcrir  contract  between   these  parties  which  each  can 
enforce  airainst  the  other.  T.iis  has  never  bc?n  doubted;   Contract be- 
but  the  real   nature  of  the  contract  lias   ^iven  rise  to   an.i  punims- 

•^  _    _  in)<  broker  or 

much  controversy.  From  the  most  recent  decisions,  jobber, 
however,  it  seems  that  the  true  contract  is  to  the  effect  that  the 
vendor  will  transfer  to  the  buyer  or  to  his  uominee,  and  that  the 
broker  or  jobber  will  either  acce;>t  the  shares  and  pay  for  them  and 
indemnify  the  seller  against  all  liability  in  respect  of  them,  or  find 
some  other  person  to  do  so;  and  that  person  must  be  a  person  .9?// 
juris  who  has  himself  agreed  to  take  the  shares,  and  to  whom  no 
reasonable  objection  can  be  taken,  (c) 

Accordingly  where  the  name  of  an  infant  was  passed,  and  the 
transfer  was  made  to  him,  the  purchasing  jobber  was  held  liable  to 
the  vendor,  although  being  ignorant  of  the  in-  instances  of 

fancy  *he  had  made  no  objection  to  the  trans-  *724  jV^^^^.'f 
feree  within  the  time  fixed  by  the  rules  of  the 
Stock  Exchange,  {d)  So,  where  a  jo])ber  ])assed  tlie  name  of  a  per- 
son whose  broker  had  exceeded  his  authority,  by  extending  the  time 
for  completing  the  sale,  and  that  person  declined  to  accept  a  trans- 
fer, it  was  held  that  the  jobber  had  not  relieved  himself  from  lia- 
bility in  re  ],ect  of  his  contract,  {e)  So,  also,  where  the  name 
passed  was  that  of  a  foreigner  resident  at  Smyrna,  it  was  held,  in 
substance,  that  the  vendor  might  reasonably  object  to  it;  and  hav- 
ing done  so,  that  the  jobber  remained  liable,  (y) 

But  if  the  ])erson  whose  name  is  jiiven  is  siii  juris,  and  is  one  to 
whom  the  vcudiu'  may  reasonably  object,  and  he  allows  waiver  of 

■'  '       1  .         objocliun  to 

the  time  for  objecting  to  pass,  and  executes  a  transfer  nominee. 
•  to  that  ]ierfon,  the  purchasing  br<»ker  or  jobber  is  discharged  from 

(r)  See  Maxted  r.  Paine,  No.  2,  L.  R  r.  Morns.  18  Eq.  203. 

6  Ex.   132,  and  the  cases  cited  in  the  (c)  Maxted  r.  Paine,  1st  action,  L.  IJ. 

next  few  notes.  A  Kx. '^1. 

id]  ]\[erry  r.  Nickr.lls.   L.    W.   7  II.  L.  i./i  .Mien  r.  Graves,  L.  Pi.  5  Q.  r>. 

oCO,  and  7  Ch.   7."V?;  ovtrnil'ny;  Kennic  47S. 

975 


*T25  SALES    ON    STOCK    EXCHANGE.  BOOK  III. 

all  further  liability,  unless,  as  sometimes  happens,  he  has  expressly 
undertaken  some  further  obligation,  e.g..,  to  guarantee  registration 
of  the  transfer. 

In  Grissell  v.  Bristowe  (</),  and  Coles  u  Bristowe  (7^.),  the  seller 
Grisseiir  ^^^^   executed  a  transfer  to  the  person    whose    name 

Bristowe.  ^j^g  mygn  as  the  ultiu:iute  purchaser,  and   he  paid  for 

Coles  V.  '^  '  '  1 

Bristowe,  the  shares  and  kept  the  transfers,  but  did  not  execute 

them,  and  did  not  procure  them  to  be  registered  in  his  name.  The 
seller  consequently  remained  liable  to  the  company  for  calls,  and 
he  sought  to  compel  the  jobber  who  first  bought  the  shares  to  in- 
demnify him.  But  it  was  held  both  by  the  Court  of  Exchequer 
Chamber  and  by  the  Court  of  Appeal  in  Chancery  that  the  jobber 
had  duly  discharged  his  obligations,  and  had  ceased  to  be  liable. 
In  these  cases  it  did  not  appear  that  the  transferee  could  have  been 
reasonably  objected  to;  but  the  decisions  showed  the  true  position 
of  purchasing  jobbers,  and  paved  the  way  to  those  which  follow. 

In  Maxted  v.  Paine,  No.  2  (^),  the  name  jiassed 
PalSe^'No  2.  *'^25  was  ouc  *which  could  have  been  reasoi;al)ly  ob- 
jected to,  and  was  the  name  of  a  nominee  of  the 
true  purchaser,  who  was  paid  by  him  for  accepting  the  transfer.  It 
was,  nevertheless,  held,  that  there  being  no  fraud  on  the  part  of  the 
defendant  (the  first  purchasing  jobber),  he  had  discharged  his  obli- 
gation, by  procuring  the  acceptance  of  a  transfer  by  a  person  who 
could  not  himself  repudiate  it,  and  to  whom  the  vendor  had  not 
objected  in  due  time.  This  case  shows  conclusively  that  as  between 
the  vendor  and  purchasing  jobber,  and  where  they  both  act  hona 
fide.,  it  is  the  duty  of  the  vendor  to  make  inquiry  respecting  his 
proposed  transferee. 

If,  as  sometimes  happens,  the  purchasing  broker  or  jobber  has 
Registration  Gxprcssly  guaranteed  the  registration  of  the  shares,  he 
guaranteed.  ^g  jjable  to  indemnify  the  seller  against  the  conse- 
quences of  their  non-registration  in  the  name  of  the  transferee  (^); 
but  he  is  not  liable  for  the  solvency  of  the  transferee. 

[g)  L.  R.  4  C.  P.  36,  reversing  S.  C.  bum,  in  this  case,  Merry  v.  Nickalls,  7 

3  C.  P.  112.  Ch.  733. 

{h)  4  Ch.  3,  reversing  S.  C.  6  Eq.  149.  (A-)  Cruse  v.  Paine,  Eq.  641,  and  4 

(t)  L.  R.  6  Ex.  132,  and  4  Ex.  203.  Ch.  441. 
See  as  to  the  judgment  of  Lord  Black- 

976 


cii-vr.  v.] 


SALE   OF    SHARES. 


*726 


2.  As  to  the  posiliou  of  the  vendor  and  the  ulliinafe  ])iirchaficr. 

"When  the  ticket  contaiiiin;r  the  name  of  tlie  ultimate  pnrcliaser 
issued  by  his  brokers   is  delivered    to   the  vendor,  and   c^„tract  be- 
lie has  executed  a  transfer  of  his  shares,  and  that  trans-  awihi^iiuim- 
fer  has   been   accepted   by   the  ])urchaser,   and  he  has  *^''■''^• 
paid  the  price,  it  is  plain  that  the  vendor  has  become  a  trustee  fur 
the  purchaser,  and  that  the  purchaser  is  bound   to  indemnify  the 
vendor  aii^ainst  all  liability   in  respect  of  the   shares.  (1)     Ttiis  has 
been  decided  even  where  the  jnirchaser  has  not  executed  the  trans- 
fer (?);  and  where   the   registration   of  the   transfer   cannot  take 
place  by  reason  of  the  stop])age  of  the  company,  (m) 

Even  before  the  Judicature  acts,  where  the  vendor  and  ultimate 
jnirchaser  had  been  thus  brought  into  direct  communica- 
tion with  each  other,  the  vendor  could  sue  the  ]nirchaser  *at     *726 
law  for  such  indemnity  (;?):  for    then,    at   all    events,  there 
was  clearly  a  contract  between  them,  (o) 

The  precise  moment  when  the  contract  in  these  cases  is  first  cre- 
ated, has  given  rise  to  some  dift'erence  of  opinion,  but  pnvityof 
the  better  opinion  seems  to  be  that  a  contract  between  '^"""■'^'-■'• 
the  vendor  and  the  nltimatc  ])urchaser  exists,  as  soon  as  the  ticket 
containing  the  purchaser's  name  has  been  handed,  by  his  authority, 
to  the  vendor,  and  he  has  accepted  the  name,  and  indicated  that  ac- 
ceptance to    the  purchaser,  (j:?)     This  opinion  is  based  upon  the 


(?)  Paine  t'.  Hutchinson,  3  Eq.  257, 
and  3  Ch.  ;i88  ;  Hodgkinson  r.  Kellj', 
6  Eq.  496  ;  Hawkins  r.  Maltby,  6  Eq. 
505,  and  4  Ch.  200  ;  Shepherd  r.  (iil- 
lespie,  5  Eq.  293  ;  Sheppard  r.  Murphy 
Ir.  Rop.  2  Eq.  544,  and  16  W.  R.  diS  ; 
Wynne  v.  Price,  3  DcG.  ic  Sm.  310. 

(»()  Evans  ».  Wood,  5  Eq.  9  ;  Hodg- 
kinson  v.  Kelly,  6  Eq.  496  ;  Hohnes  v. 
Synions,  13  Eq.  66.  Compare  Herminu- 
ham  V.  Sheridan,  33  Beav.  660,  which 
cannot  now  be  relied  upon.  See,  on  it, 
3  Ch.  393. 

(«)  Kellock  r.  Enthovon,  L.  R.  9  Q. 
B.  241;  Bowring  v.  Shepherd,  L.  R.  6 
Q.  B.  309  ;  Davis  r.  Haycock,  L.  R.  4 
Ex.  373  ;  Walker  v.  Bartlett,  18  C.  B. 
845,  reversing  S.  C.  ib.  446  ;  Humlile  i\ 
Langston,  7M.  &.  W    617.      The  ac- 


tion should  be  for  not  indemnifying  the 
seller.  See  Sayles  r.  Blayne,  14  Q.  B. 
205,  and  6  Ra.  Ca.  79,  and  the  cases 
above. 

(o)  See,  as  to  this,  Hawkins  r.  Malt- 
by,  3  Ch.  188,  where  the  contract  was 
held  to  be  misstated.  This,  however, 
was  put  right  in  the  2nd  suit,  6  Eq. 
505. 

( /) )  See  ace.  per  Christian,  L.  J., 
Shepjiard  r.  Murphy,  16  W.  R.  948, 
95() ;  per  Brett,  J.,  in  liowring  r.  Shep- 
herd. L.  R.  6Q.  B.  309.  :V2S  ;  per  Kelly, 
C.  B.,  in  l)avis  v.  Haycock.  L.  R.  4  Ex. 
373,  384-:i86.  See,  also,  p?r  Lord 
Blackburn,  in  Maxted  r.  Paine,  2nd  ac- 
tion, L.  R.  6  Ex.  132.  166.  See.  contra, 
Mr.  Justice  Lush's  judgment  in  the 
same  case. 

077 


*727  SALES    ON    STOCK    EXCHANGE.  [bOOK  IK. 

gronml  tliat  the  ticket  is  drawn  up  and  issued  by  tlie  agent  of  the 
purchaser,  who  is  authorized  to  use  the  machinery  of  the  Stock 
Exchange,  and  to  transmit  the  ticket  to  any  person  to  wliom  the 
operation  of  that  machinery  maj  bring  it.  AVhen  that  person  is 
ascertained,  and  the  ticket  is  handed  to  him,  an  offer  is  made  by 
the  purchaser  to  buy  of  tlie  vendor,  upon  tlie  terms  specified  on 
the  ticket  :  and  if  the  vendor  accepts  tliat  offer,  and  informs  the 
purcliaser  that  he  has  done  so,  it  is  difficult  to  see  that  anything 
further  is  required  to  make  a  contract  between  the  parties.  This 
point,  however,  has  ceased  to  be  of  the  same  importance  as  before 
the  Judicature  acts:  for  now,  if  the  relation  of  trustee  and  cestui 
que  trust  is  shown  to  exist,  it  becomes  unnecessary  to  consider 
whetlier  there  was  a  contract  between  the  plaintiff  and  the  defend- 
ant or  not. 

It  was  settled  in  Stray  v.  Russell  (§'),    that  in  sales  on  the  Stock 

Exchange,  it  is  not  the  duty  of  the  seller  of  shares   to 

Duty  to  pro-  procurc  their  transfer  to  the  purchaser;  and  that 

cure  trfiiisfcr 

„     ',,    *727     a  person  *who  buvs  shares  through  a  broker  may 

stray  v.  Russell.  j  ./  »  ^ 

be  com])elled  to  pay  for  them,  althougli  the  com- 
pan}'  may  decline  to  accept  him  as  a  shareliolder.  The  facts  of  this 
case  vvere  as  follows: — Some  shares  in  the  Koyal  British  Bank  were 
sold  by  the  defendant  to  the  plaintiff  through  brokers,  who  were 
members  of  the  Stock  Exchange.  Soon  after  the  sale  the  bank 
stopped  payment,  and  the  directors  refused  to  allow  any  transfers  of 
shares.  The  plaintiff,  the  purchaser,  repudiated  the  purchase,  and 
directed  his  bi'oker  not  to  pay  the  purchase-money.  The  broker, 
however,  did  pay  it,  as  he  was  bound  to  do  by  the  rules  of  the 
Stock  Exchange.  By  the  same  rules  it  was  incumbent  on  the 
purchaser,  and  not  on  the  seller,  to  obtain  the  consent  of  the  direc- 
tors to  the  transfer.  The  plaintiff  took  no  steps  to  procure  such 
consent,  and  refused  to  repay  his  broker  the  money  he  had  ])aid  for 
the  shares.  This,  however,  the  plaintiff  was  ultimately  compelled 
to  do  by  an  action  at  law  (r),  and  he  then  brought  an  action  to  re- 
cover their  price  from  the  seller.  It  was  held  that  the  action  could 
not  be  sustained:  1.  Because  there  had  not  been  a  total  failure  of 
consideration,  inasmuch  as  the  plaintiff  had  got  the  transfers  and 
the  certificates  ;  2.  Because,  by  the  rules  of  the  Stock  Exchange, 
it  was  not  the  duty  of  the  seller  to  procure  the  consent  of  the  di- 

(q)  1  E.  &  E.  888.      As  to  sales  not  (r)  See  Taylor  v.  Stray,  2  C.  B.  N.  S. 

on  the  Stock  Exchange,  see  p.  712.  175  and  197. 

978 


CHAP,  v.]  SALE   OF    SHARES.  *72S 

rectors  to  the  transfers;  and,  3.  Because  the  plaintiff  was  not  him- 
self ready  and  williii*^  to  perform  the  contract  on  his  part. 

A  reasonable  time  for  the  transfer  of  shares  bonfjht  and  sold  is 
implied  in  the  contract  for  sale;  and  where  the  sale  is  Time  for  com- 
made  through  brokers,  the  rules  of  the  Stock  Exchange  'trs. 
fixing  the  time  witliin  wliich  shares  sold  are  to  be  delivered  are  ad- 
missible in  evidence  upon  the  question  what  is  reasonable  time,  al- 
though the  buying  and  selling  brokers  are  not  proved  to  be  mem- 
bers of  the  Exchange,  {s) 


*J.  As  to  the  position  of  the  vendor  and  the  undisclosed  and  infermedi-      *728 

ate  purchasers. 

If  the  first  purchaser  is  a  broker  buying  for  a  principal,  the  lia- 
bilities of  such  principal  are  the  same  as  the  liabilities  undisclosed 
of  a  purchasing   broker   or  jobber,  (t.)      These   have  P""'='P'''^ 
been  already  examined. 

But  in  the  course  of  a  sale  on  the  Stock  Exchange,  the  only  per- 
sons who  are  brought  into  contact  with  the  vendor  are  intermediate 
the  first  and  ultimate  purchasers,  "With  the  interme-  P"'"'^'"^*-"'^- 
diate  purchasers  he  has  ordinarily  nothing  to  do,  and  unless  under 
exceptional  circumstances,  he  has  no  rights  against  them,  {u)  A 
vendor,  for  example,  has  ordinarily  no  remedy  against  an  inter- 
mediate purchaser  who  passes  the  name  of  some  one  else  as  the 
ultimate  purchaser  and  transferee,  (x) 

But  an  intermediate  jobber  may  enter  into  a  contract  with  the 
vendor  through  his  broker,  and  in  such  a  case  the  intermediate  job- 
ber will  be  liable  to  the  vendor  for  any  breach  of  such  contract,  {y) 

Moreover,  if  the  ultimate  purchaser  is  a  mere  nominee  of  and 
trustee  for  an  intermediate  purchaser,  or  for  any  one  cestui  que  trust 
else,  and  the  transfer  to  the  ultimate  purchaser  is  never  ^^  """"^''^'''e^- 

{s)   Stewart  v.  Cauty,  8  M.  W.   160.  («)  See,  however,    Lord   Blackburn's 

See,  also,  Field  v.  Lelean,  6  H.  &  N.  judgment  in  Maxted  r.  Paine,  L.  R.  6. 

617,  where  evidence  of  a  custom  among  Ex.  167-8. 

mining  sharebrokers  to  pay  on  delivery  (.r)  Torrington  r.  Lowe,  L.  R.  4  C.  P. 

was  held  admissible  upon  the  question  26.     Compare  Castellan  r.  Hobson,   10 

of  reasonalile  time.      In  this  case  both  Eq.  47. 

the  plaintiff    and   the  defendant  were  (.'/)  As  in  Allen  r.  Graves.  L.  R.  5  Q. 

mining  sharebrokers.  B.  478,  where  there  was  a  special  ar- 

(<)  See  Lord   Blackburn's   judgment  rangement     between      the     plaintiff's 

in  Maxted  r.  Paine,  No.  2,  L.  R.  6  Ex.  broker  and  the  defemlant,   an  interme- 

132.  diate  jobber. 

979 


*729  SALES   ON    STOCK   EXCHANGE.  [bOOK  III. 

registered,  but  the  vendor  continues  the  legal  owner  of  the  shares, 
and  incnrs  liability  in  consequence,  he  is  entitled  to  be  indemnilied 
against  tliat  loss  by  the  person  in  whom  tlie  beneficial  interest  of 
the  sliares  is  really  vested,  (s)  This  liability  arises  not  out  of  any 
contract  between  the  legal  and  beneficial  owners;  but  from  the  re- 
lation of  trustee  and  cestui  que  trust  which  exists  between  them; 
and  from  the  principle  that  the  interposition  of  intermediate  trus- 
tees does  not  affect  the  rights  of  the  legal  and  true  equitable  owner. 
Upon  this  principle  it  was  held  in  Brown  v.  Black  («),  that  a  vendor 
of  shares  who  had  transferred  them  to  an  infant, 
Black"  "■  *729     but  whom  he  did  not  know  to  be  *such,  was  en- 

titled to  be  indemnified  by  the  real  purchasers 
who  had  used  the  infant's  name,  although  the  infant  had  been  regis- 
tered in  respect  of  the  sliares  for  two  years.  His  infancy  was  discov- 
ered on  the  winding  np  of  the  company ;  and,  the  transfer  to  him  being 
invalid,  the  transferrer  became  a  contributory  in  his  place,  and  then 
successfully  claimed  indemnity  from  the  real  owners  of  the  shares,  (h) 
For  convenience  of  reference,  the  following  analysis  of  the  decis- 
ions, referred  to  in  the  preceding  pages  upon  the  rights  of  vendors, 
is  appended: — 

I.  Vendor  against  jobber. 

1.  Successful  actions  and  suits, 
(a)  Actions  at  law. 

Maxted  v.  Paine,  No.  1,  L.  R.  4  Ex.  81. 
Allen  V.  Graves,  L.  R.  5  Q.  B.  478. 
In  both  of  these  the  transferee  was  objected  to. 
(6)  Suits  in  equity. 

Meny  v.  Nickalls,  L.  R.  7  H.  L.  530;  7  Ch.  733. 

Transferee  an  infant. 
Cruse  V.  Paine,  6  Eq.  641,  and  4  Ch.  441. 
Registration  guaranteed. 

2.  Unsuccessful  actions  and  suits. 
{a)  Actions  at  law. 

GrisseU  v.  Bristowe,  L.  R.  4  C.  P.  36. 
Maxted  v.  Paine,  No.  2,  L.  R.  6  Ex.  132. 

In  both  of  these  the  transferee  had  accepted  the  transfer. 
{h)  Suits  in  equity. 

Coles  V.  Bristowe,  4  Ch.  3. 

Transferee  had  accepted  the  transfer. 

{z)  Castellan  v.  Hobson,  10  Eq.  47.  mise  effected  between  the  plaintiff  and 

(a)  8  Ch.  939  and  15  Eq.  363.  the  mfant  was  held  fatal  to  the  plain- 

{b)  Compare  Maynard  v.  Eaton,  9  Ch.  tiff's  claun. 
414,  a  similar  case,  but  where  a  compro- 

980 


CIIAr.  v.]  SALE   OF    SHAKES.  *730 

Rennie  r.  Morris,  13  Eq.  203. 

Transferee  an  infant;  overruled  by  Merry  v.  Nickalls,  7  Ch.  733,  and 
L.  R.  7  H.  L.  530. 

II.  Vendor  against  ultimate  purcha.«er. 

1.  Successful  actions  tuid  suits, 
(a)  Actions  at  law. 

Bowring  r.  Shepherd,  L.  R.  6  Q.  B.  309. 

Davis  V.  Haycock,  L.  R.  4  Ex.  373. 

Walker  v.  Bartlett,  18  C.  B.  84.'). 

Humble  v.  Langston,  7  M.  &  W.  517. 

Kellock  V.  Enthoven,  L.  R.  8  Q.  B.  458  and  9  Q.  B.  241. 

Where  the  purchaser  had  himself  transferred  the  shares. 
*(6)  Suits  in  equity.  *730 

Wynne  v.  Price,  3  DeG.  &  Sm.  310. 
Paine  t'.  Hutchinson,  3  Eq.  257,  and  3  Ch,  388. 
Shepherd  v.  Gillespie,  5  Eq.  293. 

Sheppard  r.  Mui-phy,  Jr.  Rep.  2  Eq.  544.  and  16  W.  R.  943. 
Hawkins  v.  Maltby,  6  Eq.  505,  and  4  Ch.  200. 
Holmes  r.  Sjanons,  13  Eq.  66. 

In  none  of  these  cases  was  the  transfer  executed  by  the  transferee 
Evans  r.  Wood.  5  E  .  9. 
Hodgkinson  r.  Kelly,  6  Eq.  496. 

In  both  of  which  the  company  had  stopped, 

2.  Unsuccessful  suits. 

Hawkins  v.  Maltby,  3  Ch.  188,  reversing  S.  C.  4  Eq.  572. 

The  case  on  appeal  turned  on  the  pleadings, 
Bermingham  t\  Sheridan,  33  Beav.  660. 

Not  now  to  bo  relied  upon.     See  ante,  p.  725,  note(«i). 

III.  Vendor  against  cefttui  que  tnist  of  transferee, 
(a)  Successful  suits. 

Castellan  v.  Hobson,  10  Eq,  47. 
Nickalls  v.  Furneaux,  4  W.  N.  118. 
Brown  v.  Black,  15  Eq.  363  and  8  Ch,  939. 

Transfer  to  an  infant, 
(fc)  Unsuccessful  suit. 
Maynard  v.  Eaton,  9  Ch.  414. 

Compromise  "with  transferee  held  to  be  a  defense. 


4.  As  io  the  position  of  the  real  vendor  and  purchaser  as  rcfjards  their 
respective  brokers. 

The  duty  of  a  broker  employed  to  sell  is  to  sell  according    to  his 
instructions  if  he  can  do  so,  and  if  he  cannot,  not  to   i)„tv  of  selling 
sell  at  all.     Ilis  dut}'  is  performed  when  he  has  enter-    ^'■"''»^''- 
ed  into  a  binding  contract  for  sale,  and  has  given  the  name  of  the 
buyer  to  his  employer.     If  the  selling  broker  receives  the  price,    it 

981 


*731  SALES    ON    STOCK    EXCHANGE.  [bOOK  III. 

is  his  duty  to  hand  it  over  to  his  principal;  but  it  is  no  part  of  a 
selling  broker's  legal  duty  to  his  employer  to  procure  payment  of 
the  price,  nor  to  procure   the   execution  by  the  purchaser   of  the 

transfer,  nor  to  procure  tlie  registration  thereof.  (<?)  Nor  has 
"731     it  yet  been  decided  that  it  is  part  of  his  duty  to  inquire  *into 

the  solvency  of  the  transferee,  {d)  As  between  the  vendor 
and  his  own  broker,  the  sale  is  effected  by  the  contract  to  sell, 
although  the  vendor  may  refuse  to  carry  it  out.  {e) 

Again,  the  duty  of  a  broker  employed  to  buy  is  to  buy  according 
^  ,    ^^    .       to  his  instructions  if  he  can  :  and  if  he  cannot,  not  to 

Duty  of  buying  '  ' 

broker.  ]j^,y  ^^  ^11.      He  has  no  implied  authority  to  enlarge 

the  time  for  completing  the  purchase  when  that  time  has  once  been 
fixed  ;  in  other  words,  he  has  no  implied  authority  to  continue  the 
account,  (f) 

A  broker  instructed  to  buy  shares  of  a  particular  kind,  fulfills  his 
Broker  bu  in  instructions  if  he  buys  what  are  commonly  bought  and 
udVdirlcTef  ®o^^^  ^^  ^"^^^  shares  in  the  share  market.  Thus,  where 
tjbuy.  ^  broker  was  instructed  to  buy  "Kentish  Coast  Rail- 

way Scrip,"  and  he  bought  what  was  known  as  such,  and  was  paid 
for  it,  it  was  held,  that  he  was  not  liable  to  refund  the  money  he  had 
received,  although  it  turned  out  that  what  he  had  bought  was  scrip 
issued  without  due  authorit}^,  and  was  in  fact  utterly  worthless  {g). 
Upon  the  same  principle,  if  a  broker  is  told  to  buy  shares  and  he 
buys  scrip  ;  if  nothing  but  scrip  has  found  its  way  into  the  market, 
and  if  such  scrip  has  been  usually  bought  and  sold  as  shares,  and  if 
there  is  nothing  to  show  that  the  broker  was  to  wait  until  shares 
were  issued,  he  will  be  held  to  have  pursued  his  authority.  (A) 

Until  the  broker  has  acted  upon  his  authority  to  buy,  it  nuiy  be 
Revocation  revoked  ;  and  if  any  money  has  been  given  liim  in 
Huthority.  Order  to  enable  him  to  pay  for  tliem,   it  may  be  de- 

manded back  (/).  Bnt  this  cannot  be  done  after  he  has  entered  into 
a  contract  for  purchase,  and  become  personally  responsible  for  the 
due  performance  of  that  contract,  (k) 

(c)  Booth  V.  Fielding,  1  W,  N.  245,  81. 

and  see  Clark's  Law  of  Joint  Stock  Com-  (g)  Lamert  v.  Heath,   15  M.  &  "W. 

panies  (Scotch),  145.  486. 

(fZ)  See,  on  this  subject,  Lord  Black-  {h)  Mitchell  v.  Newhall,  15  M.  &  W. 

hum's  judgment    in  Maxted  v.  Paine,  308. 

No.  2,  L.  R.  6  Ex.  132.  (?)  Fletcher  v.  Marshall,  15  M.  &  W. 

(e)  Ross  V.  Moses,  1  C.  B.  227.  755, 

( f)  See  Maxted  v.  Paine,  L.  R.  4  Ex.  {k)  McEwen  v.  Woods,  11  Q.  B.  13. 

982 


*7<>0 


CHAP,  v.]  SALE   OF    SHARES. 

On  tlie  other  hanrl,  a  person  who  emjiloys  a  brolvcr  to  buy  or  sell 
is  bound  to  indemnity  liim  af,'ainst  any  losses  wliicli  he  may  incur  by 
reason  of  liis  having  contracted  in  his  own  behalf,  and  of  being  after- 
wards, without  any  default  of  his  own,  unable  ^  ^^^ 
*duiv  to  complete  his  contract.  (/)     Tiic  follow-     *732  br..kcT  to 
inir  case-?  will  serve  to  illustrate  this  doctrine. 

1.  Where  a  broker  is  employed  to  sell. 

Ill  Sutton  v.  Tatham  {m\  a  person  ordered   a  broker  to  sell  for 
him  250  shares.      The  broker  entered  into  a  contract  saics through 

.  J     ,  .        brokers. 

fur  their  sale,  and  was  afterwards  intormed  that  a  mis-  gy,t,,j^^ 
take  had  been  made,  and  that  fifty  only  were  intended  'Jati'im. 
to  be  sold.  The  broker  not  being  enabled  to  deliver  the  shares 
which  he  had  agreed  to  sell,  was  compelled  to  make  good  to  the 
purchaser  the  difterence  between  the  price  agreed  upon,  and  the 
price  at  which  the  ]nirchaser  had  procured  shares  elsewhere.  It  was 
lield,  that  the  broker  was  entitled  to  recover  this  diflference  from 
his  em])loyer. 

In  I'ayliffe  v.  Butterworth  {n\  the  defendant  instructed  the 
plaintiff,  a  broker,  to  sell  shares  for  him,  which  the  n„j.,iffe,, 
plaintiff  accordingly  did.  When  the  time  came  for  the  B^»'--"vorth. 
delivery  of  the  shares  to  the  purcliaser,  the  defendant  nii^de  default, 
and  did  not  furnish  them.  The  plaintiff  having  been  compelled  by 
the  rules  of  the  Stock  Exchange  to  pay  the  difference  between  the 
price  agreed  to  be  paid  by  the  purchaser,  and  that  actually  paid  by 
him  for  other  shares,  was  held  entitled  to  recover  such  difference 
from  the  defendant. 

2.  Where  a  broker  is  employed  to  buy. 

In  Bayley  v.  Wilhins  (<?),  the  defendant  requested  the  plaintiff, 
a  broker,  to  buy  shares  for  him,  which  the  plaintiff  ac-   purchases 
cordingly  did.      At  the  time  of  their  purchase,  a  call  {^^^S^ 
had  been  made,  but  such  call  had  not  become  payable.  Bayioy  r. 

1  11  •  Wilkins. 

The  plaintiflf  paid  the  amount  ot  the  call  to  the  selling 

broker  in  pursuance  of  the  rules  of  the  Stock  Exchange,  and  was 

{!)  Sep,  in  addition  to  the  ca.ses  cited,  (m)  10  A.  &  E.  27. 

infra.  Yoimg  v.   Colo,   3   Binor.    N.  C.  (»)  1  Ex.  425.      Compare   tliis   with 

7-24;  Child    V.  Morley,    8  T.   R.    610;  Bowlby  r.  Bell,  3  C.  B.  284. 

Bowl  by  V.  Bell,  3  C.  B.  284;  Simpson  r.  [o)  7  C.  B.  886.     See,   as  to  the  evi- 

Kand,   1   Ex.  688.      As  to  idemnifying  dence  to  be  adduced  by  a  broker  who 

one's  broker  against  the   costs  of  an  ac-  seeks  to  recover  a  call  paid  by  him,  Mc 

tion  brought  against  him,  see  Brown  v.  Eweu  v.  Woods,  2  Car.  and  K.  330. 
Hall,  7  C.  B.  N.  S.  603. 

983 


*733  SALES    ON    STOCK    EXCHANGE.  [bOOK  HI. 

held  entitled  to  recover  the  money  so  paid  from  the  defendant. 
In  Taylor  v.  Stray  {j))-,  the  defendant  in- 
srray!"^  ^'  *733     structed  the  plaintiff,  *a   broker  to   buy  some 

Royal  British  Bank  shares  for  him.  The  defend- 
ant accordingly  bought  the  shares,  which  were  to  be  paid  for  on  a 
future  day.  Before  that  day  arrived,  the  bank  stopped  payment, 
and  the  defendant  refused  to  take  or  pay  for  the  shares.  The 
plaintiff  thereupon  paid  for  them  in  compliance  with  the  rules  of 
the  Stock  Exchange  ;  and  he  was  held  entitled  to  recover  the  money 
so  paid  from  the  defendant. 

In  Pollock  V.  Stables  {q),  the  plaintiff,  in  pursuance  of  the  de- 
Poiiocku  sta-  fendant's  instructions,  bought  shares  for  him,  which  the 
^^^^-  defendant  neglected  to  take  up.     The  broker  who  sold 

them,  consequently  re-sold  them,  and  thereby  a  loss  was  sustained. 
The  plaintiff,  who  was  also  a  broker,  made  good  this  loss,  as  he  was 
compellable  to  do  by  the  rules  of  the  Stock  Exchange,  and  he  was 
held  entitled  to  recover  the  amount  he  had  paid  from  the  defendant. 

In  Lacey  v.  Hill  (*•),  brokers  bought  stock   for  a  customer,   who 

suddenly  died  insolvent;  they  havino^  paid  for  the  stock 
Lacey  V.  mil.  ,     ;'  _     ,  ,,   .  , 

were  held  entitled  to  re-seli  it  and  to  prove  against  his 
estate  for  the  loss  they  sustained. 

But  a  broker  is  not  entitled  to  indemnity  from  his  employer  in  re- 
Broker  not  en-  spcct  of  loss  arising  from  his  own  default.  Thus  in  Dun- 
nity  for  ill's '^™"  cau  V.  Hill  {s),  the  plaintiffs,  who  were  brokers  on  the 

Stock  Exchange,  were  instructed  by  the  defendant  to  buy 
shai'es  for  a  certain  account,  and  afterwards  to  continue  it.  This 
was  done;  but  before  the  final  settling  day  arrived  the  brokers  M-ere 
declared  defaulters,  and  according  to  the  rules  of  the  Stock  Exchange 
all  their  transactions  were  peremptorily  closed.  The  brokers  were 
held  entitled  to  be  repaid  moneys  paid  by  them  in  order  to  keep  open 
the  account  at  the  defendant's  request,  but  not  those  further  sums 
which  had  become  payable  by  reason  of  their  own  insolvency,  {t) 

ip)  2C.   B.  N.   S.  175.      See,  too,  inson,  L.  R.  7  H.  L.  802;   7    C.  P.  84, 

Stray  v.  Eussell,  1  E.  &  E.  888  ;    Chap-  and  5  C.  P.  646. 

man  r.  Shepherd,  L.  R.   2  C.   P.  228;  {q)  12  Q.  B.  765. 

Biedennan  v.  Stone,  ib.  504.     The  last  (r)  Lacey  v.  Hill,  Scrimg-eour's  claim 

two  cases  show  that  the  broker's  right  8Ch.  921.     See  ib.  Crowley's  claim,  18 

is  not  affected  by  §  153  of  the  Compa-  Eq.  182. 

nies  act,  1862.     See,  further  as  to  the  [s)  L.  R.  8  Ex.  242,  reversing  S.  C.  6 

v'ght  of  purchasing  brokers  to  indemni-  Ex.  255. 

ly  from  their  employers,  Mollett  v.  Rob-  {t)  Compare  Lacey  v.  HiU,  Crowley's 

984 


CHAP,  v.]  SALE   OF    SIf ARES   IN    COMPANIES.  *735 

*The  cases  above  referred  to  establish  as  a  <^eneral  doc-     '-734: 
trine  that  what  a  broker,  employed  in  buying  and  selling 
shares  for  another  person,  is  compelled  by  the  rules  of  kuKs of . stock 
the  Stock  Exchano:e  to  pay,  in  consequence  of  the  non-  f)istin>juis!u-d 

t^  I     -J  ^  1  _  from  usage  of 

performance  by  his  employer  of  the  contract  entered  into  brokers, 
on  his  behalf,  is  recoverable  from  him  by  the  broker.  The  prin- 
ciple of  the  decisions  in  question  docs  not  however  extend  further 
than  this,  viz.,  that  brokers  are  im])liedly  authorized  by  those  who 
employ  them,  to  do  what  is  usual  and  customary  amongst  bro- 
kers in  matters  such  as  those  they  are  employed  about.  The  cases 
which  have  been  noticed  do  not  show  that  persons  who  em])loy 
members  of  the  Stock  Exchange  are  affected  by  the  rules  of  the 
Exchange  without  reference  to  the  question  of  what  is  customary 
amongst  its  members;  and  in  truth,  to  non-members,  such  rules 
are  only  important  so  far  as  they  evidence  usage.  This  Ancr-made 
is  shown  by  the  case  of  Westropp  v.  Solomon,  (u)  ^^^^^^  ^,  g^^_ 
There,  the  defendant  employed  the  plaintiff,  a  broker,  o""""- 
to  sell  ten  scrip  certificates,  which  the  plaintiff  did.  It  afterwards 
appeared  that  these  certificates  were  forgeries,  although  neither  the 
l^laintiff  nor  the  defendant  had  any  suspicion  that  such  was  the  case. 
The  committee  of  the  Stock  Exchange  made  a  rule  to  the  effeci  that 
the  purchasers  of  the  spurious  scrip  should  have  a  right  to  demand 
from  the  sellers  not  only  repayment  of  the  purchase-money,  but 
also  payment  of  an  additional  fixed  sum.  In  compliance  with  this 
rule,  the  plaintiff  repaid  to  the  purchaser  the  money  received  from 
him,  and  also  the  additional  sum  fixed  by  the  rule;  but  it  was  held 
that  the  plaintiff  was  only  entitled  to  recover  from  the  defendant 
the  money  which  the  purchaser  himself  could  have  recovered  at 
law;  namely  the  amount  paid  by  him  with  interest;  and  it  was 
held,  that  the  rule,  having  been  made  after  the  sale,  formed  no  part 
of  that  usage  of  brokers  by  which  the  defendant  was  bound. 

Accounts   sent  in  by  shaTebrokers  to  their  employers  may  be 
shown  not  to  have   included  charges  which  ought  to  have  been 
included ;    and  this  is  true  even  where  the  per- 
son sto  whom  *such  accounts  are  sent  have  dealt     *735   timrb'cs. 
with  other  people  upon  the  faith  of  the  accounts 
being  full  and  correct,  (cc) 

claim,  18  Eq.    182,  where  the   brokers  (»)  8  C.  B.  Sit-^.     See,  also,  Sweeting  t'. 

became  defaulters  solely  by  reason  of      Pearce,  7  C.  B.  N.  S.  449,  and  9  ib.  634. 
the  previous  default  of  their  principal.  (x)  Bails  v.  Lloyd,  12  Q.  B.  531. 


*736  EIGHT   TO    RETIRE.  [bOOK  III. 

A  broker  employed  to  buy  or  sell  shares  in  an  illegal  com  pan;. , 
jjj  or  in  a  company  which  by  law  is  not  in  a  position  to 

saies^'b ^^ br  -       issue  sliarcs,  Cannot  recover  from  his  employer  either 
^^'■s-  any  commission  on  the  purchase  or  sale,  or  any  money 

expended  for  him  on  account  of  such  shares,  [y) 


SECTION  VII.— OF  THE  RELINQUISHMENT  OF  SHARES  AND  OF  THE 
RIGHT  TO  RETIRE. 

Subject  to  a  qualification  which  will   be  presently  mentioned,  a 
Right  of  part-     member  of  an  ordinary  firm  can   surrender  his  share 

Tier  to  rfitirc 

from  firm.  and  interest  in  the  firm  to  his  co-partners,  or  any  of 
tliem,  upon  any  terms  to  which  he  and  they  may  agree.  But  there 
is  only  one  method  by  which  a  partner  can  retire  from  a  firm  with- 
out the  consent  of  his  co-partners,  and  that  is,  by  dissolving  the 
firm.  In  order  to  avoid  the  necessity  of  a  general  dissolution  when 
a  partner  may  wish  to  retire,  special  provisions  are  frequently  in- 
troduced into  partnership  articles;  but  it  is  not  unfrequently  found 
that,  owing  to  unforeseen  circumstances,  these  provisions  cannot  be 
carried  into  effect;  and  when  that  is  the  case,  a  dissolution,  with 
its  usual  consequences,  must  take  place  if  a  partner  is  to  retire 
otherwise  than  by  the  consent  of  his  co-partners,  (s) 

The  qualification  above  alluded  to,  has  relation  to  a  partner's  re- 
Right  to  retire    tirement  from  an  insolvent  firm.     A  partner  desirous 

from  insolvent  ,  „  .         ,  ,.  .  x-     i.  t  i       t 

tirm.  of  retirmg  from  an  insolvent  firm,  is  at  periect  liDe.'ty 

to  sell  his  interest  in  it  for  any  sum  the  continuing  partners  think 

proper  to  give  him;  and  a  sale  by  him  to  them  cannot  be  set 
*736     aside  or  *impeached  as  a  fraud  upon  the  creditors  of  the  firm 

unless  there  be  clear  evidence  aliunde  of  such  fraud.  («) 
At  the  same  time,  the  present  share  of  a  partner  in  an  insolvent 

(y)  Josephs  v.  Pebrer,  3  B.  &  Cr.  639;  wick  v.  Wimble,  6  Beav.  495;  Downs  v. 
Ex  parte  Neilson,  3  DeG.  M.  &  G.  556.  Collins,  6  Ha.  418.     Compare  Simmons 
See,  fm-tber,  as  to  illegal  sales  through  v.  Leonard,  3  Ha.  581;  Pettyt  v.  Jane- 
brokers,  Buck  V.   Buck,  1  Camp.  547;  son,  6  Madd.  146. 
and  Bousfield  v.  Wilson,  16  M  &  W.  185,  («)  See  Ex  imrte  Peake,  1  Madd.  346 
both  of  which  huv.;  been  noticed  ah-eady.  Parker  ».  Ramsbottom,  3  B.  &  C.  257 
See  anie,  p.  19^=.  Ex  parte   Birch,  2  Ves.  J.   260,  not? 

{z)  SeeCookt^.  Colhngridge,  Jac.  607;  Ex  jxirte  Car-pentei;  Mont.  &  McAr.  1. 
Kershaw  V.  Matthews,  2  Russ.  62;  Madg- 

986 


CHAP,  v.]  8UREENDEK  OF  SHARES.  *737 

firm  {!/)  is  obviously  less  than  nothing,  whatever  may  be  the  amount 
of  the  capital  brought  in  by  him.  Consequently  a  partner  who  re- 
tires from  an  insulvent  firm  and  withdraws  from  it  a  sum  of  money 
which  he  is  pleased  to  call  his  share,  is  defrauding  the  creditors  of 
the  firm;  and  such  a  transaction  cannot  stand,  and  may  be  im- 
peached by  the  trustee  in  bankruptcy  of  the  continuing  firm,  (c) 
To  proceedings  instituted  by  tlie  trustee  to  impeach  such  a  trans- 
action, it  is  no  answer  to  say,  that  the  bankruitts  themselves  were 
bound  by  it;  for  the  trustee  represents  the  creditors,  and  can  im. 
peach  any  transaction  which  is  a  fraud  as  against  them,  although 
the  bankrupts  themselves  might  not  be  in  a  position  to  do  so.  ((/; 
Upon  similar  grounds,  if  a  partner  relinquishes  his  share  in  a  ])art- 
nership  to  his' co-partners,  upon  such  terras  and  under  such  circum- 
stances as  to  render  that  relinquishment  a  fraud  upon  his  creditors, 
and  he  then  becomes  bankrupt,  his  trustee  will  be  entitled  to  re- 
scind the  transaction. 

Laying  aside,  however,  all  such  considerations  as  ^^J? "irJ,,?'*^  ^ 
these,  it  may  be  said — 

1.  That  it  is  competent  for  a  partner  to  retire  with  the  consent 
of  his  co-partners  at  any  time  and  upon  any  terms; 

2.  That  it  is  competent  for  him  to  retire  without  their  consent 
by  dissolving  the  firm,  if  he  is  in  a  position  to  dissolve  it. 

3.  That  it  is  not  competent  for  a  partner  to  retire  from  a  part- 
nership which  he  cannot  dissolve,  and  from  which  his  co-partners 
are  not  willing  that  he  should  retire. 

Similar  principles  apply  to  the  retirement  of  shareholders  from 
companies;  except  that  retirement  by  a  transfer  Retirement 

of  shares  *is  always  contemplated  and  provided  *737  ^'■;^'s" ''""'^'" 
for  when  companies  are  formed.  This  mode  of 
retiring  has  been  already  considered.  With  respect  to  retirement 
bv  a  relinquishment  and  surrender  of  shares,  if  such  a  method  of 
withdrawing  from  the  company  is  authorized  by  its  constitution,  a 
surrender  by  a  shareholder  of  his  shares  will  of  course  be  valid,  if 
all  the  formalities  which  may  be  necessary  are  duly  complied  with; 
and  where  the  power  to  surrender  exists,  the  due  observance  of  all 

{}))  An  insolvent  firm  is  one  in  which  (r)  See  AmU-rson  r.  M;iitbv,  4   Bro. 

the   joint  assets  are  less  than  th.' joint  C.  C.  42:?,  and  2Ves.  J.  244:  h'r  Kcinpt- 

liabilities.     Such    a    finu    is    insolvent  ner,  8  Eq.  2SG;  and  a;i^',  p.  6">8. 
whatever  the  wealth  of  the  individual  {d)  lb.   2  Ves.  J.  6")'),  and  see  Billiter 

partners  composing  it  may  be,  see  Mont.  r.  Younpr,  6  E.  &  B.  40;  Tyrrell  r.  Hope, 

&  McAr.  p.  5.  2  Atk.  562. 

987 


-"738  EIGHT   TO    RETIRE.  [bOOK  III. 

necessary  formalities  will  be  precUineJ  in  favor  of  every  lonajide 
retiring  shareholder,  {e) 

The  Companies  clauses  consolidation  act,  1845,  contains  no  pro- 
vision authorizino;  the  surrender  of  shares.     But  by 

C  )mpanies  °  /    /in    /     i  .    i  ^• 

causes  act.  <^^q  Companies  clauses  act,  1863  (/ )  (which  applies  to 
all  companies  which  have  a  special  act  of  Parliament  incorporat- 
ing that  act),  it  is  enacted  (§  9)  that  "  the  company  may  from  time 
to  time  accept,  on  such  terms  as  they  think  fit,  surrenders  of  any 
shares  which  have  not  been  fully  paid  up ; "  and  (§  10)  that  "  the  com- 
pany shall  not  pay  or  refund  to  any  shareholder  any  sum  of  money 
for  or  in  respect  of  the  cancellation  or  surrender  of  any  share." 
Neither  the  Companies  act,  1862,  nor  the  regulations  in  Table 
,    A.  to  that  act,  authorize  the   retirement  of  a  member 

Companies  act,  '  ■  i     i 

1802.  by  surrendering  his  shares  to  the  company;  and  the 

effect  of  a  surrender  of  shares,  unless  it  be  in  exchange  for  others, 
is  to  diminish  the  capital  of  the  company.  Nevertheless,  it  has 
been  held  that  the  holder  of  unpaid-up  shares  in  a  company  regis- 
tered with  limited  liability,  can  surrender  his  shares  without  first 
paying  them  up  in  full  if  the  articles  as  originally  framed  or  as 
altered  by  special  resolution  {g)  authorize  such  a  surrender.  (A)  The 
power  to  surrender  has  been  regarded  as  open  to  no  more  objection 
on  the  ground  that  it  reduces  the  capital  than  a  power  to  forfeit, 

the  legality  of  which  is  unquestioned,  {i)     A  power  to  for- 
*738     teit,  however,  is  only  operative  "'-where  a  shareholder  cannot 

or  will  not  pay  up  his  calls,  and  is  far  less  open  to  abuse  in 
order  to  reduce  capital  than  a  power  to  surrender;  and  notwith- 
standing the  decisions  supporting  the  validity  of  a  power  to  surren- 
der, it  has  been  decided  that  a  special  resolution  authorizing  direc- 
tors to  apply  a  company's  money  in  buying  up  the  shares  of  such 
shareholders  as  may  choose  to  surrender  them,  is  invalid,  (k) 
The  risht  of  a  shareholder  in  a  cost- book  mining  company  to  re- 
tire from  the  company  upon  the  relinquishment  of  his 
companies.        shares,  and  payment  of  what  may  be  due  from  him  to 

(e)  See  Lane's  case,  1  DeG.  J.  &  Sm.  Co.  7  Eq.  129;  and  see  Wright's  case, 

5Q4_  12  Eq.  336,  note;  Snell's  case,  5  Ch.  22. 

(/)  26  &  27  Vict.  c.  118.  (0  Table  A.  expressly  allows  this.  See 

\g)  Teasdale's  case,  9  Ch.  54,  where,  the  next  section, 
however,  the  effect  of  all  the  resolutions  (/!■)  Hope  v.   International   Financial 

taken  together  was  to  mcrease  the  un-  Society,  4  Ch.  D.  327,  wliich  compare 

paid-up  capital.  with  Teasdale's  case,  ante,  note  (jj). 

{h)  Ibid;  Marshall  v.  Glamorgan  Iron 
988 


CHAP,  v.]  SURRENDER  OF  SHARES.  *739 

the  coini)any,  is  established  by  custom,  and  is  therefore  imported 
into  the  contract  hy  which  tlie  members  of  such  companies  are 
mutually  bound  (Z);  and  where  it  was  proved  to  be  the  practice  of 
a  cost-book  company  to  allow  shareholders  to  retire  upon  any  terms 
agreed  upon  at  f]jeneral  meetings,  it  was  held  that  a  shareholder 
who  had  been  allowed  at  a  general  meetins  to  surrender  his  shares 
without  paying  the  arrears  of  calls  upon  them,  had  ceased  to  be  a 
shareholder.  {711)  The  surrender  must  be  by  notice  in  writing  to 
the  purser,  (w.) 

The  retirement  of  a  shareholder  by  surrendering  his  shares,  is, 
however,  not  one  of  those  matters  as  to  which  a  ina-   powcr  of  ma- 
jority of  members   binds  a  minority,  or  as   to   which   ^"i7i!yty  wuh 
directors   have  any  imj)lied  authority  to  represent  the  uicTlTi'iuiui^h- 
company.     Botli   principle  and   authority    are    clearl}^   mem  oi  sUres. 
opposed  to  ain'  such  doctrine.  (0)     Kor  if  directors  have   power  to 
accept  a  surrender  of  shares  can  they  delegate  this  power  to  a  iiian- 
ager.  (j9)     At  the  same  time  if  shares  have  been  surrendered  witli 
the  knowledge  of  all   the  shareholders   under   circumstances  iully 
disclosed  to  thctn  all,  and  such  surrender  has  not  been  questioned 
for  a  considerable   period,  the  comj^any  will   be  precluded 
from  *afterwards  tlisputing  the  validitj'  of  the  surrender. ((^)     ^-730 
The  following  ai-e  the  leading  authorities  upon  this  subject: — 

Morgan's  case.  (?■)     The  company's  deed  authorized  the  directors 
to  buy  up,  out  of  certain  speciHed  funds  of  the  com- 
pany, an}^  shares  which  might  be  oifered  for  sale.      An 

(Z)  See,  as  to  this,  Ex  parte  Palmer,  [q)    As   in    Brotherhood's  case,    31 

7  Ch.  286  ;  Fenn's  case,  4  DeG.  M.  &  Beav.  365,  and  4  DeG.  F.  &  J.  .566  ;  no- 

G.   285,    and   1   Sm.  &  G.   26;  Bodmin  ticed  ) n/ra,  p.  74^3,  and  Hunt's  case,  32 

United    Mines,  23  Beav.  370  ;  Birch's  Beav.  387.     Implied  notice  to  the  direc- 

case,  2  DeG.  &  J.  10;  Lcfthouse's  case,  tors  of  the  companj- through  the  books 

ib.  69  ;  Northey  v.  Johnson,  19  L.  T.  of  the  company  is  not  enough.      Cart- 

104.  mell's  case,  9  Ch.  691,  where  the  dii-ec- 

int)  Bodmin  United  Mines',  23  Beav.  tors  had   power  to  accept  surrenders. 

370.  See,  as  to  estopped  by  conduct,  ante,  p. 

(«)  32  &  ?A  Vict.  c.  19,  §§  21-23.  128,  et  seq. 

(0)  The  Phite  Glass,  &c.  Co.  r.  Sun-  {>■)  1  DeG.  &  S.  750,  and  1  Mac.  & 
ley,  8  E.  ife  B.  47,  is  not  inconsistent  G.  225.  Richmond's  Executors'  case,  3 
with  this  nor  with  the  cases  referred  to  DeG.  &  Sm.  96,  and  Lawes'  case,  1 
in  the  text;  in  that  case  the  demurrer  DeG.  M.  &  G.  421,  where  similar  de- 
admitted  that  the  company  had  accept-  cisions  with  respect  to  other  sharehold- 
ed  the  surrender  of  the  shares  then  in  ers  in  the  same  company.  Compare 
question.  Kent  v.  Jackson,  14  Beav.   367,    and  2 

ip)  Cai-tmell's  case,  9  Ch.  691.  DeG.  M.  &  G.  49. 

989 


*740  EIGHT    TO    RETIRE.  [bOOK  III. 

extraordinary  general  meeting  resolved  that  if  any  shareholder 
should  be  desirous  of  withdrawing  from  the  company,  the  direc- 
tors should  be  at  liberty  to  purcliase  his  shares  upon  certain  speci- 
fied terms.  A.  shareholder  acted  upon  this  resolution,  complied 
with  the  terms,  and  sold  his  shares  to  the  company.  But  it  was 
held  that  the  resolution  was  not  binding  on  the  company;  and 
that  the  shareholder  in  question  was  properly  made  a  contributory, 
although  nearly  five  years  had  elapsed  since  his  withdrawal. 

Stanhope's  case,  (s)     The  directors  had  power  generally  to  act  as 
might  appear  to  them  best  for  the  interest  of  the  com- 

Stanhope's  case.   „„„  AJ'i.  j.    ^^  ^  ,• 

pany.  A  dispute  arose  amongst  tliem,  and  one  ot 
them  retired,  and  his  shares  were  surrendered  and  cancelled.  It 
was  held  that  his  retirement  was  unauthorized,  and  he  was  put  on 
the  list  of  contributories  ten  years  after  his  shares  had  been  can- 
celled. 

Munt's  case,  (t)     The  directors  of  a  company,  disagreeing  as  to 
the  mode  of  managinor  its  affaii's,  and  being  divided 
into  two  parties,  it  was  resolved  that   one  of  the  two 
parties  should   retire,  and  that  the  other  should  take  the 
*740     management  of  the  *company    and  relieve   the  first  from 
their  liabilities.     The  directors  composing  one  of  the  two 
parties  did  accordingly  retire,  and  relinquish  their  shares  in  favor 
of  the  company;  but  it  M'as  held  that  their  retirement  was  alto- 
gether unauthorized  and  invalid,  and  that  they  were  contributories 
on  the  winding  up  of  the  company. 

The  principles  laid  down  in  these  cases  were  very  much  consid- 
Asricuiturist     ercd  in  the  course  of  winding:   up   the   Ag-riculturist 

Cuttle  Insur-  or  tr> 

ance  Company.  Cattle  Insurance  Company.  The  company  was  formed 
in  1845.  In  1848  it  had  got  into  difliculties,  and  several  share- 
holders wished  to  retire.  This  they  could  not  do  consistently  with 
the  company's  deed  of  settlement.  An  arrangement,  however,  was 
made  in  November,  1848,  under  resolutions  passed  at  a  meeting 
of  shareholders  specially  convened  for  the  purpose,  to  the  effect 
that  a  call  of  4Z.  per  share  should  be  made,  and  that  those  share- 

(s)  3  DeG.  &  S.  198.    See,  too,  Dan-  directors  in  the  first,  and  the  adoption 

iell's  case,  22  Beav.  43,  affirmed  3  Jur.  of  their  acts  in  the  last,  of  these  two 

N.  S.  803  ;  Walter's  case,  3  DeG.  &  S.  cases. 

244 ;  Holt's  case,  1   Sim.   N.  S.   389  ;  (t)  22  Beav.  55.    See,  too,  Bennett's 

and  compare  Cockburn's  case,  4  DeG.  case,   18   Beav.   339,  and  5  DeG.  M.  & 

&S.  177,    and  Busk's  case,  3  ib.  267,  G.  284;  Richmond's  case,  and  Painter's 

and    observe  the  larger  powers  of  the  case,  4  K.  &  J.  305. 
990 


CHAP,  v.]  SLKKKNDER  OF  SHARKS.  ''741 

holders  wlio  M-ishcd  to  retire  should,  on  a  particular  day,  pay 
part  only  of  the  call,  and  that  their  shares  should  be  for- 
feited for  non-])aynieiit  of  the  rest.  Under  this  arrangement 
many  persons  retired  at  once;  many,  however,  remained,  and 
of  those  some  retired  afterwards  under  various  arrangements 
made  between  themselves  and  the  directors.  In  1S<U  the 
company  was  ordered  to  l)e  wound  up,  and  in  the  course  ot  such 
windins:  up  it  was  held — 1.     That  havin<j'  rei^ard  to  the   Bnvherhood's 

'3      r  no  case. 

publicity  and  land  Jides  of  the  arrangement  come  to   g^iaiicombe's 
in  November,  1848,  and  to  the  time  which  had  since  t-asc- 
elapsed,  the  validity  of  the  retirement  of  those   shareholders  who 
withdrew  in  pursuance  of  that  arrangement  could  not  be  disputed, 
and  that  those  persons  therefore  were  not  liable  to  be  placed  on 
the   list  of  contributories  (m);    2.  That  those   persons  spackman's 
who  retired  afterwards  by  arrano;ement  with  the  direc-   „    ,^ 

•'  ^^  Hoiildsworth  s 

tors,   but  without  the  knowledge  of  the  other  share-   fwc- 
holders,  were  to  be  treated  as  shareholders  still,  and  were  liable  to 
be  placed  on  the  list,  although  twelve  years  had  elapsed  since  their 
retirement  and  the  winding-up  order,  (a?) 

■^Moreover,  where  persons  have  only  agreed  to  take  *T41 
shares,  and  have  not  become  actual  sliareholders,  the  direc- 
tors have  no  implied  power  to  release  them  from  their  agree- 
ment (y).  Xevertheless,  an  express  power  to  accept  a  surrender 
of  shares,  or  to  rescind  and  abandon  contracts,  has  been  held  to 
apply  to  contracts  to  take  shares  and  to  authorize  a  release  of  a 
person  from  his  agreement  to  become  a  member,  {s) 

The  foregoing  decisions  sufficiently  establish  the  doctrine  that  in 
the  absence  of  a  special  authority  enabling  them  so  to  Directors  have 
do,  directors  have  no  power  to   bind   the  company   by  bj,y"!ur^ 
buying  each  other  out;  nor  by   buying  out  sharehold-  shareholders. 
ers  ;  nor  by  accepting  the  surrender  or  relinquishment  of  shares 
to  the  company,  {a)     Moreover,  if  the  directors  of  a  company  mis- 

(k)  Evans  v.  Smallcombe,  L.  R.  3  H.  ca.<5e,  13  Eq.  474. 

L.  249  ;  Brotherhood's  case,  31   Beav.  (-)  Snell's  case,  5  Ch.  22;  Tliomas 

36o,  alHrmed  4  DeG.  F.  &  J.  566.  case,  13  Eq.  4;37. 

(.r)  Spackman  v.  Evans,  L.  R.  3  H.  (n)  See,  further,  London  and  Provin- 

L.    171  ;    Houldsworth  r.    Evans,     ib.  ciiil  Coal  Co.  5  Ch.  D.  52');  Phosphate 

263  ;  Stanhope's  case,  1  Ch.  161  ;  Stew-  of  Lims  Co.  v.  Green,  L.  R.  7  C.  P.  43; 

art's  case,  ib.  511.     See,  on  these  cases,  Harris  v.   North   Devon    Kail.   Co.   2(1 

the  note  infra,  p.  743.  Beav.  384;  Walker's  case.  2  Jiir.  N.  S. 

((/)  Hall's  case,  5  Ch.  707;    Adam's  121G,  L.  J.;   Playfau:  r.  Birmingham, 

901 


*742  EIGHT    TO    KETIRE.  [bOOK  III. 

apply  its  funds  by  buying  np  shares  in  the  company,  they  are  com- 
pellable to  make  good  to  the  company  the  money  so  expended,  with 
interest,  {b) 

It  is  necessary,  however,  to  distinguish  the  retirement  of  a  share- 
Retirement  of  holder  from  the  refusal  of  a  person  to  be  a  shareholder 
(oiupai't'iVith  in  a  concern  which  he  never  agreed  to  join  (c);  and  it 
ceptshares.  lias  very  properly  been  held  that  the  principle  of  the 
above  decisions  does  not  apply  to  the  case  of  a  person  who,  having 
taken  shares  in  a  company  formed  for  given  objects,  relinquishes 
such  shares  and  retires  from  the  company,  upon  a  change  being 
(Compromise       made  in  those  obiects  without  his  consent,  (d)     So,  if 

witli  doubtful  .       T       1     p   1       1       1 

shareiioider.  it  IS  doubtiul  whether  a  person  ever  w\as  a  shareholder 
or  not,  an  agreement  releasing  him  from  all  liability,  if  any,  may 

be  validlj''  made,  so  as  to  bind  the  company  [e);  and  an  allot- 
*T42     ment  of  shares   made  *pursuant    to   an  invalid  resolution 

may  be  properly  cancelled  at  all  events  before  the  shares 
are  registered  in  the  name  of  the  allottee,  (y*)  But  a  gen- 
eral power  to  compromise  does  not  authorize  an  agreement  to 
allow  a  shareholder  to  retire  when  there  is  no  dispute  as  to  his 
membership,  and  where  there  is  no  power  to  buy  or  accept  a  sur- 
render of  shares,  (g) 

It  is  further  necessary  to  distinguish  the  retirement  of  a  share- 
surrenderof  bolder  by  relinquishing  his  shares  to  the  company, 
pan^comm™^^^  from  liis  retirement  by  transferring  his  shares  to  some 
ofthe'in  to^thT  or  One  of  the  directors  of  the  company  upon  their  own 
directors.  individual   account.       For  whilst,  in    the   absence  of 

Bristol,  <Src.  Co.  1  Ra.  Ca.  640;   Hodg-  Sm.  41;  Dixon's  case,  L.  R.  5  H.  L.  606, 

kinson  v.  Ka.tional  Live  Stock  Insur.  Co.  reversing  5  Ch.  79.     See,  also,  Wright's 

26  Beav.  473,  and  4  DeG.  &  J.  422;  case,  7  Ch.  55,  reversing  S.  C.  12  Eq. 

Burt  V.   British   National   Co.   4  DeG.  B31  Fox's  case,  5  Eq.  118. 
&  J.  158;  Paul  and  Beresford's  case,  10  (/)  Bamett's  case,    18  Eq.  507. 

Jur.  N.  S.  692,  M.  R.  iff)    See,  L.   R.    3  H.   L.  188,  231  ; 

(fc)  Evans «;.  Coventry,  8  DeG.  M.  &  G.  Adam's   case,    13  Eq.  474;   Phosphate 

835.     See  decree,  pax.  4,  varying  pars.  5  of  Lime    Co.    v.    Green,    L.   R.    7    C. 

and  6  of  the  decree  in  the  court  below.  P.    43;  Dixon's  case,    5  Ch.   79,    was 

(c)  See  Pim's  case,  3  DeG.  &  S.  11,  decided  on  the  principle  that  there 
and  1  Mac.  &  G.  291 ;  Henessy's  case,  2  can  be  no  compromise  where  there 
Mac.  &  G.  201,  and  3  DeG.  &  S.  191,  as  is  no  dispute,  and  although  the  House 
to  placing  shares  in  a  person's  name  of  Lords  reversed  the  decision,  see  L.  R. 
without  authority.  5  H.  L.  606,  the  principle  of  L.  J.  Gif- 

(d)  Meyer's  case,  16  Beav.  383.  fard's  decision  is  unquestionable.  Comp. 

(e)  Lord  Belhaven's  case,  3  DeG.  J.  &  Wright's  case,  7  Ch.  55. 

992 


CHAP,  v.]  SUKRENDER  OF  SHARKS.  *743 

sj  eeial  authorily,  it  is  not  co»n])3teiit  for  directors  to  accept  on  be- 
half of  a  company  tlie  sni-render  of  shares  hehJ  in  the  company,  it 
is  as  competent  for  tlie  directors  of  a  coiujmny,  as  for  anybody  else, 
to  accept  shares  in  tlie  company  from  snch  sliareholders  as  may  be 
willing  to  transfer  them  in  the  ordinar}'  way.  Consequently,  an 
agreement  between  the  directors  and  some  of  the  shareholders  of  a 
company  to  the  effect  that  the  latter  shall  relincpiish  their  shares 
and  transfer  them  to  the  directors,  is  not  ultra,  vlres^or\n  any  way 
illegal,  if  the  agreement  is  M'ith  the  directors  as  individuals,  and  not 
with  them  as  representing  the  company.  (A)  Upon  the  same  princi- 
ple, if  a  shareholder  transfers  his  shares  to  a  director  or  to  an  ordina- 
ry individual,  and  without  notice  that  the  director  is  acting  on  behalf 
of  the  company,  the  transferrer  does  effectually  retire  from  the  com- 
pany; although  had  he  known  that  he  was  in  fact  surrendering  his 
shares  to  the  company,  the  surrender  would  have  been  invalid,  {i) 

Moreover    directors  who  individually   agree  to  accept  a 
*surrender  of  shares  and  to  indemnily  the  surrenderer  against    *743 
calls,  are  personally  bonnd  by  their  agreement,  whether  it  is, 
as  regards  the  company,  nlt7-a  vires  or  not.  (i^) 


NOTE  ON  SMALLCOMBE'S  CASE,  SPACKMAN'S  CASE,    AND  HOULDS- 
WORTH'S  CASE,  REFERRED  TO  ABOVE,  P.  740. 

Smallcombe  retired  in  strict  accordance  with  the  arrangement  come  to  in  184S. 

Houldsworth  retired  parsuantto  the  same  aiTangement,  with  this  exception,  that 
he  did  not  retire  within  the  time  fixed  thereby,  but  shortly  afterwards;  the  time 
liaving  been  extended  by  the  directors. 

Spackman  retired  pui-suant  to  another  agn'eement  altogether,  come  to  between 
him  and  the  directors  for  compromising  litigation  between  him  and  the  company. 

The  House  of  Lords  held, — 

1 .  That  the  arrangement  of  1848  was  one  by  which  a  majority  of  shai^holders 
could  not  bind  a  minority. 

2.  That,  novcrtholoss,  the  minority  might  be  precluded  from  disputing  it. 

3.  That  all  the  shareholders  must  be  treated  as  having  had  notice  of  it,  and  that 
as  they  had  allowed  it  to  be  carried  out,  and  had  not  disputed  its  validity  for  many 
years,  they  were  all  precluded  from  disputing  it. 

4.  That  consequently  Smallcombe  was  not  a  contributory,  (7) 

5.  That  the  agreement  with  Houldsworth  differed  in  an  essential  particular  from  the 

{h)  Haddon  v.  Ajies,  1  E.  &  E.  118.  777;   Bagge's  case,  13  Beav.  162;  Ex 

See,  too,  Jessopp's  case,  2  DeG.  &  J.  parte  Nicol,  3  DeG.  &  J.  387. 

6;^.     In  Cai-tmell's  case,  9  Ch.  601,  the  (A-)  Barker  r.  Allan,  5  H.  &  N.  61. 

directors  never  assented  to  the  transfer  (/)  Brotherhood's  case,  31  Beav.  'iO)-'^. 

made  to  them.  affirmed  4  DeG.  F.  &  J.  506,    wixs  lik' 

(i)  See  flollwey'a  case,  1  DeG,  &  S.  Smallcombe 's. 


ss 


903 


*r 


4-i  EIGHT    TO    EXPEL.  [bOOK  III. 


arrangement  of  184S,  and  was  one  whicli  tlie  directors  had  no  power  to  enter  into. 

6.  That  cdl  the  shareholders  could  not  be  treated  as  having  had  sufficient  notice 
of  the  agreement  with  him  to  preclude  them  from  disputing  it,  even  after  the  lap-e 
of  many  years. 

7.  That  consequently  Houldsworth,  or  he  bemg  dead,  his  executors,  were  con- 
tributories. 

8.  That  the  agreement  with  Spackman  was  one  which  the  du-ectors  had  no  pow- 
er to  make. 

9.  That  all  the  shareholders  could  not  be  treated  as  having  had  sufficient  notice 
of  it  to  preclude  them  from  disputing  it,  even  after  the  lapse  of  many  years. 

10.  That  he  therefore  was  also  a  contributory,  {m) 

The  Lords  were  by  no  means  unanimous  ia  their  decision,  and  Lord  St.  Leon- 
ards, in  a  judgment  which  the  writer  ventures  to  think  ought  to  have  prevailed 
with  the  House,  gave  his  opinion,  that  in  all  three  cases  the  company  ought  to  be 
held  precluded  from  disputing  transactions  so  long  passed  as  those  in  question,  and 
all  of  which  were  perfectly  bondjide.     The  same  view  was  taken  by  Lord  Romilly 

when  the  cases  were  before  him  (see  1  Ch.  163).  As  the  decisions  stand, 
744*     however,  they  are  extremely  difiTicult  to  *reconcile  on  satisfactory  grounds; 

for  the  notice  which  the  shareholders  had  in  Houldsworth 's  and  Spack- 
man's  cases  was  Kttle  if  at  all  less  full  than  the  notice  they  had  in  Smallcombe's 
case.  Som3  general  priaciples  of  value,  however,  can  hi  extracted  from  these  three 
cases.     They  show — 

1.  That  a  company  will  be  precluded  from  disputing  the  validity  of  transactions 
sanctioned  by  a  general  meeting,  but  not  binding  on  absentees,  if  such  transactions 
are  ho7id  fide,  and  such  as  all  the  shareholders,  if  sui  juris,  could  sanction,  and  if 
it  can  be  inferred  that  all  the  shareholders  were  informed  of  them,  and  if  no  steps 
have  been  taken  for  a  considerable  tune  to  impeach  them. 

2.  That  information  on  the  part  of  all  the  shareholders,  sufficient  for  the  purpose 
in  question,  must  be  inferred  from  notices  sent  to  them  all,  in  the  usual  way,  telling 
them  what  has  been  done;  but  not  from  reports,  &c.,  not  distinctly  gi\ing  them 
this  information. 

3.  That  powers  of  compromise  and  powers  of  forfeiture  must  be  bond  fide  exer- 
cised for  the  purposes  for  which  they  are  confen-ed,  and  that  attempts  to  make 
them  available  for  other  purposes  will  not  succeed. 

This  view  of  thck  joint  effect  is  supported  by  Phosphate  of  Lime  Co.  v.  Green, 
L.  R.  7  C.  P.  43,  where  the  Court  of  Common  Pleas  held  that  a  company  had  rati- 
fied a  purchase  of  shares  which  the  directors  had  no  power  to  make. 


SECTION  VIII .-OF  THE  FORFEITURE  OF  SHARES  AND  OF  THE  RIGHT 

TO  EXPEL. 

In  the  absence  of  an  express  agreement  to  tli at  effect,  there  is  no 

rh'-lit  on  tlie  part  of  any  of  the  members  of  an  ordinary 
Riarht  to  expel       o  '  ''  i  -v^  •       i.i 

a  partner.  partnership  to  expcl  any  Other  member.     JNor,  m  tlie 

(w)  Stanhope's  case,  1  Ch.   161,    was      like  Spackman's. 
994 


CHAP.  V.J 


FORFEITURE    OF    SHARES. 


•74: 


absence  of  express  ar^reement,  can  :ui  j  of  tlie  meniljcrs  of  an  ordinary 
partnership  forfeit  the  share  of  any  otlier  member,  or  compel  liim 
to  quit  the  firm  on  takinfj  wliat  is  due  to  liiin.'  As  there  is  no 
metliod  except  a  dissolution,  by  wliich  a  partner  can  retire  figainst 
the  will  of  his  co-partners,  so  there  is  no  method  except  a  dissolu- 
tion by  ■which  one  partner  can  be  got  rid  of  against  his  own  will,  (n) 
The  consequence  of  this  is,  that  when  partners  disagree  and  can- 
not dissolve  except  with  the  concurrence  of  all,  it  is  not  Driving  a  pan- 

,  '■  ^  ner  to  a  disso- 

unnsual   tor  some  ot  them  so  to  conduct    themselves  lution. 
towards  another,  as,  if  possible,  to  drive  him  to  agree  to  a 
dissolution.     *But  it  need  hardly  be  said  that  a  scheme  of     *745 
this  kind  will,  if  possible,  be  frustrated;  and  redress  may  be 
obtained  in  such  a  case  without  dissolving  the  partnership.  (0) 

"With  a  view  to  facilitate  the  removal  of  a  partner  who  miscon- 
ducts himself,  it  is    not   unfrequently   ao:reed   that   a  Exercise  of 

1      1     ,1    1  .^   ,  ,       .  .  powers  of 

power  to  exjiel  shall  be  exercisible  in  certam  events  expulsion, 
and   under  certain  restrictions.     These  expulsion  clauses,  as  they 
ai'e  termed,  will  be  alluded  to  hereafter  in  the  chapter  on  tlie  con- 
struction of  partnership  agi'eements;  but  it  may  be  observed  in 


'  The  mere  failure  of  one  partner  to 
pay  his  share  of  the  debts  or  expenses 
does  not  forfeit  his  right  to  the  com- 
mon property.  Kimball  r.  Gearhart,  12 
Cal.  27. 

A  partner,  by  failing  to  contribute  his 
share  of  the  partnership  fund,  does  not, 
in  ordinary  cases,  forfeit  the  interest 
which  he  already  has  in  the  firm,  espe- 
cially where  no  extraordinary  emergency 
exists  requiring  it.  Piatt  v.  Oliver,  3 
McLean,  27. 

An  association  or  partnership  cannot 
exclude  or  expel  a  member  for  refusing 
to  do  an  act  not  required  by  the  consti- 
tution or  laws  when  he  joined,  and  en- 
tirely foreign  to  the  pui-poses  of  the  asso- 
ciation.    Gorman  v.  Russell,  14  Cal.  5:31 . 

Where  personal  property  belongs  to 
the  members  of  a  voluntary  unincorpor- 
ated association,  especially  for  public, 
and  not  for  private  purposes,  if  a  member 
abandon  the  association,  he  thereby 
abandons  his  interest  in  such  property, 
and  those  who  rcmam  are  entitled  to 
such  interest.     Curtiss  v.  Iloyt,  Id  Conn. 


154. 

An  agreement  in  co-partnership  arti- 
cles provided  that  after  each  partner  had 
provided  the  .sums  of  money  stipulated 
in  the  articles,  any  further  sums  re- 
quired should  be  raised  by  joint  efforts 
and  on  the  partners'  joint  credit;  and 
further,  that  the  party  violating  the 
agreement  should  forfeit  thereby  his 
interest  in  the  concern,  at  the  option  of 
the  other  party,  and  be  ejected  from  the 
finn,  the  other  partner  refunding  to  him 
the  sum  he  advanced:  Jfeld.  that  the 
mere  fact  that  the  joint  responsibility 
of  the  firm  was  insutficient  to  raise  the 
requisite  funds,  gave  one  partner  no 
right  to  declare  the  share  of  the  other 
forfeited.  Patterson  v.  Silliman,  28  Pa. 
St.  304. 

(h)  See  Hart  v.  Clarke  6  DeG.  M.  & 
G.  232,  and  on  appeal,  Clarke  v.  Hai-t,  6 
H.  L.  C.  633;  Crawshay  v.  Collins.  1^. 
Ves.  226;  Feathei-stonhaugh  v.  Fen- 
wick,  17  ib.  309. 

(o)  See  Fairthome  v,  Weston,  3  Ha. 
3^7. 

995 


*746  FORFEITURE    OF    SHARES.  [bOOK  III. 

passing,  that  sucli  clauses  are  always  construed  strictly,  and  that 
T\o  expulsion  under  them  will  be  effectual  unless  the  expelling  part- 
ners have  acted  with  i)er{ect  good  faith,  {p) 

Companies  have  no  ]X)wer  to  forfeit  the  shares  of  their  members, 
Right  of  com-  or  of  subscribers  who  have  not  yet  become  members, 
feirshar^es."'^'  uulcss  such  powcr  IS  Specially  conferred  upon  them,  {q) 
A  clause  in  a  company's  articles  enabling  the  directors  to  forfeit 
the  shares  of  any  member  who  shall  take  any  legal  proceedings 
against  the  company  is  invalid.  (?•) 

The  right  to  forfeit  shares  is  frequently  arrogated  in  cases  where 
a  shareholder  will  not  pay  to  the  company  what  is  due  to  it  from 
him  in  respect  of  his  shares;  and  it  is  not  uncommonly  assumed 
that  a  right  to  forfeit  in  such  a  case  is  possessed  as  a  matter  of 
course  by  directors.     But  this  opinion  is  erroneous;  for,  as  already 
stated,  a  right  to  forfeit  exists  only  when  specially  conferred;  and 
even  a  majority  of  shareholders  cannot  confer  it  unless  empowered 
so  to  do  by  the  company's  act,  charter,  deed  of  settlement,  or  regu- 
lations, (s)     But  if  there  is  power  to  forfeit  for  non-payracRt 
*74:6     of  *calls,  that  power  may  be  extended  to  non-payment  of 
additional  capital  wliich  may  be  authorized  to  be  raised,  {t) 
Bv  the   Stannaries   act,    1869,    shares   in    cost-book 

Forfeiture  of  J  i  .       i    ,•  /? 

shares  in  cost-    rninino"  companics  can  be  forfeited  tor  non-payment  ot 

book  compa-         ^^  &  1  ■»     •/ 

"ies.  calls,  {u) 

The  only  other  general  legislative  enactment  now  in  force  (v), 
which  expressly  confers  on   comi)anies  the  power  of 

Statutes  B.U-  r  •/  *  ^ 

thorizingfor-     forfeitiuo"  the  shares  of  their  members,  is  the  Conipa- 

feitures  of  o  , .  ,      .  mi       /-(  •  i.      x- 

shares.  jjjgg  clauscs  Consolidation  act.     ihe  Uompanies  act  oi 

{p)  See  Blisset  v.  Daniel,  10  Ha.  493;  Society,  4  Ch.  D.  327. 

Wood  V.  Woad,  L.  R.  9  Ex.  190.  (s)  Barton's  case,   4  Drew.    535,  af- 

{q)  Hart  V.  Clarke,  6  DeG.  M.  &  G.  firmed  on  appeal,  4  DeG.  &  J.  46. 

232,   and  6  H.   L.  C.  633;  Nonnan  v.  (t)  See  Kelk's  case,  9  Eq.  107. 

Mitchell,  5  DeG.  M.  &  G.  648;  Barton's  {u)  32  &  33  Vict.  c.  19,  §  16.     See, 

case,  4  Drew.  535.    As  to    companies  before  this  act,  Hart  v.  Clarke,  6  DeG. 

partly  English  and  partly  foreign,  see  M.  &  G.  232,  and  6  H.  L.  C.  633. 

Ludlow  V.  Dutch  Rhenish  Rail.  Co.  21  {v)  The  7  &  8  Vict.  c.  113,  §  37,  pro- 

Beav.  43.     As  to  the  right  of  corpora-  vided  for  forfeiture,  but  the  7  &  8  Vict, 

tions  to  disenfranchise  and  expel  mem-  c.  110,  did  not.     Companies  governed 

bers  for  reasonable  cause,  see  Grant  on  by  this  last  act  usually  possessed  the 

Corporations,  262-269.     As  to  expulsion  right  of  foi-feiting  shares  under^  their 

from  a  club,  see  Hopkinson  v.  Marquis  deed  of  settlement.      A  clause  in  the 

of  Exeter,  5  Eq.  63.  deed  that  the  shares  of  subscribers  who 

{>•)  Hope  V.   International  Financial  would  not  execute  it  might  be  forfeited, 
996 


CIIAl'.  v.]  UNDER   THE    COMPARES   ACT,    1862.  *747 

1802  does  not  itself  contain  any  provisions  on  tliis  subject,  Lut  the 
Table  A.  to  that  act  does,  as  will  be  seen  ])resently.  (x) 

As  to  comjxinies  governed  hy  the  Companies  clauses  consolida- 
tion act,  it  is  i>rovided  by  8  &  9  Vict,  c.  10,  §S  29-35,  Forfeiture  of 

,1  ...  1  1      1  1        /.   -I  11  1  1      1         shares  in  c-om- 

tliat  11  anv  sluircholder  lail  to  pav  any  call  payable  by   pmnos  jrov 

,.,*,.  \     .-  J  I     .  J     ^.rin,,]  i,y  8  ^  y 

liim,  the  directors,  at  any  time  after  the  expiration  of  Vict.  c  i6. 
two  months  from  the  day  appointed  for  the  payment  of  a  call,  may 
declare  the  share  in  respect  of  wdiich  such  call  was  payable  for- 
feited, whether 'the  call  has  been  sued  for  or  not.  But  before  de- 
claring any  share  forfeited,  the  directors  must  give  notice  of  their 
intention  to  do  so,  twenty-one  days  at  least  before  making  a  declar- 
ation of  forfeiture.  After  a  share  has  been  declared  forfeited,  it 
may  be  sold  for  payment  of  the  calls  in  arrear;  but  before  it  is  so 
sold,  the  declaration  of  its  forfeiture  must  be  confirmed,  and  its 
sale  must  be  ordered  at  a  general  meeting  held  not  sooner  than  two 
months  after  the  day  on  which  notice  of  intention  to  forfeit  was 
given.  If  the  money  arising  from  the  sale  of  a  forfeited  share  is 
more  than  sufficient  to  pay  the  arrears  of  calls  with  interest,  and 
the  expenses  of  sale,  the  surplus  is  to  be  paid  to  the  de- 
faulting shareholder;  and  if  before  a  share  *is  sold  he  pays  *747 
what  is  due  upon  it  and  also  the  expenses,  if  any,  incurred 
for  the  ])urpose  of  selling  it,  then  he  is  entitled  to  have  the  share 
restored  to  him.  The  act  in  question  expressly  de-  porfeuin  and 
clares  that  shares  may  be  forfeited  for  non-payment  of  ^"'"s  for  caUs 
calls,  whether  those  calls  have  been  sued  for  or  not.  The  right  to 
forfeit  and  the  right  to  sue  may  consequently  both  be  exercised 
together;  the  remedies  are  cumulative,  not  alternative,  (y) 

If  the  company  has  a  special  act  also  incorporating  the  Compa- 
nies clauses  act,  1863,  the  shares  when  forfeited  may  cancellation  of 
be  cancelled  if  they  cannot  be  sold.  (2)  But  this  can  f^rf^'it^^J shares, 
only  be  done  by  a  general  meeting,  held  at  least  two  months  after 

was  valid;  Stewart  v.  Anglo-Californian  (//)  fireat  Northern  Rail.  Co.  v.  Ken- 
Co.  18  Q.  B.  736;  Beresford's  case.  2  nedy,  4  Ex.  417;  Inglis  r.  Great  North- 
Mac.  &  G.  197,  and  3  DeG.  k  S.  175;  ern  Rail.  Co.  1  Macq.  112.  In  Edin- 
Baily's  case,  15  Jur.  29 ;  but  if  there  was  burgh,  Leith,  kc.  Rail.  Co.  r.  Hebble- 
no  such  clause,  no  forfeiture  could  be  white,  6  M.  «fc  W.  707;  Giles  v.  Hutt,  3 
effected;  Barton's  case,  4  Drew.  5.35,  Ex.  l^^;  London  «&  Brighton  Rail.  Co.  r. 
and  on  appeal,  4  DeG.  &  J.  46.  Fairclough.  2  Man.  &  Gr.  674,  there 
{x)  The  acts  of  1856-58  also  left  the  was  only  an  option  to  sue  or  to  forfeit, 
subject  of  forfeiture  to  be  dealt  with  by  {z)  26  &  27  Vict.  c.  118,  §  4. 
the  regulations  of  each  company. 

997 


*''748  FORFEITUKE   OF   SHARES.  [bOOK  III. 

notice  of  the  forfeiture  (a),  and  the  shares  maj  he  redeemed  bj 
payment  of  what  is  due  in  respect  of  them  before  they  have  been 
cancelled.  (I)  Even  such  cancellation,  however,  does  not  release 
the  shareholder  from  his  liability  to  pay  what  may  be  due  from  him 
at  the  time  of  cancellation  (c);  although  if  he  is  afterwards  sued  in 
respect  of  what  is  so  due,  he  must  be  credited  with  the  value  of  his 
shares  at  that  time,  {d)  However,  by  the  consent  in  writing  of  the 
shareholder  and  the  sanction  of  a  general  meeting,  shares  which 
have  been  forfeited  or  on  which  money  is  due  may  be  cancelled,  so 
as  to  release  the  holder  from  all  liabilities  (e);  but  no  money  must 
be  paid  by  the  company  for  the  cancellation  of  any  share,  (y)  New 
shares  may  be  issued  in  lieu  of  cancelled  shares,  (g) 

As  to  companies  governed  hy  the  Companies  act^  1862,  it  is  pro- 
companies  vidcd  by  Table  A.,  that  shares  may  be  forfeited  for 
fhe  act  of  1862.  nou-paymcnt  of  calls  (No.  17).  In  order  legally  to  for- 
feit a  share,  under  the  regulations  of  this  table,  it  is  necessary,  first 
to  serve  the  defaulting  member,  personally  or  by  post  (see 
*748  Nos.  *95-97),  with  a  notice  (No.  17);  and  secondly,  to  pass 
a  resolution  of  the  directors  forfeiting  his  shares  (No.  19). 

The  notice  must 

1.  Ttequire  the  defaulting  member  to  pay  the  call  in  arrear,  with 
interest  and  any  expenses  that  may  have  accrued  by  reason  of  its 
non-payment  (No.  17)  (A); 

2.  Name  a  further  day  on  or  before  which  the  unpaid  calls,  with 
the  interest  and  expenses,  are  to  be  paid  (No.  IS); 

3.  State  the  place  where  the  payment  is  to  be  made,  such  place 
being  either  the  company's  registered  office  or  some  other  place  at 
which  the  calls  are  usually  made  payable,  e.g.^  at  the  company's 
bankers  (No.)  18; 

4.  State  that,  in  the  event  of  non-payment  at  or  before  the  time 
and  at  the  place  appointed,  the  shares  in  respect  of  which  the  call 
was  made  will  be  liable  to  be  forfeited  (No.  1 8). 

If  the  requisitions  of  this  notice  are  not  complied  with,  the  shares 
in  respect  of  which  it  was  given,  may  be  forfeited,  by  a  resolution 

(«)  Ibid.  ig)  lb.  §  11. 

(ft)  lb.  §  7.  {h)  Interest  can  only  be  claimed  froip 

(c)  lb.  §  6.  the  time  when  the  call  ought  to  be  paid 

{d)  lb.  §  7.  not  from  the  date  of  the  call,  Johnson 

(e)  lb.  §8.  V.  Lyttle's  Ii-on  Agency,  5  Ch.  D.  687. 
(/)  lb.  §  10. 
998 


CHAP,  v.]  uxd?:r  the  coMrvNiKS  act,  1SC2.  *749 

of  the  directors,  at  any  time  before  payment  of  what  is  due  in  res- 
pect of  such  shares  (No.  19). 

Any  member  whose  shares  have  been  forfeited  is  liable  to  pay 
all  calls  due  upon  them  at  the  time  of  their  forfeiture  (No.  21). 

Forfeited  shares  are  the  property  of  the  company,   p„rfeiied 
and  may  be  disposed  of  as  the  members  at  a  general  shares. 
meeting  think  lit  (No.  2(>). 

In  order  to  enable  such  shares  to  be  reissued,  and  to  protect  a 
purchaser  from  the  risk  of  having  his  title  defeated  by  some  ir- 
regularity in  the  forfeiture,  it  is  provided  that  a  statutory  declara- 
tion in  writing  that  the  call  in  respect  of  a  share  was  made  and 
notice  thereof  given,  and  that  default  in  payment  of  the  call  was 
made,  and  that  the  forfeiture  of  the  share  was  made  by  a  resolution 
of  the  directors  to  that  efi'ect,  shall  be  sufficient  evidence  of  the 
facts  therein  stated  as  against  all  ])ersons  entitled  to  such  share; 
and  such  declaration,  and  the  receipt  of  the  company  for  the  price 
of  such  share,  shall  constitute  a  good  title  thereto  (No.  22). 

*A  right  to  forfeit  shares  must,   in  order  to  be  eflectually     *74:9 
exercised,  be   pursued    with  the  greatest   exactness  («);  it 
must  be  exercised  by  the  proper  |)arties  [k)  in  the  proper  manner 
and  for  proper  cause;    that  is,  it  must  he  ho  fid  Jide  for  Exercise  of 
the  purpose  for  which  the  right  was  conferred.     The  toion'eit. 
power  to  forfeit  is  a  trust,  the  execution  of  which  will  be  nai;rowly 
scanned  by  the  court  {I).     It  cannot,  for  example,  be  exercised  sur- 
reptitiously, for  the  purpose  of  expelling  a  shareholder;  nor  by  con- 
nivance, for  the  purpose  of  assisting  him  in  getting  rid  of  shares 
and  retiring  from  the  company,  in  fraud  of  the  other  shareholders. 
A  court  will  not  sanction  or  recognize  as  valid  a  forfeiture  made 
maid  fide  for  any  such  purpose.     The  case  of  Blisset  v.  Daniel  (??i), 

(t)  See,  as  to  the  iiisutficiency  of  no-  1  App.  Ca.  39,  whore  the  appointment 

tioes,    &c.    Johnson    v.    Lyttle's     Iron  of  the  directoi-s  was  invalid. 

Agency,  5  Ch.  D.  687  ;  Watson  v. Bales,  (/)  Harris  v.  North  Devon  Rail.  Co. 

23  Beav.  294  ;  Van  Dieraen's  Land  Co.  20  Beav.   334;  Richmond's   case,    and 

r.  Cockerell,  1  C.  B.  N.  S.   732,   affirm-  Painter's  case,  4  K.  &  J.  305;  Stnbbs  r. 

ing  Cockerell  v.   Van   Diemen's  Land  Lister,  1  Y.  «&  C.  C.  C.  81.     See,  also, 

Co.  18  C.  B.  454;   Edinburgh,  Leith,  Stewart's  case,  1  Ch.  511. 

&c.  Rail.  Co.  V.  Hebble white;   6  M.  &  (m)  10  Ha.  493.      See,  too.  Wood  r. 

W.  707;  London  and  Brighton  Rail.  Co.  Woad,  L.  R.  9  Ex.  190;  Stubbs  v.  Lis- 

V.  Fairclough,  2  Man.  &  Gr.  674.    Com-  ter.  1  Y.  &  C.  C.  C.  81;  Sweny  v.  Smith, 

piue  Graham  v.   Van  Diemen's  Land  7  Eq.  324,  where  the  plaintiii'  had  sent 

Co.  1  H.  (fc  N.  541.  a  ehetiue  for  his  culls. 


(^•)  Giu-deu  Gully,  &c.  Co.  v.  M "Lister, 


999 


'750  FOEFEITUEE   OF    SHARES. 


[book  III. 


■which  will  be  found  referred  to  at  some  length  in  another  portion 
of  the  present  treatise,  is  a  strong  illustration  of  this  doctrine,  so 
far  as  regards  the  expulsion  of  a  partner,  and  the  invalidity  of  a 
forfeiture  made  for  the  purpose  of  enabling  a  shareholder  to  retire 
when  he  is  not  entitled  so  to  do,  is  w^ell  showm  by  the  decision  in 
Forfeiture  to      Richmond's   case,    and   Painter's  case  (71).      There   a 

enable  a  share-  ^    -' 

holder  to  retire,  director  of  a  Company  proposed  that  he  and  his  co- 
directors  should  take  a  number  of  shares  as  trustees  for  the  com- 
pany, and  he  signed  the  deed  for  2,000  shares,  and  he  was  regis- 
tered as  the  owner  thereof.  None  of  the  other  directors,  however, 
followed  his  example.  About  two  years  afterwards  he  ceased 
*750  to  be  a  director;  and  a  *year  after  that,  finding  the  company 
to  be  the  reverse  of  prosperous,  he  desired  to  have  his  2000 
shares  cancelled.  To  enable  the  directors  to  cancel  them,  he  sua:- 
gested  that  a  call  should  be  made  on  his  shares,  and  that  they 
should  be  forfeited  under  the  powers  contained  in  the  company's 
deed.  This  suggestion  was  acted  on  ;  a  call  was  made,  and  his 
shares  were  forfeited  for  non-payment  thereof.  But  it  was  held, 
that  the  directors  had  no  power  whatever  to  release  a  shareholder 
from  his  obligations  by  enabling  him  to  retire  at  the  expense  of  the 
company;  that  the  shares  had  not  been  ho?id  fide  forfeited  for  the 
benefit  of  the  company,  and  that  the  forfeiture  was  therefore 
invalid. 

Clauses  in  deeds  of  settlement,  &c.,  which  declare  that  on  non- 
what  amounts  P^yineut  of  calls,  &c.,  sharcs  shall  become  absolutely 
to  a  forfeiture,  forfeited,  do  not  enable  shareholders  to  get  rid  of  their 
shares  by  refusing  to  pay  their  calls.  Such  clauses  are  inserted  for 
the  benefit  of  the  company,  and  there  is  no  forfeiture  until  a  for- 
feiture is  declared.  (6») 

Moreover,  a  declared  intention  to  forfeit  not  carried  into  efiect 
{jp\  or  not  duly  confirmed,  is  no  forfeiture  at  all  {q).  Still,  if  there 
is  power  to  foi-feit,  and  a  declared   intention  to  forfeit,  and  the 

(n)  4  K.  &  J.  305.     See,  also,  HaU's  S.  289. 

case,  5  Ch.  707;  Gower's  case,  6  Eq.  77;  (p)  Bigg's  case,  1  Eq.  309. 

Spackman  v.  Evans,  L.  R.  3  H.  L.  171;  (g)    See    Birmingham,    Bristol,    &c. 

Stanhope's  case,  1   Ch.  161;  Phosphate  Rail.  Co.  r.  Locke,  1  Q.   B.  256;   Edin- 

of  Lime  Co.  v.  Green,  L.  R.  7  C.  P.  43;  burgh,  Leith,  &c.  Rail.  Co.   v.   Hebble- 

Harris't?.   North  Devon  Rail.    Co.   20  white,    6  M.   &   W.  707;  London  and 

Beav.    384;  Preston    v.  Grand  Collier  Brighton  Rail.  Co.  r.  Fairclough,  2  Man. 

Dock  Co.  11  Sim.  327.  &  Gr.  674. 

(o)  See  Moore  v.  Rawlins,  6  C.  B.  N. 
1000 


CHAP,  v.] 


INEFFECTUAL   FORFEITURES. 


^751 


shares  intended  to  be  forfeited  are  treated  by  the  company  and  tlie 
sliareholder  as  forfeited,  tlie  company  will  be  precluded  from  after- 
wards insisting  that  no  forfeiture  ever  took  place  {i').  This  doc- 
trine, however,  cannot  apply  where  the  forfeiture  is  altogether 
ultra  vires  /  and  there  are  cases  in  which,  after  the  lapse  of  many 
years,  persons  whose  shares  had  been  forfeited  in  order  to  enable 
them  to  retire  were  nevertheless  held  to  be  contribntories.  (s) 

The   eifect  of  the  forfeiture  of  a  share   depends  entirely  upon 
whether  the  forfeiture  is  valid  or  not.     If  it  is 
valid,  the  *shareholder  ceases,  by  the  forfeiture  of    ^751   feiture. 
liis  shares,  to  be  a  member  of  the  company;  and 
althouirli  he  may  be  liable  to  be  sued  for  the  calls  (t)  for  the  non-])ay- 
ment  of  which  his  shares  have  been  forfeited,  he  is  not  liable  to  subse- 
quent calls  nor  to  be  made  a  contributory  as  a  present  member  on  the 
winding  up  of  the  company. (?/) '  But  if  a  forfeiture  is  invalid  and, 
if  the  company  is  not  estopped  from  shoNving  the  invalidity  (./;),  then 
the  shareholder  does  not  cease  to  be  a  member  of  the  com i  any,  and 
he  still  remains  liable  to  calls  (y),  and  to  be  made  a  contributory  on 
the  winding  up  of  the  company,  (s)     Whether  the  invalidity  of  a 
declaration  of  forfeiture  affords  a  defense  to  an  action  by  the  in- 
jured shareholder  against  the  company  for  damages  occasioned  by 
its  wrongful  act,  is  a  question  on  which  decisions  conflict,  ia)     But 


(r)  Eximrie  Woollaston,  4  DeG.  &  J. 
437;  Knight's  case,  2  Ch.  321,  where  a 
resolution  to  furfeit  was  presumed; 
Lyster's  case,  4  Eq.  233,  where  the  for- 
feiture was  by  two  directors  out  of  six. 
See,  under  the  head  Contribntories,  in 
bk.  iv. 

(s)  See  ante,  p.  740. 

{t)  Interest  on  such  calls  was  held  not 
recoverable  in  Stocken's  case,  5  Eq.  6, 
and  3  Ch.  412. 

(u)  See,  infra,  under  the  head  Con- 
tributories,  in  book  iv.  He  may  be  a 
contributory  as  a  past  member,  Bridger's 
case,  4  Ch.  2G6;  Creyke's  case,  5  Ch.  63. 

*  A  voluntary  unincoiporated  associa- 
tion for  manufacturing  pui-poses,  pro- 
vided in  their  articles  of  agreement  that 
each  stockliolder  should  pay  a  certain 
sum  per  share,  at  the  time  of  subscrib- 
ing, and  all  subsequent  assessments,  or 


forfeit  his  stock:  HelJ,  that  this  was  a 
partnership,  and  that  the  stockholders 
could  not  escape  liability  for  debts  con- 
tracted within  the  scope  of  the  partner- 
ship business  by  a  forfeiture  of  their 
stock.  Skinner  v.  Dayton,  19  Johns. 
513. 

(.r)  See  ante,  p.  129. 

(//)  See  Birmingham,  Bristol,  &c. 
Rail.  Co.  V.  Locke,  1  Q.  B.  256  ;  Edin- 
burgh, Leith,  <S:c.  Rail.  Co.  v.  Hebble- 
white,  6  M.  &  W.  707;  London  and 
Brighton  Rail.  Co.  v.  Fairclough,  2 
Man.  &  Gr.  674. 

(-)  Barton's  case,  4  Drew.  535,  luid 
4  DeG.  &  J.  46  ;  Richmond's  case,  and 
Painter's  ca.se,  4  K.  &  J.  305,  and  the 
cases  cited,  ante,  p.  749,  note  («). 

(a)  See  Catchpole  r.  Ambergate  Rail. 
Co.  1  E.  &  B.  Ill,  and  compare  the 
cases  in  the  next  note.      If  a  company 

1001 


*752  FOEFEITUEE    OF   SHARES.  [bOOK  IIL 

if  a  member  has  been  in  fact  wronofully  expelled,  and  been  danmi- 
lied,  it  is  not  easy  to  see  why  an  action  should  not  lie.  Be  this, 
Relief  in  such  however,  as  it  may,  the  invalidity  of  a  forfeiture  affords 
cases.  jjQ  reason  why  the  court  should  not  interfere  to  protect 

or  restore  a  shareholder  to  that  position  from  which  lie  is  in  fact  ex- 
cluded. In  Hart  v.  Clarke  (b),  a  shareholder  in  a  cost-book  mining 
company,  wdiose  shares  had  been  improperly  forfeited,  was,  after 
the  lapse  of  a  considerable  length  of  time,  restored  to  his  rights 

as  a  shareholder;  in  Xorman  v.  Mitchell  (c),  and  in  Wat- 
*752     son  V.  Eales  {d),  an  injunction  was    granted  to  restrain  "the 

carrying  into  effect  of  declarations  of  forfeiture  recently 
nuide;  and  in  Stubbs  v.  Lister  (e),  a  forfeiture  of  shares  was  set  aside 
on  the  ground  that  the  directors  Mdio  were  bound  to  credit  the  share- 
holder with  the  utnujst  value  of  the  shares,  had  credited  him  with 
a  value  set  upon  them,  by  themselves,  and  which  value  was  less 
than  the  current  market  price  of  shares  in  the  company  at  the 
time  the  forfeiture  was  declared.  In  this  case  the  shares  were  a  se- 
curity for  money  owing  by  their  owner  to  the  company,  and  were 
forfeited  for  non-payment  of  that  money. 

It  may  further  be  observed,  that  although  a  court  will  not  relieve 
a  person  whose  shares  have  been  duly  forfeited  {/).  it  will  inter- 
fere to  prevent  a  forfeiture  pending  a  dispute  between  a  company 
and  a  shareholder  upon  payment  by  him  into  court  of  what  may 
be  due  from  him  in  respect  of  the  shares  intended  to  be  forfeited 
(g),  and  will  take  care  that  the  shareholder  has  credit  for  whatever 
the   shares  may  or,  if  properly  sold,  might  have  fetched.  (A) 

has  110  power  to  forfeit,  a  forfeiture  can-  been  noticed, 

not  be  imputed  to  it,  and  the  action  tor  (c)  5  DeG.  M.  &  G.  648. 

damages  ought  to  be  agamst  its  direc-  {d)  23  Beav.  294. 

tors,  if  it  can  be  sustained  at  all.  (e)  1  Y.  &  G.  C.  C.  81. 

{b)  6  DeG.  M.  &  G.  232,  and  6  H.  L.  (/)  Sparks  v.  Liverpool  Watei-wovks 

C.  633.     See,    also,    Sweny  v.  Smith,  7  Co.  13  Ves.  428. 

Eq.   824  ;    Garden  Gully,    &c.    Co.   v.  {g)  See  Naylor  v.  South  Devon  Rail. 

M'Lister,  1  App.  Ca.  39  ;  where  the  de-  Co.  1  DeG.  &  S.  32. 

fense  failed,  and  Wood  v.  Woad,  L.  R.  (h)  See  Stubbs  v.  Lister,  1  T.  &  C.  C. 

9  Ex.   190,   where  it  succeeded.    The  C.  81. 
former  case  does  not  appear  to  have 
1002 


CIIAl".  VI.]  CONTUIIJLTION    ANI»    INDEMNITY.  i  oZ 


*CH AFTER  yi.  *'53 

OF  CONTRIBUTION  AND  INDEMNITY  WITH  REFERENCE  TO   PART- 
NERSHIPS AND  COMPANIES. 

In  this  chapter  it  is  proposed  to  consider  the  nature  of  those  ex- 
])ense8  and  losses  which,  as  between  the  ineniljers  of  a  tirm  or  com- 
])any  are  char:,'eal)lc  to  the  aggre<^ate  body,  and  also  the  guycct  of  pres- 
nature  of  those  which  are  pro])erly  char creable  against  e^t  chapter. 
some  one  or  more  of  the  members  exclusively  of  the  others.  In 
other  words,  it  is  projxised  to  investigate  the  principles  upon  which, 
in  taking  the  accounts  of  a  firm  or  company,  a  given  expense  or 
loss  is  to  be  ])laced  to  the  debit  of  the  tirui  or  company,  or  to  the 
debit  of  one  or  more  of  its  members  separately.  For  this  purpose 
it  will  be  convenient  in  the  first  place  to  examine  the  general  prin- 
ciples upon  which  a  right  to  contribution  and  indemnity  is  founded. 


SECTION  I.— GENERAL  OBSERVATIONS. 

Foundation  of  the  right  to  contribution. 

Whether  a  person  M'ho  has  suffered  loss  is  entitled  to  be  indem- 
nified wholly  or  partly  by  others,  is  aipiestion  which  TheriRhtof 
cannot  be  decided  in  the  negative  merely  upon  the  contribuUon. 
ground  that  no  agreement  for  contrilnition  or  indemnity  has  been 
entered  into.  An  agreement  may  undoubtedly  give  rise  to  a  right 
to  indemnity  or  contribution;  but  the  absence  of  an  agreement 
giving  rise  to  such  a  right,  is  by  no  means  fatal  to  its  existence. 
The  general  principle  which  prescribes  e([uality  of  burden  and  of 
benefit,  is  amply  suflicient  to  create  a  right  of  contribution  in  many 
cases  in  which  it  is  impossible  to  found  it  upon  any  genuine  contract, 

1003 


*754:  CONTRIBUTION    A^D    INDEMNITY.  [bOOK  III. 

express  or  tacit.  The  common  feature  of  sncli  cases  is  that 
Toi*  one  person  has  sustained  some  *los3  which  would  have  fallen 
upon  others  as  well  as  upon  himself,  but  which  has  been 
averted  from  them  at  his  expense;  for  example,  where  one  tenant 
in  common  re])airs  the  common  property,  and  so  saves  it  from  de- 
struction («);  where  one  of  several  sureties  pays  a  debt  for  which 
all  are  liable  (5);  where  one  person  has  his  goods  thrown  overboard 
in  order  to  save  the  ship  and  the  rest  of  its  cargo,  (c)  In  all  these 
cases  a  right  of  contribution  arises;  not  by  virtue  of  any  contract, 
but  because  the  safety  of  some  cannot  justly  be  purchased  at  the 
expense  of  others;  and  all  must  therefore  contribute  to  the  loss  sus- 
tained, [d) 

But  altliough  a  right  to  contribution  may  exist  where  there  is  no 
Exclusion  of  contract  upon  which  it  can  be  founded,  it  cannot  exist 
mem.  ^  ^^^''^'  if  excluded  by  agreement;  and  it  is  so  excluded  when- 
ever those  who  would  otherwise  be  contributories  have  en- 
tered into  any  contract,  express  or  tacit,  amongst  themselves  which 
is  inconsistent  with  a  right  on  the  part  of  one  to  demand  contribu- 
tions from  the  others,  (e)  This  is  too  obvious  to  require  comment, 
but  it  must  be  borne  in  mind  as  qualifying  the  common  saying, 
that  the  right  to  contribution  is  independent  of  agreement. 

Ao-ain,  a  right  to  contribution  may  be  excluded  by  fraud,  as  is 
Exclusion  of  the  case  where  a  person  induces  another  by  false  and 
right  by  fraud.  fj-j^^Kjuient  representations  to  join  him  in  partnership. 
In  such  a  case  the  person  defrauded  has  a  right  to  rescind  the  con- 
tract of  partnership,  and,  as  between  himself  and  co-partner,  to 
throw  all  the  partnership  losses  upon  the  latter  alone.  (/) 

The  application  of  these  principles  to  the  winding  up  of  compa- 
nies will  be  noticed  in  a  subsequent  part  of  the  work. 

(«)  F.  N.  B.  162,  b.  (e)  As  in  Gillan  ty.  Morrison,  1  DeG. 

{b)  Bering  v.  Winclielsea,  1  Cox  318.  &  S.  421;  Re  the  Worcester  Corn  Ex- 

(c)  Abbott  on  Shipping,  part  iv.  c.  10.  change  Co.  3  DeG.  M.  &  G.  180,  which 

{d)  Lefroy  v.  Gore,  1  Jo.  &  Lat.  671;  will  be  noticed  hereafter. 

Spottiswoode's  case,  6   DeG.   M.  &  G.  (/)  See  Pillans  v.   Harkness,  Colles, 

345;  Ashurst  v.  Mason,   20  Eq.   225;  a  442;  Rawlins  v.  Wickham,  1  Giff.   355, 

case  of  co-directors  noticed,  ante,    597.  and 3  DeG.  &  J.  304,  noticed  more  fully 

See,  too,  the  cases  in  1  Eq.  Ca.  Ab.  Con-  hereafter  under  the  head  Rescission  of 

tribution  and  Average,  and  in  the   note  Contract.     See,     too,  Carew's    case,   7 

to  Averall  v.  Wade,  LI.  &  Gould  (temp.  DeG.  M.  &  G.  43. 
Sug.),  264. 

1004 


CHAP.  VI.]  CONTRIBUTION   AND   INDEMNITY.  *755 

'''Of  the   right  of  agents  and  trustees   to  indemnity  from     *755 
theh'  'principals  and  cestuis  que  trustent.^ 

Ill  order  to  clear  tlie  way  fur  tlie  (.lisciission  of  tlie  ri^lit  of  a 
partner  to  be  indeiiuiified  by  liis  firm,  and  of  the  ri<;lit  Apem's  right  to 
of  directors  to  be  indemnified  by  the  compan3'of  which  i""^^"""i>'- 
they  have  the  matiagement,  it  is  necessary  to  advert  sliortly  to  the 
riglit  of  agents  and  trustees  to  be  indemnified  by  their  ])iiiieipals 
and  cestui  que  trustent. 

With  respect   to   agents    the   following   cases  have  to  be  con- 
sidered. 

1.  "When  the  agent  having  instructions  executes  them; 

2.  When  tlie  ajjcnt  liavint;  instructions  does  not  follow  them; 

3.  When   the  aiicnt  having;  no  instructions  acts  nevertheless  for 
his  pi'ineipal. 

1.  Witli  respect  to  the  first  of  these  three  classes  of  cases,  noth- 
ing is  clearer  than  that  an  ai;ent  who   has  instructions   i.  wiu-nhe 

^  .  .  •  '  •    1     1  1  .      1  obeys  liis 

to  act  m  a  certain  manner,  is  entitled  to  be  reimbursed  instructions. 
by  his  principal  for  all  outlays  made  in  pursuance  of  these  instruc- 
tions, and  to  be  indemnified  for  any  loss  sustained  by  executing 
them,  ig)  Even  if  what  the  agent  does  is  unlawfnl  he  is  entitled 
to  indemnity  (A);  unless,  indeed,  the  act  be  one  which  the  agent 
must  have  known  his  princi])al  could  under  no  circumstances 
justify;  for  then  the  maxim  in  pari  delicto  melior  est  positio  de- 
fendentis  applies,  and  the  agent  can  obtain  no  indemnity  from  a 
court  of  justice,  (i) 

2.  It  is  equally  clear  that,  speaking  generally,  an  agent  who  acts 
contrary  to  his  instructions  is  not  entitled  to  any  in-  2.  whcnhedis- 

,  .  .      ,  .        T  .  obi'vs  liis  iu- 

demnity  or  reimbursement  for  losses  or  expenses  in-  struetious. 
ciirred  whilst  so  acting.  {Jc)     Even  although  the  instructions  may 

'  See  this  subject  considered  and  the  dal,  C.  J.,  in  Collins  r.  Evans,  5  Q.  B. 

cases    collected  in  E well's    Evans    on  830. 

Agency  *353  et  seq.,  and  notes.  (»)  See  Merryweather  v.  Nixan,  2  Sm. 

iff)  Story  on   Agency,  §  3:j5  et  seq.  ;  L.  C;  Collins  r.  Blantem,  1  ib.;  Josephs 

Paley  on  Agency,  chap.  2;  Smith,  Merc.  r.  Pebrer,  3  B.  &  C.  639;  Schackell  r. 

Law,  pp.  119,  120,  ed.  9  ;  Curtis  r.  Bar-  Rosier,  2  Bing.  N.  C.  6.34. 

clay,  5  B.  &  C.  141.    As  to  costs  of  ac-  (A)  See  Stokes  r.  Lewis,  1  T.  R.  20; 

tions  unsuccessfully  defended,  see  Broom  Gallway    v.    Smithson,  10    East,   264; 

r.  Hall,  7  C.  B.  N.  S.  503.  Child  r"  Morley,  8  T.  R.  610;  Warwick 

{h)  Adamson  v.  Jarvis,  4  Bing.    66;  r.  Slade,  3  Canip.  127. 


Betts  r.  Gibbins,  2  A.  &  E.  57;  j^cr  Tin- 


1005 


*757  CONTRIBUTION    AND    INDEMNITY.  [bOOK  III. 

*756  have  been  *given  by  the  principal  under  a  misapprehension 
of  facts,  and  the  agent,  being  aware  that  such  was  the  case, 
may  have  acted  hond  fide  for  the  benefit  of  his  principal  (?),  still 
the  agent  will  not  be  entitled  to  indemnity;  for  it  is  the  duty  of 
an  agent  to  obey  and  not  to  disregard  his  orders.  But  if  the  prin- 
cipal chooses  to  ratify  the  agent's  conduct,  the  latter  acquires  aright 
to  be  considered  as  having  acted  in  pursuance  of  instructions,  and 
to  be  entitled  to  reimbursement  and  indemnity  accordingly;  for 
the  principal  cannot,  whilst  ratifying  the  agent's  conduct  so  far  as 
it  is  beneficial,  repudiate  it  so  far  as  it  is  onerous,  (m) 

The  position  of  an  agent  who  has  already  acted  on  his  instrnc- 
Effectofrevo-    tious,  and   has   thereby  incurred   a  legal  obligation  to 

cation  of  au-  t.i  .         .      ■,.  r^  mii  •••! 

thority.  third   parties,  is  diiierent.     ihe  better  opinion  is  tliat 

in  this  case  he  is  not  bound  on  the  command  of  his  principal  to 
stop  short  and  refuse  to  perform  the  obligation  incurred.  There  is 
no  doubt  that,  as  between  himself  as  his  principal,  an  agent  is  en- 
titled to  obey  the  counter  order,  and  to  obtain  a  full  indeinnity 
from  the  consequences  of  so  doing.  But  it  is  apprehended  that  he 
is  at  liberty  so  tar  to  carry  out  the  instructions  on  which  he  has 
begun  to  act,  as  may  be  necessary  to  relieve  himself  from  all  t!ie 
legal  liabilities  incurred  before  notice  of  the  countermand,  and 
having  done  so,  to  insist  upon  indemnity  and  reimbursement  as  if 
the  principal  had  not  changed  his  instructions.  Nemo  potest  mu- 
tare  consilium  suum  in  alterius  injuriam  is  the  maxim  of  tJie 
civil  law,  and  expresses  the  correct  principle  for  the  decision  of 
these  cases,  {n) 

3.  There  remains  the  third  class  of  cases,  viz.,  where  the  agent, 
3.  When  he  having  uo  instructious  to  guide  him,  acts  for  his  princi- 
instructions.  pal,  and  then  seeks  to  be  indemnified  by  him.  Now 
liere,  as  in  the  last  class  of  cases,  ratification  by  the  principal  re- 
moves all  difificulty,  and  may  be  excluded  from  consideration. 
*757  *Again,  an  agent  having  no  specific  instructions  may  yet 
have  an  implied  authority  to  act  in  a  given  way  for  his 
principal;  and  in  the  absence  of  orders  to  the  contrary,  an  agent 

{])  Howard  v.   Tucker,    1   B.  &   Ad.  Balsh  v.  Hyam,  2  P.  W.  453;  Sutton  r. 

712.  Tatham,  10  A.  &  E.  27.     On  the  other 

(m)  Story  on  Agency,  §  250.  hand,  see  2  Kent.  Com.  644.      In  Child 

(»)  The  subject  is  not,  however,  free  v.  Morley,  8  T.  R.  610,  and  Warwick  r. 

from  doubt.     The  position  in  the  text  is  Slade,  3  Camp.  127,  the  agent  was  only 

supported  byPothier,  Mandat.  No.  121,  bound  in  honor. 

and  Story,  Agency,  §465.  &c.,  and  by 

1006 


CII.M'.  VI.]  COXTKIBUTTON    AND    INDEMXIT^.  *7oS 

iilwajs  lias  iinjnied  authority  to  act  in  the  manner  in  whicli  he  has 
hecn  accustomed  to  act  with  the  approval  of  his  principal;  and  to 
act  with  respect  to  any  matter  as  other  persons  situate  like  himself 
usually  act  with  respect  to  similar  matters;  and  to  take  all  those 
steps  which  are  usual  and  necessary  to  enable  him  duly  to  execute 
his  instructions,  (o)  It  may  therefore  well  happen  that  an  agent 
who  has  no  positive  instructions,  may  nevertheless  act  within  the 
limits  of  his  real  authority;  and  so  long  as  he  keeps  within  those 
limits  he  is  entitled  to  reimhursement  and  indemnity,  {p)  The 
principle  ap))]ieable  to  the  first  cla?s  of  cases  applies  here;  but  if 
the  agent  claims  an  indemnity  against  loss  sustained  by  the  com- 
mission by  him  of  an  illegal  act,  he  must  be  prepared  with  very 
strung  evidence  to  show  that  such  acts  fell  within  the  limits  of  his 
authority.  In  a  case  of  doubt  no  authority  to  commit  an  unlaw- 
ful act  can  be  inferred. 

The   greatest   difficulty   arises  when   an   agent  acts  without  any 
authority,  express  or  tacit,  but  bond  iide  for  the  l)enefit  p^ghts  of  a  per- 
of  his  ])rincipal.      There  is   a  leaning  in  many  minds  a'^ued'lttrfor 
in    favor   of  the  agent  in  such  cases,  and  it  cannot  be  '^"""^^r. 
denied  that  circumstances   may  occur  which  render  officious  con- 
duct justifiable,  and  even  benevolent.     On  the  other  hand,  culpa 
est  immiscere  se,  rei  ad  se  non pertlnenti  {q);    and  by  the  law  of 
England  a  person  who  chooses,  unasked,  to  incur  expense  for  an- 
other, must,  speaking  generally,    trust  rather  to  gratitude  than  to 
judicial  aid  for  reimbursement.  (?■)     The   only   established  excep- 
tions to  this  rule  seem  to  be — 1,  where  one  person  alone  sustains  a 
loss  or  incurs  expense  for  the  relief  of  himself  and  others 
from  some  -lisk  or  obligation  common  to  all;  and,  2,  where     *758 
one  person  does  for  another  that  which  the  latter  is  legally 
bound  to  do,  but  either  cannot  or  will  not  do  himself.     The  first 
class   of   exceptions   has   been   already  alluded   to.      The   second 
may  be  illustrated  by  those  ca?e^  in  which  executors  and  husbands 

(o)  Stoiy  on  Agency,  c.  6.  r.  The  Mayor  of  Norvrich,   2  M.  k  Cr. 

[p)    Curtis  r.   Barclay,    5  B.  &   C.  424. 

141;  Sutton  r.  Tatham,  10  A.  &  E.  27  ;  {q)  Dig.  T.    tit.  17,  DeReg.  Jur.  L. 

see,  too,  1  Wms.  Sannd.  264,  b  ;  Belt-  36. 

man  v.   Keble,    15  Jur.  38;    Wolfe   v.  (r)  '&Q(msio\hQ  negot'wrumgestor  oi 

Horncastle,  1  Bos.  &  P.  323,  ;7fr  Ruller,  the  Koman  law,  Dig.    III.  tit.   5,    De- 

.1.      This  was  also  the  principle    ap-  Negot.   Gest.    Thibaut's    System    (l.-s 

plied  in  R.  v.  Essex.  4  T.  R.  591.  and  Band.  Recht.  §  538,  ed.  9. 


referred  to  by  Lord  Cotlenham  in  A.-U. 


1007 


*T59  CONTKIBUTION    AND    INDEMNITY.  [bOOK  in. 

are  lield  liable  for  the  expenses  of  funerals,  altliougli  they  gave 
no  orders  for  them,  and  took  no  part  in  them,  {s) 

The  general  rule,  certainly,  is  that  the  officious  conduct  of  one 
person  imposes  nu  obligation  on  another  to  compensate 
him  for,  or  indemnify  him  from,  the  consequences  of 
his  own  spontaneous  act ;  and  even  although  the  other  may  be 
benefited,  he  cannot  on  that  ground  alone  be  compelled  to  pay  for 
what  he  never  sought  to  obtain,  {t)  A  very  strong  illustration  of 
Edmistonr.  this  IS  afforded  by  the  case  of  Edmiston  v.  "Wright  (ti) 
Wright.  There  the  defendant  was  the  owner  of  some  estates  in 

Georgia,  and  of  some  negroes  in  Jamaica.  The  plaintiff's  partner 
was  the  defendant's  agent,  and  the  general  manager  of  his  West 
Indian  estates.  The  negroes  in  Jamaica  were  shipped  for  Georgia, 
and  seized  by  Custom-house  officers  in  consequence  of  the  captain 
of  the  ship  having  neglected  to  procure  some  necessary  documents. 
The  plaintiff,  for  the  purpose  of  redeeming  the  negroes  from  the 
authorities  who  had  seized  them,  paid  the  sum  of  1200/.,  and,  the 
negroes  were  then  allowed  to  proceed  to  the  defendant's  estate  in 
Georgia.  The  plaintiff  sued  the  defendant  for  the  sum  of  1200/. 
as  money  paid  to  his  use,  but  Lord  EUenborough  held  that  it  was  a 
voluntary  payment  made  by  the  plaintiff,  and  one  which  he  could 
not  recover  from  the  defendant. 

The  right  of  a  trustee  to  indemnity  from  his  cestui  que,  trust 
Right  of  trus-     very  closely  resembles  the  rio-ht  of  an  ag-ent  to  indem- 

tees  to  indem-  .    -^     .  •^ .  ... 

nity.  nity  irom  his  prmcij'jal — 

1.  A  trustee  is  clearly  entitled  to  be  indemnified  out  of  the  trust 

property  against  all  costs,  charges,  and  expenses  properly  in- 
*T59     curred,  and  against  all  losses  sustained  by  him,  in  the  *exe- 

cution  of  his  trust  (a?);  and  if  the  trust  party  is  not  suffici- 
ent for  the  purpose  of  indemnifying  him  in  respect  of  such  mat- 
ters, his  cestui  que  trusty  if  under  no  disability,  is  personally  liable 
to  indemnify  him  (y),  unless  such  liability  is  excluded  by  some 
special  circumstance,  (s) 

(s)  See  Ambrose  v.  Kerrison,  10  C.  B.  this  rule  was  applied  in  favor  of  a  trustee 
776 ;  Rogers  v.  Price,  3  Y.  &  J.  28 ;  for  a  company  against  its  debenture- 
Jenkins  V.  Tucker,  IH.  Bl.  91.  holders. 

(<)  1  Wms.  Saund.  264,  a  ;  6  B.  &  C.  [ij)    See    Oriental    and    Commercial 

444,  per  Bayley,  J.;  Stokes  v.  Lewis,  1  Bank,  3Ch.  791;  Balshz;.  Hyam,  2 P.  W. 

T.  R.  20  ;  Child  v.  Morley,  8  T.  R.  610.  453;  Phene  v.  Gillan,  5  Ha.  1,  and  Ex 

(u)   1  Camp.  88.  paiie  Chippendale,  4  DcG.  M.  &  G.  52. 

(x)  Re  Bleckley,  35  Beav.  449,  where  {z)  If  there  is  an  express  covenant  to 

1008 


CHAP.  VI.] 


CON'fniBUTION    AND    IXDP:5INITV, 


■760 


2.  On  the  other  hand,  a  trustee  who  cotniaits  a  breach  of  trust 
is  entitled  to  no  indemnity  in  respect  tliereof,  except  from  those 
cestui  que  trustent,  if  any,  at  wliose  request  lie  wroui^fiiUy  acted,  or 
who  hav^e  sanctioned  and  benefited  by  his  improper  conduct,  {a) 

3.  Ever}'  act  of  a  trustee  respecting  the  trust  property  must  nec- 
essarily either  be  warranted  by  the  trust  reposed  in  him,  or  amount 
to  a  breach  of  trust,  and  must  therefore  be  governed  by  one  or  other 
of  the  two  foregoing  principles.  But  as  with  agents,  t^o  with  trust- 
ees; their  acts  may  be  pnjj^er,  although  not  e.\]>ressl3'  authorized; 
and  whatever  is  necessary  in  order  duly  to  execute  an  ex])ress  trust, 
is  warranted  by  that  trust,  and  entitles  the  trustee  tu  indemnity  ac- 
cordingly. Jjut  even  this  principle  will  not  entitle  a  trustee  to 
indemnity  in  respect  of  everything  he  may  do  hou''i  Jirle.  for  the 
benefit  of  liis  cestui  que  trust,'  regard  must  be  had  to  the  nature  of 
the  trusts  to  be  executed. 


Of  the  right  of  partners  and  directors  to  indemnity  hy  tlie  firm  or 

company. 

Passing  now  to  contribution  and  indemity  between  partners,  it 
is  to  be  observed  that  every  metnber  of  an  ordinary   position  of 
firm   is,  to  a  certain  extent,  both  a  principal  and  an  portiu-ra'^ 
agent.     lie  is  liable  as  a  principal  to  the  debts  and  "''^'• 
engagements  of  the  firm,  and  in  respect  of  them  he  is  enti- 
tled to  contribution  from  his  *co-partners;  for  they  have  no     *700 
right  to  throw  on  him  alone  the  burden  of  obligations  which, 
ex  hypothesis  are  theirs  as  mucli  as  his,  (J)'     Again,  each  member 


indemnify,  the  obligation  will  be  limited 
by  the  covenant.  See  Selwyn  r.  Ham- 
son,  2  J.  &  H.  334;  Gillan  v.  Morrison, 
1  DeG.  &Sm.421. 

(a)  See  Lewin  on  Trusts,  p.  525,  ed.  6. 

(6)  See  Robinson's  case,  6  DeG.  M.  & 
G.  572;  Spottiswoode's  case,  ib.  345; 
Lefroy  r.  Gore,  1  Jo.  &  Lat.  571. 

'  See  Forbes  r.  Webster,  2  Vt.  5«. 

After  the  dissolution  of  a  partnership, 
ajudg'inent  upon  a  partnership  debt  was 
rendered  against  the  partners,  and  ex- 
ecution was  levied  upon  lands  belong- 
ing to   tlioni  severally:     lldil,   that  a 


partner  who  redeemed  the  lands  from 
the  execution  was  entitled  in  equity  to 
contribution.  Downs  r.  Jackson,  33  III. 
404. 

Two  partners  had  been  engaged  in 
purchasing  cattle;  most  of  them  were 
sold,  and  it  was  agreed  that  the  residue 
should  be  taken  by  one  of  them  at  a 
specified  price.  They  settled  their  part- 
nei-ship  accounts  and  divided  the  assets. 
For  some  of  the  cattle  sold  a  note  was 
given  to  the  firm,  which  was  received 
by  th?  plaintift',  who  indorsed  it  in  the 
name  of  the  firm,  had  it  discounted,  and 

1009 


^760 


CONTRIBUTION    AND    INDEMNITY. 


[book  III. 


as  an  H'j;ent  of  the  firm  is  entitled  to  be  indemnified  by  the  firm 
ag\ainst  losses  and  expenses  honCi  fide  incurred  by  him  for  the  benefit 
uf  the  firm,  whilst  pursuing  the  authority  conferred  upon  him  by 


applied  the  proceeds  to  the  credit  of  the 
firm.  The  debtor  failed  to  pay  the 
note,  the  plaintiff  paid  it  and  brought 
this  action  against  the  other  partner  for 
contribution:  Held,  that  nothing  short 
of  an  agreement,  mutually  releasing 
each  other  from  liability  on  the  note, 
Avould  produce  such  effect,  and  no  such 
agreement  was  proved.  Kelly  v.  Kauff- 
man,  18  Pa.  St.  351. 

Where  a  partner  executed  a  note  in  the 
firm  name  to  raise  his  share  of  the  cap- 
ital stock,  and  such  note  was  executed 
to  a  person  ignorant  of  that  fact,  the 
firm  was  held  responsible  for  the  note, 
and  the  other  partner  entitled  to  his 
bill  for  contribution.  His  bill  for  con- 
tribution could  be  defeated,  however, 
by  proof  under  appropriate  pleadings, 
showing  that  the  defendant  had  paid  his 
proportion  of  the  debts  of  the  firm. 
Fletcher  r.  Brown,  7  Humph.  385. 

Where,  after  division  of  the  assets  of 
a  late  firm,  one  partner  is  compelled  to 
pay  outstanding  debts,  he  may  sue  for 
contribution.  Eskins  v.  Knox,  6  Rich, 
14.  See,  also,  Maginnis  v.  Crosby,  11 
La.  Ann.  490;  Forbes  v.  Webster,  sup. 

A  partner  in  the  location  of  land  war- 
rants, on  adjusting  a  demand  occasioned 
by  the  parsonal  default  of  his  co-partner, 
is  entitled  against  him  to  contribution, 
Noel  V.  Bowman,  2  Litt.  46. 

To  entitle  one  partner  to  recover  at 
law  of  another  partner  contribution  for 
his  proportion  of  the  debts  of  the  firm 
paid  since  dissolution  by  th3  former,  it 
must  appear  that  the  latter  was  notified 
of  such  payment  before  suit.  Dakin  v. 
Graves,  48  N.  H,  45, 

In  an  action  by  one  partner  against 
his  co-partner  for  contribution  for  a 
partnership  debt  paid  by  the  plaintiff 
more  than  six  years  after  the  general 
assignment  of  the  partnership  effects 

1010 


for  the  benefit  of  their  creditors,  the  pre- 
sumption is  that  the  partnership  ac- 
counts are  settled,  and  the  burden  is 
upon  the  defendant  to  show  the  con- 
trary. Brown  v.  Agnew,  6  Watts  &  S. 
235. 

Where  a  surviving  partner,  after  ex- 
hausting the  partnership  assets,  is  com- 
pelled to  pay  the  residue  of  the  partner- 
ship debts  out  of  his  own  means,  he  is 
entitled  to  recover  frord  the  estate  of 
the  deceased  partner  a  moiety  of  the 
amount  thus  paid.  Olleman  v.  Reagan, 
28  Ind.  109.  See,  also,  Wheeler  r.  Ar- 
nold. 30  Mich.  304. 

Where  a  suit  is  brought  by  a  surviv- 
ing partner,  as  such,  if  he  fails,  the  es- 
tate of  the  deceased  partner  is  liable  to 
contribute  to  the  costs.  Allen  v. 
Blanchard,  9  Cow.  631. 

The  representatives  of  a  deceased 
partner,  who  had  paid  the  whole  of  a 
partnership  debt,  will  be  substituted  m 
the  jjlace  of  the  creditor,  in  order  to  re- 
cover a  contribution  from  the  surviving 
partner  or  his  estate.  Sells  v.  Hubbell, 
2  Johns,  Ch,  394. 

There  is  no  principle,  on  which,  after 
the  satisfaction  of  a  judgment  for  a  part- 
nership debt,  Ijy  one  of  the  partners  sued, 
equity  ought  to  extend  or  preserve  the 
vitality  of  the  legal  security,  under  the 
gui?e  of  an  assignment,  so  as  to  charge 
tlie  bail  of  the  other  partner.  Ilinton 
r.  OdenheimBr,  4  Jones  Eq.  406. 

Where  several  judgments  are  recov- 
ered for  the  same  debt,  against  the  sur- 
\'iving  partners  and  the  administratrix 
of  a  .deceased  partner,  she  cannot,  by 
paj-ing  the  judgment  against  her,  and 
taking  an  assignment  of  the  other,  have 
execution  thereon  in  the  name  of  the 
plaintiff,  in  order  to  her  reimbursement. 
Bartlett  v.  M'Rae,  4  Ala.  688. 

Pending    an  action    against    A    for 


CHAP.  VI.] 


CONTRIBUTION    AND   INDEMNITY. 


*760 


tlie  agreement  entered  into  between  himself  and  his  co-partners. 
On  the  other  hand,  a  partner  has  no  right  to  charge  the  firm  witli 
losses  or  expenses  incurred  by  his  own  negligence  or  want  of  skill, 
or  in  disregard  of  the  authority  reposed  in  him. 


breach  of  a  contract  which  was  in  fact 
the  contract  of  the  firm  of  A  and  B,  the 
partners  had  a  settlement  of  all  the 
partnership  dealings,  except  the  sum  to 
be  paid  by  13  to  A  upon  the  determination 
of  such  action.  At  the  time  of  the  set- 
tlement the  firm  owned  certain  lots  of 
land,  of  which  the  title  was  in  A,  and  A 
testified  that  B  proposed  a  division  of 
the  lands  into  two  parcels,  and  the  exe- 
cution of  a  deed  by  A  to  him  of  one 
parcel,  to  be  determined  by  lot;  that  A 
objected,  on  the  ground  that  said  action 
was  not  yet  settled;  that  B  asked  in  re- 
ply, "Am  I  not  man  enough  for  that 
suit?  "  that  a  third  person  interposed 
the  remark  that  B  was  "good  enough 
for  that  amount,  and  there  was  no  need 
of  any  writing  between  them  in  regard 
to  it;  "  and  that  A  thereupon  assented 
to  what  was  said,  and  executed  a  deed 
of  B's  parcel  of  the  lands:  Held,  that 
the  evidence  sustained  a  finding  that  B 
promised  to  repay  to  A  the  former's 
share  of  whatever  the  latter  might  be 
compelled  to  pay  in  said  action,  and 
that  A  conveyed  the  land  to  B  upon 
faith  of  such  promise.  Gauger  r, 
Pantz,  45  Wis.  449. 

An  award  required  the  partner  taking 
charge  of  the  assets  to  indemnify  his 
CO- partner  against  the  finn  liabilities: 
HehJ,  that  even  if  such  had  not  been 
the  terms  of  the  award,  a  court  of  equity 
should  have  required  such  indemnity; 
and,  therefore,  whether  the  award  was 
correct  or  not,  it  was  proper  not  to  dis- 
solve an  injunction  which  had  been 
gi-anted,  without  imposing  such  indem- 
nity as  a  condition.  Cook  v.  Jenkins, 
85  Ga.  113. 

If  one  partner  pays  an  award  against 
the  firm,  the  amount  of  the  award  is 


conclusive  upon  the  question  of  contri- 
bution by  the  othei-s.  Evans  v.  Clapp, 
12:5  Mass.  1G5. 

Where  property  owned  by  two  part- 
ners is  subject  to  a  mortgage,  and,  as 
between  the  two,  it  is  the  duty  of  one  to 
discharge  it,  and  the  other  pays  tlie 
debt  on  condition  that  the  mortgage 
shall  enure  to  his  benefit,  an  equity 
arises  in  his  favor  entitling  him  to  in- 
demnity through  the  mortgage.  Laylin 
r.  Know,  41  Mich.  40. 

A  member  of  a  partnership  who  has 
sold  and  delivered  to  his  co-partners  hin 
interest  in  the  partnership  property  and 
choses  in  action,  in  consideration  of  their 
pajTnent  to  him  of  a  stipulated  sum,  and 
their  agreement  to  pay  otF  the  partner- 
ship indebtedness  may,  if  he  be  com- 
pelled to  pay  off  such  indebtedness,  re- 
cover the  same  of  them.  Vanness  r. 
Dubois.  64  Ind.  J'hJS.  See,  also,  Hinkle 
V.  Reid,  4o  Ind.  390  ;  Myers  v.  Smith, 
15  Iowa,  181.  Such  an  agreement  is 
not  within  the  statute  of  frauds,  and  is 
upon  a  valuable  consideration.  Vanness 
V.  Dubois,  supra.  See,  also,  Gauger 
V.  Pantz,  45  Wise.  449. 

Members  of  a  co-partnership  associa-  ■ 
tion  who  have  assigned  their  interest  j 
therein  to  other  solvent  parties,  with' 
the  assent  of  their  co-partners,  and  who. 
accept  such  a.ssignees  as  co-partners  in 
their    stead,  and  recognize    and   treat' 
them  as  such,  are  not,  as  between  them- 
selves,  liable  for  the  debts  of  the  co- 1 
partnership  existing  at  the  time  of  such 
assignment,  and  they  cannot  be  required 
to  contribute  for  tlicir  payment  to  those 
continuing  partnei-s  who  have  been  re- 
quired   to    pay  the  same.     Savage  r. 
Putnam,  32  N.  Y.  501. 
Where  a  member  of  a  co-partnership 

ion 


*760  CONTKIBUTION    AND   INDEMNITY.  [UOOK  III. 

Similar  observations  apply  to  directors  of  companies.     As  mem- 
Lers,  tliev  are  entitled  to  contribution  in  respect  of  sucli 

Position  of  '         -  1  1 

directors.  debts  and  liabilities  ot  the  company  as  tliey  may  be 

compellable  or  have  been  compelled  to  pay;  and  as  apjents  and 
trustees  they  are  entitled  to  be  indemnified  by  the  company  against 
all  losses  and  expenses  bond  fide  sustained  and  incurred  by  them 
in  the  exercise  of  the  trust  reposed  in  them.  But  if  directors  ex- 
ceed their  authority,  and  thereby  incur  loss,  such  loss  must  be 
borne  by  them  and  not  by  the  company,  unless  the  company  rati- 
lies  what  they  have  done.  But  even  in  this  case  one  director  will 
be  entitled  to  contribution  from  his  co-directors  if  he  has  acted  with 
their  knowledge  and  consent,  (c) 

The  cases  illustrating  these  general  statements  wall  be  examined 
in  the  subsequent  sections  of  the  present  chapter,  but  before  pro- 
ceeding to  notice  them  it  is  requisite  to  aUude  to  certain  decisions 
of  courts  of  equity,  which  tend  to  show  that  where  di- 

T)irpotors  flct- 

meibrmafide,      rectors  of  a  compauv  acting:  hond  jlde  and  to  the  best 

but  bevond  i        ./  o  ".  ,        . 


of  courts  of  equity,  which  tend  to  show  that  where  di- 

Directors  act-  i        ^  '  _         .      .  _  .  .       , 

ing  h(yaa  fide 

but  beyond  '        "-,  "  "•  i        - 

tiieir authority,  ^f  their  judgment,  advance  money  m  order  to  carry  on 


the  business  of  the  company,  and  spend  the  money  for  that  pur- 
pose, they  are  entitled  to  be  reimbursed  by  the  company;  although 
they  had  no  authority  to  borrow  money,  and  could  not  have  ren- 
dered the  company  liable  to  third  persons  for  money  lent  on  the 
credit  of  the  company. 

retires  by  consent,   there  is  an  implied  his  partners.      The  bant  which    dis- 

promise  on  the  part  of  the  remaining  counted  the  draft  recovered  the  amount 

partners  to  pay  the  debts  of  the  firm  and  from  H.  &  E. :    Held,  in  a  suit  by  H.  & 

save  the  retiring  partner  harmless    to  E.  against  H.  &  G.  that  the  latter  were 

the  extent  of  the  assets  received,  but  no  not  liable  for  contribution.      Grubb  v. 

further;  if  the  assets  are  insuiticient  to  Cottrell,  62  Pa.  St.  23. 

indemnify  him,  he  is  entitled  to  contri-  A  partner  who  goes  out  of  a  partner- 

bution  from  those  of  his  former  co-part-  ship  and  for  a  valuable  consideration,  is 

ners  who  are  solvent.   Hobbs  r.  Wilson,  indenmified  by  his  partners  against  all 

1  W.  Va.  50.  debts  and  liabilities  of  the  firm,  stands 

H.,  who  was    of  the  fimi  of  H.    &  in  the  attitude  of  a  stranger  as  against 

G.,  and  also  of  the  firm  of  H.  &   E.  a  creditor  of  one  of  the  partners  for  his 

drew  in  the  name  of  H.  &  G.,  in  favor  individual  debt    where   judgment  has 

of  H.  &  E.,   and,    after  acceptance  in-  been  obtained  smce  his  outgoing,  and 

dorsed  the  draft  in  the  name  of  H.  &  E.  is  entitled  to  subrogation  for  a  debt  of 

The  draft  was  discounted,    and  H.  re-  the  firm  paid  him,  for  which  he  was  not 

ceived  the  proceeds.     The  acceptor  was  liable  as  between  himself  and  partners, 

not  indebted  to  either  firm  ;  the  cbaft  at  the  time  of  leaving  the  firm.     Scott's 

was  not  for  the  benefit  of  either  finn,  Appeal,  88  Pa.  St.  173. 

and  the  whole  transaction  was  without  (c)  See  Ashurst  v.  Mason,  20  Eq.  225, 

the  authority  or  knowledge  of  any  of  noticed  ante,  pp.  597,  754. 
1012 


CIIAr.  VI.]  GERMAN   MINING    COMPANY'S   CASE.  *7G2 

Upon  this  subject  tlie  case  of  the  Gennaii  ]\Iiuinor  Company  (d) 
is  the  leading  authority.     It  was  tliere  decided  German  Min- 

that  *di)-ectors  who  had  no  power  to  borrow  *7G1  J^'c/""^^""^  * 
money  on  the  credit  of  the  company,  but  who 
nevertlieiess  did  borrow  money,  and  themselves  advance  money,  and 
hoiid  fide  apply  the  whole  for  the  benetit  of  the  company,  were  en- 
titled, having  themselves  repaid  the  money  borrowed,  to  be  reim- 
bursed by  the  shareholders  the  whole  amount  borrowed  and  ad- 
vanced. The  circumstances  of  this  case  were  somewhat  peculiar. 
The  partnership  was  a  mining  partnership;  it  was  absolutely  nec- 
essary to  work  the  mines  in  order  to  preserve  them  from  rajiid 
deterioration  and  destruction;  the  directors  had  ostensible  power 
not  only. to  carry  on  the  mines,  but  also  to  carry  them  on  on  credit; 
the  money  borrowed  and  advanced  was  wholly  a])jtlied  in  paying 
miners'  wages,  and  other  expenses  necessarily  incurred  in  carrying 
on  the  works,  and  so  preserving  the  mines;  and  the  shareholders 
were  kept  informed  of  what  was  being  done.  The  money  borrowed 
and  advanced  was  in  fact  applied  in  discharging  debts  for  which  the 
company  was  or  would  have  been  legally  responsible,  and  although 
it  by  no  means  necessarily  followed  that  those  debts  were  not  in- 
curred improperly  as  between  the  directors  and  the  shareholders, 
yet  the  full  information  which  the  shareholders  had  of  what  was 
being  done,  precluded  them  from  sajing  that  the  debts  were  im- 
properly incurred.  Although,  therefore,  the  company  was  not  lia- 
ble at  law  to  repay  the  money  borrowed,  the  mode  in  which  that 
money  was  applied,  coupled  with  the  acquiescence  of  the  share- 
holders in  the  course  pursued  by  the  directors,  entitled  them  to  be 
reimbursed  the  money  they  had  advanced. 

This  case  paved  the  way  for  others  which  have  gone  far  beyond  it. 

In  the  Norwich  Yarn  Company's  case  {e),  the  company's  deed  of 
settlement  w^as  prepared  with  an  anxious  view  to  limit  ExparteBig- 
the  liability  of  tiie  shareholders,  as  between  themselves,   "''''^• 
to  the  amount  of  their  shares  in  the  capital  of  the  company;   and 
there  were  co-tain  ])rovisions  for   increasing   that  ca)>ital,  and  fin- 
borrowing  money  on  mortgage  of  the  compan^-'s  landed  ])roperty. 
The  capital  being  all  expended,  the   directors,  instead  of  raising 
money  by  increasing  the  capital,  or  by  mortgage,  from  time 
to  time  borrowed  money  of  a  bank,  and  ajiplied  the  *money     ^'702 

(fZ)  Ex  parte  Chipponclale,  4  DeG.  M.  (e)  22  Bcav.  143,  Ex  parte  Bignokl. 

&  G.  19. 

1013 


*763  ADVANCES   BY   DIRECTORS.  [bOOK  III. 

in  carrying  on  the  business  of  the  company.  It  was  held  that  they 
were  entitled  to  charge  this  money  against  the  company,  although 
the  consequence  was  to  render  each  shareholder  liable  to  a  consider- 
able extent  beyond  the  amount  of  his  share.  (/) 

In  Baker's  case  {(j),  the  V.-C.  Kindersley  held  that  a  director  of  a 
company  governed  by  7  &  8  Yict.  c.  110,  was  not  entitled 

Baker's  case.  ,  ,.,  •       x.  1.1  i.         •    4-    ^  „4.' 

to  stand  as  a  creditor  against  the  company  by  virtue  ot 
a  debenture  issued  to  him  by  the  company,  for  the  loan  had  not  been 
confirmed  as  required  by  that  statute.  (A)     But  his  Honor  said  : 

"  But  although,  for  want  of  confirmation,  the  contract  is  not  binding  upon  the 
company  as  a  contract,  still  Mr.  Baker  may  be  entitled  to  recover  the  money,  if  he 
can  show  that  it  was  duly  applied  in  caiTying  on  the  business  of  the  company. 
For,  if  a  director,  finding  that  it  is  necessary  for  the  can-ying  on  of  the  business  of 
the  company  that  goods'should  be  purchased,  or  that  workmen  should  be  employed 
and  wages  paid,  or  that  other  disbursements  should  be  made,  and  that  there  are 
no  available  funds  of  the  company  at  thek  bankers,  should,  out  of  his  own  pocket, 
advance  the  money  necessary  to  cany  on  the  business,  and  it  was  applied  accord- 
ingly, he  would  have  a  right  to  recover  that  money;  and,  in  my  opinion,  such  a 
transaction  would  not  be  a  contract  within  the  meaning  of  the  29th  section. 

"  Upon  the  whole,  I  am  of  opinion  that  the  claim  of  Mr.  Baker,  by  virtue  of  the 
contract,  must  be  disallowed;  but  he  must  be  at  Uberty  to  establish  a  claim  for  so 
nuich  of  the  sum  in  question  as  he  can  show  to  have  been  properly  applied  for  the 
pui-poses  of  the  company," 

Tliis  case  was  followed  by  Troup's  case  (*),  and  Hoare's  case  (j),  in 

both  of  which  the  sliareholders  of  a  company  were  held  liable  to 

Troup's  case.  ^"61  mburee  the  directors  a  sum  of  money  borrowed 

Hoare's  case.      •5^7(]3     "5^ by  them  without  authority,  but  applied  in  the 

construction  of  the  works  of  the  companj'. 

In  Lowndes  v.  The  Garnett  and  Moseley   Mining   Company  (z^-), 

advances  were  made  by  a  director,  and  were  applied  in 

Lowndes  v.  ''  11111 

GariiettaiKi        Daviuo-  dcbts  of  the  company  ;   the  shareholders  were 

M(«eley  Com-       1     .        »  v       J    •> 

pany.  \\iAA  liable  to  repay  the  advances,  although  they  had 

f/)  It  is  very  difficult  to  reconcile  the  334,  noticed  infra,  pp.  765,  767. 
company's   deed  in  the  Norwich  Yam  [g)  1  Dr.  &  Sm,  55.     See,  also,  Brit- 
Company's  case  with  the  notion  that  the  ish  Prov.   Society  v.   Norton,  3  N.  R. 
directors  had,    as   between  themselves  147,  and  9  Jur.  N.  S.  1308. 
and  the  shareholders,  power  to  borrow  (^0  The  29th  section  of  7  &  8  Vict.  c. 
in  any  other  way  than  that  pointed  out  110,  rendered  contracts  with  dii-ectors 
in  the  deed;  and  yet  if  this  were  not  so,  invalid,  unless  confirmed  by  the   com- 
the  decision  ought  to  have  been  agamst  pany.     There  were  some  exceptions, 
the  directors,  as  in  the  case  of  The  Wor-  (0  29  Beav.  353. 
cester  Com  Exchange,  3  DeG.  M.  &  G.  (i)  30  Beav.  2'25. 
180,  and  Selwyn  v.  Harrison,  2  J.  &  H.  (A;)  3  N.  R.  601. 
1014 


CIIAr.  VI.]  CONTKinUTION    AND    INDEMNITY.  ''TG-i 

not  been  sanctioned  in  the  manner  rc(iuired  by  the  regulations  of 
the  company  respecting  the  borrowing  of  money. 

These  decisions  are  based  upon  the  principle  laid  down  in  the 
case  of  Tiie  German  Mining  Company,  that  directors  [;^';7,;j;';;'J^« 
are  not  only  agents,  and  in  that  character  incapable  of  goinj,- .uses. 
binding  their  companies  beyond  the  limits  of  their  authority,  but 
are  also  trustees,  and  in  that  character  entitled  to  be  indemnified 
lur  expenses  incurred  by  them  within  the  limits  of  their  trust;  and 
tbat  directors  do  not  exceed  the  limits  of  their  trust  by  borrowing 
and  advancing  money  hond  fide  for  the  purposes  of  the  company, 
altiiough  the  borrowing  may  have  been  an  excess  of  authority,  and 
the  company  may  not  be  bound  to  repay  the  money  to  those  from 
whom  the  directors  obtained  it. 

It  is  difficult  to  understand  the  correctness  of  this  view,  or  to 
see  how  that  which,  as  between  the  directors  and  the  shareholders, 
is  a  clear  excess  of  authority,  can  as  between  the  same  persons  be 
deemed  warranted  by  any  trust.  ISTor  is  it  easy  to  assent  to  the 
doctrine  that  where  shareholders  have  anxiously  limited  the  powers 
of  directors  with  res])ect  to  raising  capital  and  borrowing  money, 
there  is  no  breach  of  trust  on  the  part  of  directors  who  persist  in 
carrying  on  the  business  of  the  company  on  credit,  when  tlie  cap- 
ital of  the  company  has  been  expended,  and  its  borrowing  powers 
have  been  exhausted.  The  principle  alluded  to  has  always  appeared 
to  the  writer  to  require  reconsideration,  and  to  be  at  variance  with 
the  established  doctrine  that  an  agent  who  exceeds  his  authority  is 
not  entitled  to  indemnity  against  the  consequences  of  his  unauthor- 
ized acts;  and  practically  to  place  shareholders  at  the  mercy  of 
their  d.  oetors,  however  carefully  the  powers  of  the  managing  body 
may  have  been  defined  and  restricted.  It  is  not  a  little  remark- 
able, that  whilst  the  courts  have  gone  great'  lengths  in  pro- 
tectiiig  shareholders  against  bond  fide  creditors,  *by  making  ^TG-i 
them  look  to  the  powers  of  the  directors,  comparatively 
little  protection  is  afforded  to  shareholders  against  hond  fide  direct- 
ors; and  yet  one  would  have  supposed  it  to  be  more  in  accordance 
with  established  principles,  to  prevent  directors  rather  than  cred- 
itors from  holding  shareholders  liable  beyond  the  limits  imposed 
by  companies'  deeds  of  settlement. 

It  may  be  urged,  in  support  of  the  decisions  in  question,  that  as, 
if  gain  had  resulted  from  the  outlays  made  by  the  directors,  the 
shareholders  would  have  had  the  benefit  of  it,  so  it  is  only  fair  that 

1015 


«76j  ADVAXCKS    by    DIUKCTORS.  [book  III. 

if  loss  has  unfortunately  ensued  they  should  sustain  that  loss.  T.ut 
in  answer  to  this,  the  shareholders  are  entitled  to  say,  "  As  you 
chose  to  act  without  authority,  it  rests  with  as  to  adopt  or  repudi- 
ate what  you  have  done;  and  we  are  not  to  be  deprived  of  our 
ri.^ht  of  repudiation,  on  the  ground  that  if  we  elect  not  to  repudi- 
ate your  acts,  we  shall  be  bound  to  indemnify  you."  Xeither  lias 
the  maxim,  qui  sentlt  commoduni  sentire  debet  et  onus,  any  appli- 
cation; unless  the  shareholders  liad  some  opportunity,  either  of 
objecting  to  the  outlays  before  they  were  made,  or  of  rejecting  the 
benefit  and  the  burden  at  some  subsequent  period.  If  the  share- 
holders, having  had  an  opportunity  of  objecting  to  the  proposed 
outlay,  did  not  object;  or  if,  having  had  an  opportunity  of  reject- 
ing the  benefit  derived  from  the  outlay,  they  have  declined  to  do 
so^then,  indeed,  the  maxim  may  apply;  but  in  the  absence  of  any 
such  opportunity  it  is  impossible  to  hold  them  liable  to  indemnity 
the  directors  on  the  ground  of  having  had  the  benefit  of  the  ex- 
penditure. No  liability  can  be  established  on  this  ground,  unless 
it  is  to  be  held  that  a  benefit  is  to  be  paid  for,  because  it  cannot  be 

got  rid  of. 

With  reference  to  the  extract  from  the  judgment  in  Baker's  case, 
Observation  on  given  abovc,  tlic  Writer  ventures  to  observe,  that  al- 
ttJr's'cUe.      though  the  doctrine  there  laid  down  is  apparently  war- 
ranted by  what  fell  from  the  Court  in  the  case  of  The  Germnn 
Mining  Company,  yet,  as  already  pointed  out,  the  actual  decision 
in  that  case  by  no  means  involves  the  necessity  of  holding  that  as 
between  directors  and  shareholders  the  liability  of  the  latter  is  to 
be  determined  by  the  benefits  they  have  received   rather  than  by 
the  powers  which  they  have  conferred.     When  directors  who  have 
no   power  to   borrow  money  find  that  the  business  of  the 
*765     *company  cannot  go  on  without  borrowing,  they  ought  to 
disclose  the  truth  to  the  shareholders.  If,  however,  the  prin- 
ciples laid  down  in  the  above  decisions  are  to  be  taken  as  correct,  and 
are  to  be  logically  carried  out,  it  will  follow  that  directors  may,  if  they 
honestly  believe  it  to  be  for  the  benefit  of  a  company,  advance  and 
borrow  money  to  any  unlimited  extent,  and  expend  it  in  attempt- 
ing to  keep  the  company  on  foot;  and  then,  having  failed,  make 
the  shareholders,  at  least  in  unlimited  companies,  pay  for  the  ex- 
periment.    Surely  this  cannot  be  right. 
Comparison  of        The  dccisious  uoticcd   above,  are,  however,   hardly 

the  foregoing 

cases  with        rcconcilable  with  other  cases. 

others. 

1016 


CHAP.  VI.]  CONTKIBuV.OX    AND    IXDIMNI  I'-i'  *TG6 

In  tlie  "Worcester  Corn  Exchange  Company's  case  (Z),  a  company 
was  formed  for  the  purpose  of  building  a  corn  exchange.   Re  The  wor- 
Tlie  deed  of  settlement  of  the  company   limited  the  cimii^L-.*"^" 
amount  of  each  shareholder's  subscription  and  author-     ^"^p*^"^- 
ized  the  directors    to  create  new  shares  and  to   raise  money    by 
borrowing,  under  certain    restrictions.     The  capital   of  the  com- 
pany being  expended,  and  more  money  being  required,  the  direct- 
ors advanced  money  themselves,  and  expended  it  in  payment  of 
debts  of  the  company.     They  also,  but  in  excess  of  their  powers, 
borrowed  money  of  a  bank  which  had  notice  of  the  company's  deed, 
and  that  money  was  similarly  expended.     It  was  held  that  the  direc- 
tors were  not  entitled  to  charge  the  shareholders,  either  in  respect 
of  the  advances  or  in  respect  of  the  bank  debt,  beyond  the  amount 
of  the  capital  which  each  shareholder  had  agreed  to  subscribe. 

Again,  in  Cropper's  case  (m),  a  committee  of  directors  charged 

with  the  winding  up  of  a  company,  was  held  not  enti- 

"      '  1        ./  '  _  Cropper  s  case. 

tied  to  be  repaid  by  the  company,  expenses  incui-redin 
endeavoring  to  obtain  the  passing  of  a  public  bill  pending  in   Par- 
liament, for  facilitating  the  winding  up  of  the  affairs  of  insolvent 
C(jmpanies  generally;  for  to   support  bills   in  Parliamant  was  not 
within  the  scope  of  the  committee's  authority. 

These  decisions  are  strictly  in  conformity  witli  the  sensible  rule  that 
agents  are  not  entitled  to  any  indemnity  from  their  principals  in  re- 
spect of  unauthorized  expenditure;  and  in  the  first  edition  of 
this  work  the  writer  ventured  to  express  a  hope,  *that  this  Y66* 
rule,  so  essential  to  the  protection  of  shareholders  against  direc- 
tors, would  not  be  frittered  away;  and  that  the  principle  of  the  Ger- 
man Mining  Company's  case  would  not  receive  further  countenance. 
That  hope  has  been  partially  realized,  for  all  attempts  to  extend  that 
principle  have  failed,  anH  its  practical  ap]dication  is  now  confined  to 
cases  where  the  money  has  been  applied  in  discharging  debts  for 
which  the  company  was  liable,  {n)  Even  when  thus  restricted,  how- 
ever, it  must  be  borne  in  mind  that  debts  for  which  a  company  is  liable 
may  as  between  the  directors  and  the  shareholders  have  been  improp- 
erly contracted  by  the  directors ;  and  in  such  a  case  the  directors  ought 
to  indemnify  the  shareholders  and  not  the  shareholders  the  directors. 

(Z)  3  DeG.  M.  &  G.  180.  748;  Hill's  case,  9  Eq.  60o;  Davis'  case, 

(»?)  1  DeG.  M.  &  G.  147.  12  Eq.  516;  The  Catholic  Publishing  Co. 

(h)  See /(Jx  j9«We  Williamson,   5  Ch.  10  Jur.  N.  S.  19o;  and  «»/<>,  p.  ;j63. 
309;  Cork  and  Youghal  Rail.  Co.  4  Ch. 

10]7 


*767  ADVANCES    BY    DIKECT0R8.  [bOOK  III. 

Notwithstanding  the  lengths  to  which  the  courts  have  gone  in 
Limits  of  the  the  cases  observed  npon  above,  directors  who  borrow 
^iscii'sed.*"  °^^  money  without  authority,  and  apply  it  to  purposes  not 

1.  Where  mon-    faUino-  within  the  sco])e  of  the  company's  business,  are 

cy  IS  raised  lor     •"••'"    o  x  i        .^ 

an  unauthoriz-  ^^^  entitled  to   be   reimbursed    by   the   shareholders. 

CO.  purpose  ^  .^ 

Kent  Benefit  Tliis  is  Well  sbown  by  the  recent  case  of  the  Kent  ben- 
Buiidingsocie-  gfi^  building  Socicty.  (o)  There  the  managing  com- 
mittee of  a  benefit  building  society  exceeded  their  powers  by  pur- 
chasing land,  and  by  borrowing  the  money  to  pay  for  it.  The  re- 
payment of  the  money  was  secured  by  a  mortgage  of  the  land  ])ur- 
chased.  The  society  was  ordered  to  be  wound  up.  The  mortgage 
securities  were  realized  for  less  than  the  amount  due  upon  them, 
and  the  members  of  the  committee  had  to  make  good  the  difference. 
They  sought  to  prove  the  amount  paid  by  them  as  a  debt  against 
the  society;  but  it  was  held  that  the  society  was  not  liable.  The 
fact  of  the  borrowing  appears  to  have  been  brought  to  the  notice  of 
the  society  at  a  general  meeting;  but  there  was  nothing  to  show 
that  the  acts  of  the  committee  had  been  sanctioned  by  all  the  mem- 
bers of  the  society;  and  to  buy  land  was  not  within  the  scope  of  the 
objects  of  the  society,  and  was  altogether  nitra  vires. 

2.  Where  the  Again,  the  right  of  directors  to  indemnity, 
ni^t5Vs°expreS-  *767  if  exprcssly  *confined  and  limited,  cannot  be  ex- 
ly  restricted.  tended  bcyoud  the  limit  thus  expressly  set.  The 
two  following  cases  illustrate  this. 

In  Gillan  v.  Morrison  {p),  a  company  was  formed  for  purchasing 
Giuan  V.  l^nd  in   Segovia,  and  establishing  a  colony  there.      It 

Morrison.  ^,^g  agreed  at  a  meeting  of  the  directors  and  proposed 

shareholders,  that  an  expedition  should  proceed  to  Segovia,  to  ex- 
amine and  report  upon  the  land  which  it  was  proposed  the  com- 
pany should  purchase;  that  the  expense  oT  the  expedition  should 
not  exceed  1200/.;  that  the  expense  to  that  amount  should  be 
defrayed  out  of  the  shareholders'  deposits;  and  that  if  the  expense 
should  exceed  1200?.,  the  difference  should  be  raised  by  a  new  issue 
of  shares.  Certain  persons  were  appointed  trustees  to  direct  tlie 
fitting  out  of  the  expedition,  to  nominate  the  persons  who  were  to 
conduct  it,  and  to  manage  the  fund  supplied  for  defraying  the  ex- 
penses. The  persons  composing  the  expedition  proceeded  to  Se- 
govia, and  arrived  at  the  place  where  the  lands  in  question  wcr'^ 
situate:  and  were  then  arrested  and  imprisoned.     The  ol)ject  of  the 

(o)  1  Dr.  &  Sm  .417.  {p )  1  DeG.  &  S.  421. 

1018 


CHAP.  VI.]  CONTRIBUTION    AND    INDEMNITY.  *7G8 

expedition  was  thus  frustrated;  tlie  expenses  incurred  by  its  mem- 
bers greatly  exceeded  the  fixed  sum  of  1200?.:  and  an  attempt  was 
made  on  behalf  of  the  trustees  to  com])cl  the  shareholders  to  make 
good  the  excess.  But  it  was  held  that,  as  between  the  trustees  and 
the  shareholders,  the  liability  of  the  latter  was  limited  to  1200Z., 
and  that  they  were  not  bound  to  contribute  more. 

Again,  in  the  case  of  Selwyn  v.  Harrison  {q\  the  creditors  of  a 
firm  executed  a  deed  by  which  the  business  of  the  firm  i^^.i^.y^^, 
was  placed  in  the  hands  of  inspectors,  and  the  credi-  »'*'"'"'s<"i- 
tors  severally  convenanted  to  indemnify  the  inspectors  to  a  limited 
extent  against  the  liabilities  which  they  might  incur  in  carrying 
on  the  business.  It  was  held  lh  it  the  creditors  were  not  bound, 
otherwise  than  by  their  convenants,  to  contribute  to  the  payment 
of  debts  contracted  by  the  inspectors  in  carrying  on  the  business. 
The  express  covenant  to  indemnify  the  trustees  to  a  definite  amount, 
excluded  any  more  extensive  obligation  to  indemnify  them  which 
might  otherwise  have  arisen. 

The  reader,  however,  will  not  fail  to  observe  that   both  in  Tlic 
German  Mining  Company's  case  and  in  The  Norwich  Yarn 
^Company's  case,  the  shareholders  had  taken  care  to  stipu-     '^TGS 
late  that  their  liability  should  not  be  unlimited. 

It  is  scarcely  necessary  to  remark  that  tiie  shareholders  in  a  lim- 
ited liability  company  cannot  be  compelled  to  contribute  nu)re 
than  the  amount  of  their  shares,  either  for  the  purpose  of  indem- 
nifying directors  or  for  any  other  purpose. 

Of  8ome  former  differences  hetween  contribution  at   law  and 

in  equity. 

Before  the  passing  of  the  Judicature  acts,  a  right  to  contril)U- 
tion  or  indemnity,  arising  otherwise  than  by  special  ,  Astoin- 
agreement,  was  only  enforceable  at  law  by  a  person  ^«s^u\;'^e■.'^/° 
who  could  prove  that  he  had  already  sustained  a  ''"='^'*'"'-'  • 
loss.  (/•)  But  in  equity  it  was  very  reasonably  held,  tiiat  even  in 
the  absence  of  any  special  agreement,  a  person  who  was  entitled 
to  contril)ution  or  indemnity  from  another  could  enforce  his  right 

((;)  2  J.  Sc  H.  334.  (r)  See  Maxwell  v.  Jameson,  2  B.  & 

'  As  to  -whether  contribution  is  to  t>e      A.  T)!.  Compare  Spark  v.  Heslop,  1  E  & 

compelled  by  action  at  law  or  bill  in  equi-      E.  5G:'>,  and  the  judgment  of  Crompton, 

ty,  see  ^os^pp.  1026,  1029,  and  notes.      J.  in  Randall  v.  Raper,  E.  B.  &  E.  84. 

1019 


••^7  ')9  CONTRIBUTION    AND    INDEMNITY.  [bOOK  III. 

before  he  had  sustained  actual  loss  (6')';  and  this  principle  will  now 
p;-evail  in  all  divisions  of  the  High  Court,  (i)  Therefore  a  person  who 
is  entitled  to  be  indemnified  ag-ainst  loss  is  not  obliged  to  wait  un- 
til he  has  suffered,  and  perhaps  been  ruined,  before  having  recourse 
to  judicial  aid.  Thus,  in  the  ordinarj^  case  of  principal  and 
surety,  as  soon  as  the  creditor  has  acquired  a  right  to  immediate 
payment  from  the  surety,  the  latter  is  entitled  to  call  upon  the 
principal  debtor  to  pay  the  amount  of  the  debt  guaranteed,  so  as 
to  relieve  the  surety  from  his  obligation  {u)',  and  where  one  per- 
son has  covenanted  to  indemnify  another,  an  action  for  specific  per- 
formance may  be  sustained  before  the  plaintiff  has  actually  been 
damnified  (v);  and  the  limit  of  the  defendant's  liability  to  the 
plaintiff  is  the  full   amount    for    which    he   is    liable;   or   if  he  is 

dead  or  insolvent  the  full  amount  provable  against  his  es- 
*769     tate,  and  not  only  *the  amount  of  dividend  which  such  a 

state  can  pay.  {x)  In  strict  conformity  with  these  principle's, 
partners  and  directors  who  are  individuallj^  liable  to  be  sued  on 
bonds  and  notes,  which  as  between  them  and  their  co-partners 
rea  to  be  regarded  as  the  bonds  and  notes  of  the  firm  or  company- 
are  entitled  to  call  for  contribution  before  these  bonds  or  notes  have 
been  actually  paid,  {y)  So  a  trustee  of  shares  is  entitled  to  be  indem- 
nified by  his  cestui  que  trust  against  calls  before  they  are  paid,  (s) 
Another  difference  between  law  and  equity  which  formerly  pre- 
„  .  .  „  vailed,  and  to   which  it  is  necessary  to  advei't,  affects 

2.  Astothe  '  11 

abieb"'^e'at^i      *^^®  Hiodc  in  whicli  the  amount  to  be  paid  by  each  of 

contributory,      several  contributorics  was  ascertained. 

At  law,  before  the  Judicature  acts,  if  several  persons  had  to  con- 
tribute a  certain  sum,  the  share  which  each  had  to  pay, 
was  the  total  amount  divided  by  the  number  of  con- 

(s)  See  Lacey  v.  Hill,  18  Eq.  182,  and  money  boiTOwed  by  the  dii-ectors  in  that 

the  cases  noticed  infra.  case  was   secured  by  their  own  notes, 

^  See  Hodgson  v.   Baldwin,    65    111.  but  these  notes  had  not  been  actually 

532.  paid  when  the  call  on  the  shareholders 

{t)  See  Jud.  Act,  1873,  §§  24  and  25.  was  made.      This  does  not  appear  very 

{u)  Wooklridge  v.  Norris,  6  Eq.  410;  clearly  from  the  report  referred  to,  but 

Nesbit  V.  Smith,  2  Bro.  C.  C.  582.  the  writer  has  been  informed  by  per- 

{v)  See  Ranelagh  v.   Hayes,  1  Vern.  sons  conversant  with  the  case  that  the 

190.  above  statement  is  correct. 

{x)  Cruse  V.  Paine,  6  Eq.  641,  and  4  (s)  Oriental  Commercial  Bank,  o  Ch. 

Ch.  441.  791;  Cruse  v.  Paine,  6  Eq.  641,  and  4 

(y)  See,   for  example,  The  Norwich  Ch.  441. 
Yam  Co.'s  case,   22    Beav.    143;    the 

1020 


CHAP.  VI.]  CONTRIBUTION    AND   INDKMNITV.  *770 

tributors;  and  no  allowance  Nvas  made  in  the  event  of  the  inability 
of  some  of  them  to  pay  their  shares,  (a)     But  in  equity, 

i    -^  ^    '  1  B.\i\c  in  equity. 

those  who  could  pay  were  compellable  not  only  to  con- 
triljute  their  own  shares,  ascertained  as  above,  but  also  to  malce 
cood  the  shares  of  those  who  were  unable  to  furnish  their  contri- 
butions.'  This  rule  also  now  prevails  in  all  divisions  of  the  High 
Court.  (6)  For  example,  if  A.,  B.,  C,  and  D.  are  liable  to  a  debt, 
A.  can  coin])el  B.  and  C.  to  contribute  one- third  each,  if  D.  can 
contribute  nothinr^  ;  and  this,  as  between  A.,  B.,  and  C,  is  evi- 
dently only  fair  and  just.  (<") 

In  "Wadcson  v.  Kichardson  (d),  one  of   four  partners  assigned 
property  to  trustees  u]H>n  trust,  inter  alia,  to 

,  .  .  ..  1  I'll  111.         it-»rt    Wndcsnn  v. 

pay  lus  ])r()])()rtic>n  ■''•■i)r  share  ui  all  sucli  dents  *<70  Richuni.son. 
as  were  or  should  be  owing  by  him  and  his  three 
co-partners.  lie  and  they  afterwards  l)ccame  bankrupt;  and  it  was 
held  that  the  share  and  proportion  of  debts  wliich  the  trustees  were 
to  pay  was,  not  the  share  and  proportion  wliicli,  as  between  the 
assignor  and  his  co-partners,  he  ought  to  contribute  to  the  funds 
of  the  firm,  but  the  share  and  proportion  which,  as  between  him 
and  the  creditors  of  the  firm,  it  was  necessary  for  him  to  pay,  in 
order  that  they  might  receive  twenty  shillings  in  the  pound.  The 
creditors  were  therefore  held  entitled  to  come  in  under  the  deed  for 
60  much  as  they  were  not  paid  out  of  the  partnership  funds,  and  as 
they  could  not  recover  from  the  estates  of  the  other  partners. 

[a]  See  Cowell  r.  Edwards,  2  Bos.  &  count,  and  to  compel  each  solvent  mem- 

P.  268;  Batard  r.  Hawes,  2  E.  &  B.  287.  ber  to  pay  his  pro  rata  share  of  the  in- 

^  See  j9os^  807,  note.  debtedness.    The    defendants  in    such 

One  partner  can  maintain   a  bill  in  case  have  no  right  to  require  that  the 

equity  against  all  the  others,  within  the  complainants  shall   first  pay  the  debts 

jurisdiction    of   the  court,    to    compel  and  take  their  risk  of  making  the  de- 

them  to  contribute  to  sums  paid  by  him,  fendants  contribute.     Hodgson  v.  Bald- 

although  not  at  their  request,   for  the  win,  65  111.  o32. 

use  of  the  association,  and  the  amount  [b)  Jud.  Act,  1873,  §§24  and  2"). 

of  the  defendants'  liability  is  to  be  de-  {c)  Dering  r.  Winchelsea,  1  Cox,  31S; 

termined  by  an   apportionment  among  Hole  v.  Harrison,  1  Ch.  Ca.  246;  Petev 

themof  the  amount  paid,  without  regard  v.  Rich,  Rep.  in  Ch.  19.     This  rule  docs 

to  subscribers  out  of  the  jurisdiction.  not  apply  where  it  is  inconsistent  with 

Whitman  r.  Porter,  107  Mass.  522.  an  express  agreement  between  the  par- 

A  court  of  equity  will  entertain  a  bill  ties :    where  there  is  such  an   agree- 
by  a  part  of  the  members  of  an  insol-  ment  the  extent  of  liability  depends  on 
vent  voluntary  association  (making  all  its  terms.     See  McKewan's  case,  6  Ch. 
the  solvent  members  parties)  whose  as-  D.  447. 
sets  have  all  been  disposed  of,  for  an  ac-  {d)  1  V.  &  B.  103. 

1021 


*771  CONTRIBUTION    AND    INDEMNITY.  [bOOK  III. 

So,  where  a  loss  has  been  incurred  nnder  circumstances  which 
Rule  applies  render  it  wholly  chargeable  to  the  account  of  the  part- 
ne^r'^ought  to'"^'  ^®^'  ^^'^^^  causcd  it,  jct,  SO  far  as  he  is  unable  to  make 
i-est'^™'"'^^^^  it  good,  it  must  be  borne  rateably  by  the  other  part- 
and  to  the  ncrs.  {e)  Upon  the  same  principle,  wlien  a  company 
compaifies.  is  being  wound  up,  the  solvent  shareholders  must,  if 
their  liability  to  creditors  is  not  limited,  contribute  whatever  may 
be  necessary  to  pay  all  the  creditors  in  full;  and  must  make  up 
rateably  amongst  themselves  what  ought  to  have  been  contributed 
by  those  shareholders  who  are  insolvent  (,/);  and  this  holds  even 
where  the  creditors  are  themselves  shareholders,  and  where  the  lia- 
bility of  the  shareholders  is  as  between  themselves  proportionate 
to  their  shares,  (g) 


Of  contribution  hetween  wrong-doers. 

There  is  a  saying  that  there  is  no  contribution  amongst  wrong- 
er contribu-       doers  (A),'  but  this  doctrine  is  certainly  inapplicable  to 

tion  amongst  .  „  ,  i-i'-.'  •    .     t 

wrong-doers,  partners  m  the  general  lorm  m  wnicli  it  is  enunciated. 
It  is  true,  that  if  a  partnership  is  itself  illegal,  no  member  of  it 
can,  in  respect  of  any  transaction  tainted  with  the  illegality  which 

infects  the  firm,  obtain  relief  against  any  other  member;  but 
*T71     there  is  no  authority  for  saying  that  if  one  of  the  ^members 

of  a  firm  sustains  a  loss  owing  to  some  illegal  act  not  at- 
tributable to  him,  but  nevertheless  imputable  to  the  firm,  such  loss 
must  be  borne  entirely  by  him,  and  that  he  is  not  entitled  to  con- 
tribution in  respect  thereof  from  the  other  partners,  {i) 

The  claim  of  a  partner  to  contribution  from  his  co-partners  in 
Application  of  rcspcct  oti^a  partnership  transaction  cannot  be  defeated 
partners.  ou  the  ground  of  illegality,  unless  the  partnership  is 

[e)  See  Oldaker  v.  Lavender,  6  Sim.  son,  Cr.  &  Ph.  1. 

2'9;  Cruikshank  v.  Mc Vicar,  8  Beav.  '  See  this  subject  and  its  application 

117,  118.  to  partnerships,  considered  in  Cooley  on 

(/)  Robinson's  Ex.  case,  6  DeG.  M.  Torts,  144-150. 

&  G.  572.  (t)  See,  at  law,  Betts  v.  Gibbins,  2  A. 

{g)  Professional  Life  Ass.  Co.  3  Eq.  &  E.  57;  Adamson  v.  Jarvis,  4  Bing.  66, 

668,  and  3  Ch.  167.  and  see  in  equity,  Lingard  v.  Bromley, 

(A)  MeiTyweather  v.  Nixan,  8  T.  R.  1  V.  &  B.  114;  Baynard  v.  WooUey,  20 

186,  and  2  Sm.  L.  C;  Colburn  v.  Pat-  Beav.  583;  Ashurst  v.  Mason,  20  Eq. 

more,  1  Cr.  M.  &  R.  73;  A.-G.  v.  Wil-  .225. 

1022 


CHAP.  VI.]  CONTKinUTION    AND    I.N'ltKMM'lY.  ^772 

itself  an  illegal  partnership  (k);  or  unles>  the  act  relied  on  a?  the 
basis  of  the  claiiu  is  not  only  illegal,  but  has  been  conunitted  by 
the  partner  seeking  contribution,  under  such  circumstances  that  he 
must  have  known  of  its  illegality,  (l)  In  either  of  tliese  cases  he 
can  obtain  no  assistance  against  his  co-partners,  and  must  abide  the 
consequences  of  his  own  willful  breach  of  the  law.'  Upon  this 
ground  it  was  often  held  (before  it  became  lawful  for  partners  to 
carry  on  the  business  of  marine  insurance)  that  if  one  of  a  firm  of 
marine  insurers  paid  money  in  res])ect  of  a  loss  insured  against  b}' 
the  firm,  he  could  not  recover  an^^  ])art  of  the  payment  from  his 
co-partners,  {m) 

But  if  the  partnership  is  not  itself  illegal,  and  if  the  partner 
claiming  contribution  has  not  himself  been  knowingly  guilty  of  a 
breach  of  the  law,  his  claim  will  prevail,  although  the  luts  in  re- 
spect of  which  it  is  made  may  have  arisen  from  an  unlawful  act. 
This  appears  from  Campbell  v.  Campbell  {n),  where  campboii  v 
a  firm  of  distillers  had  incurred  a  penalty  in  conse-  CampboU. 
quence  of  a  purchase  of  illicit  whiskey.  The  purchase  was  made 
by  the  managing  partners;  and  one  of  the  members  of  the  firm, 
who  took  no  part  in  its  business,  was  entirely  ignorant  and  inno- 
cent of  what  had  been  going  on.  The  firm  was  convicted  for  the 
lull  amount  of  the  penalties  claimed;  but  the  Crown,  on  being  me- 
morialized by  the  innocent  partner  and  the  principal  of  the  actiu"- 
partners,  remitted  the  penalties  except  to  the  amount  of 
oOuO/.  This  sum  was  levied  partly  on  the  property  *of  the  *772 
firm  and  partly  on  that  of  the  innocent  partner  only.  lie 
then  claimed  to  have  the  whole  of  what  he  had  been  compelled  to 
pay  made  good  to  him  by  his  co-partners,  on  the  ground  that  they 
alone  had  been  guilty  of  the  illegal  purchases.  The  innocent  part- 
ner obtained  a  verdict  for  the  whole  amount  claimed,  with  interest; 
and  his  co-partners  were  adjudged  liable,  jointlv  and  severally,  to 
indemnify  him.  A  motion  for  a  new  trial  was  refused.  An  ap- 
peal to  the  liords  was  dismissed  with  costs,  for  technical   reasons, 

(l-)  As  to  which,  see  ante,  p.  180.  on   transactions    arising:     out  of    such 

(/)  See  Adamson  v.  Jarv'is,  4  Bing.  partnership,  whether  for  profits,  losses, 

66;  Betts  V.  Gibbins,  2  A.  &  E.  57.  expenses,    contribution    or    reinibui-se- 

'  A  court  of  equity  will  not  lend  its  ment.     Watson  r.  Fletcher,    7  Grat.  1. 

aid  for  the  soitlement  and  adjustment  (m)  Aubert  r.  Maze,  2  Bos.  &  P.  370. 

of  the  transactions  of  a  partnei-ship  for  (n)  7  CI.  &  Fin.  ITiG.     S  h\  too,  Woo!- 

prambling.     Nor  will  it  give  relief  to  ley  r.  Bate,  2  Car.  &  P.  417  ;  Pearson  r. 

either  pai-tner  against  the  other  founded  Skelton,  1  M.  &  W.  504. 

1023 


*773  CONTKIBL-TION    AND    INDEMNITY.  [bOOK  III. 

to  which  it  is  not  necessary  to  allude;  but  the  Lord  Chancellor,  in 
giving  the  judgment  of  the  House,  expressed  a  s-trong  opinion  that 
the  defense  of  illegality  which  was  set  up  could  not  be  supported. 
His  Lordship  said,  "  If  this  objection  could  prevail,  that  because 
these  parties  were  all  guilty  of  a  common  offense,  therefore  out  of 
such  a  transaction  no  contribution  could  arise,  it  would  be  an  an- 
swer to  him  (i.e.,  tlie  innocent  partner)  if  he  liad  paid  tlie  whole, 
and  demanded  contribution  only  against  the  other  parties." 

Again,  where  a  company  had  illegally  commenced  business  be- 
Ex  parte  Long-    fore  the  amouut  of  capital  required  by  statute  to  be 

w'ortli's  exGCU." 

tors.  paid  up  had  been  paid  up,  it  was  held  that  the  share- 

holders were  nevertheless  liable  amongst  themselves  to  contribute 
to  the  discharge  of  the  debts  of  the  compan3\  (o) 

The  case  which  presents  most  difficult}^  is  one  in  which  an  un- 
whereaiiare  ^^^wful  act  has  been  knowingly  performed  by  all  the 
in  pari  delicto,  partners,  SO  that  all  are  in  pari  delicto.  There  is  a 
dictum  of  Lord  Cottenham  to  the  effect  that  in  such  a  case  each 
partner  must  bear  all  the  loss  he  may  happen  to  sustain,  and  that 
he  cannot  require  his  co-partners  to  share  that  loss  (p);  but,  on  the 
other  hand,  there  is  a  decision  which  goes  far  to  show  that  the  loss 
ought  to  be  apportioned  between  all  the  partners,  unless  the  illegal 
act  in  question  is  a  pure  tort  (q),  or  a  direct  violation  of  some 
statute,  or  unless  the  contract  of  partnership  is  itself  void  on  the 

ground  of  illegality.  It  is  apprehended  that  if  all  the  mem- 
*TT3     bers  of  a  firm  were  equally  guilty  of  a  breach  *of  trust,  and 

one  of  the  firm  alone  had  made  it  good  out  of  his  own 
moneys,  he  would  be  alloAved,  in  taking  the  partnership  accounts, 
to  chfirge  his  co-partners,  rateably  with  himself,  with  the  amount 
paid  by  him.  {r) 


Of  contrihution  hetween  directors  inter  se. 

The  right  of  directors  to  contribution  inter  se,  as  distinguished 
from  their  right  to  idemnity  by  the  company  has  not  been  mncli 
discussed.  The  principles,  however,  already  examined  will  be 
found  applicable  to   cases  of  this  description,  which,  it  may  be  ob- 

(o)  Ex  parte  Longwortli's  Executors,  (q)  See  Baynard  v.  Wooldy,  20  Beav. 

Johns.  465,  and  on  appeal,  1  DeG.  F.  &  583. 

J.  17.  (r)  See  Ashurst  v.  Mason,  20  Eq.  225, 

ip)  See  A.-G.  v.  Wilson,  Cr.  &  Ph.  1.  noticed  ante  p.  597. 
1024 


ClfAP.  ^^.]  COMPENSATION   FOR  TROUBf-E.  ''''774 

served,  can  seldom  if  ever  arise,  except  wliere  tlie  directors  liave 
sustained  some  loss  or  inenrred  some  liability  wliich  tliej  are  not 
(  ntitled  to  throw  upon  the  coni])any  at  lari^e.  In  such  cases  two 
(luesliuiis  naturally  arise;  vi;^.,  1.  Are  all  the  directors,  or  some  of 
them  only,  liable  to  indemnify  the  company  ?  2.  Are  all  tho>e  who 
are  liable  to  indemuity  the  company  equally  liable  as  between 
themselves,  or  are  of  some  of  them  bunnd  to  indemnify  the  others  ? 

1.  With  respect  to  the  liability  to  the  company,  it  follows  from 
the  doctrine  that  directors  are  trustees  (s),  that  all  of  j  Liauiitvto 
them  who  are  parties  or  privies  to  a  breach  of  trust  are  the ^'o^'ipasiy- 
jointly  and  severally  responsible  for  it ;  and  this  inference  is  war- 
ranted by  those  cases  in  which  directors  have  been  held  liable  for 
the  misapplication  of  the  funds  of  companies,  (t) 

2.  As  between  themselves,  the  right  of  one  director  to  be  in- 
demnified by  another  in  respect  of  acts  fur  which  both  ^   Liability 
are  liable  to  third  persons,  depends  npon  the  authority  "''^■'■'■*=- 
which  he  who  did  the  acts  had  from  the  others,  and  upon  the  ben- 
efit derived  from  those  acts.    A  director  who  has  ncitlier  authorized 
nor  derived  benefit  from  what  has  been  done,  is  not  oidy  not  bound 
t©  indemnify  the  others,  but  is  himself  entitled  to  indemnity   by 
those  who  have  ;  and  they,  as  between  themselves,  must  share  the 
loss  equally  or  in  proportion  to   the  benefits  they  have  re- 
ceived, as  the  case   may  be,   unless  they   *come  within  the     *774 
rule,  according  to  which  relief  to  one  wrong-doer  as  against 
another  is  refused,  (w) 


SECTION  II.— OF  COMPENSATION  FOR  TROUBLE. 

Under  ordinary  circumstances  the  contract  of  partnership    ex- 
cludes any  implied  contract  for  payment  for  services  partner  not 
rendered  for  the  firm  by  any  of  its  members,  (a?)    Con-   eillirieyrm  for 
sequently,  under  ordinary  circumstances,   and  in  the  '»» services, 
absence  of  an  agreement  to  that  effect,  one  partner  cannot  charge 


(s)  Ante,  p.  587,  et  seq.  v.  Goodman,  4  Ha.  54,   and  Lowin  on 

{t)  See,  ante,  p.  592,  and  in  particu-  Trusts,  744,  ed.  6. 

hir,  Evans  v.  Coventry,   8   DeG.    M.  &  (.r)  Thompson  r.  Williamson.    7   Bli. 

G.  835,  and  2  Jur.  N.  S.  557.  N.  S.  4:32,  i?er  Lord  Wjniford;  Holmes 

{it)  See  Asliurt  v.  Mason,  20  Eq.  225,  r.  Higgins,  1  B.  &  C.  74. 
noticed  ante,  p.  597.    See,  also,  Wilson 


C5 


1025 


'774 


co^"rFv;I!UTION  and  k^'demxity. 


[book  III. 


his  co-partners  with  any  snni  for  compensation,  whether  in  the 
shape  of  salary,  commission,  or  otlierwise,  on  account  of  his  ow;i 
trouble  in  conducting  the  partnership  business  (y);*  and  in  this  re- 


(//)  As  to  a  charge  of  commission  by  a 
ship's  husl^and,  see  Miller  v.  Mackay, 
81  Beav.  77. 

^  See,  post,  page  837,  note. 

A  partner  is  not  entitled  to  charge 
the  firm  for  his  services  in  the  partner- 
ship business,  unless  there  is  a  special 
agreement  to  that  effect,  or  unless  such 
an  agreement  can  be  implied  from  the 
course  of  dealing  among  the  partners, 
or  from  the  nature  of  the  service  per- 
formed. Caldwell  V.  Leiber,  7  Paige, 
488;  'Lewis  v.  Moffet,  11  111.  392.  Phil- 
lips V.  Turner,  2  Dev.  &  Bat.  Eq.  123; 
(Xmllff  V.  Dycrville,  etc.  Co.  7R.  I.  325; 
Reybold  v.  Dodd,  1  HaiT.  401 ;  Lyman 
V.  Lyman,  2  Paine,  11;  Zimmerman  v. 
Huber,  29  Ala.  379;  Levi  v.  Kan-ick,  13 
Iowa,  844,  Bevans  v.  Sullivan,  4  Gill, 
383;  Bennett  v.  Russell,  34  Mo.  524; 
Bradford  r.  Kimberly,  3  Johns.  Ch. 
431;  Dougherty  v.  Van  Nostrand,  1 
Hoffm.  68;  Buford  v.  Ncely,  2  Dev.  Eq. 
481;  Andersons.  Taylor,  2  Ired.  Eq. 
420;  Butler  v.  Lemley,  5  Jones  Eq.  148; 
Drew  ?;.  Person,  22  Wis.  651;  King  t?. 
Hamilton,  16  111.  190;  Roach  v.  Perry, 
id.  37;  Coddmgton  v.  .Idell,  29  N.  J. 
Eq.  504;  Boardman  v.  Close,  44  Iowa, 
428;  Fan-er  v.  Farrer,  29  Gratt.  134;  Lee 
V.  Lashbrooke,  8  Dana,  214;  Mills  v. 
Fellows,  30  La.  Ann.  824;  Heath  v. 
Waters,  40  Mich.  457;  Franklin  v.  Rob- 
inson, 1  John.  Ch.  165;  Bennett  v.  Rus- 
sell, 34  Mo.  524;  Cameron  v.  Francisco, 
26  Ohio  St.  190;  Coursen  v.  Hamlin,  2 
Duer,  513;  Gilhooly  v.  Hart,  8  Daly, 
176  ;  Kimball  v.  Lincoln,  5  Bradw. 
(111.)  316. 

A  partner  in  the  purchase  and  per- 
mitting of  lands,  who  by  agreement 
puts  his  personal  services  against  the 
furnishing  of  capital  by  his  co-partner, 
has  the  right  to  charge  against  the 
partnership  any  sums    necessarily    ex- 

1026 


pended  by  him  for  the  personal  services 
of  others  in  and  upon  the  common 
property.  Burleigh  v.  White,  70  Me. 
130. 

Thus,  a  co-partner  has  no  claim 
against  the  other  member  of  the  finn. 
for  personal  services  in  preparing  and 
superintending  a  mill  for  the  finn. 
where  it  is  not  shown  that  such  services 
were  outside  of  the  joint  dealings  of 
the  firm;  and  it  does  not  affect  such  a 
claim  that  the  title  to  the  land  on  which 
the  mill  is  located  is  in  said  other  mem- 
ber of  the  firm.  Cunliff  v.  Dycrville, 
etc.  Co.  7R.  1.325. 

An  attorney  at  law,  who  is  also  a 
partner  of  a  mercantile  firm,  is  not  en- 
titled to  charge  commissions  for  collect- 
ing the  notes  and  accounts  of  that  fimi 
as  against  his  co-partner,  in  the  absence 
of  any  special  agreement  to  that  effect; 
the  legal  presumption  is  that  he  was  to 
collect  the  debts  due  the  firm,  as  a  part- 
ner, for  the  benefit  of  the  concern. 
Vanduzer  v.  McMillan.  37  Ga.  299. 

In  an  action  for  the  liquidation  of  the 
affairs  of  a  partnership,  when  one  part- 
ner, the  plaintiff,  sets  up  a  claim  under 
express  contract  for  compensation  for 
extra  services  or  labor,  testimony  is  in- 
admissible to  prove  the  value  of  the  ser- 
vices of  th?  other  partner,  und^r  a  claim 
b^  reconvention  on  a  quantum  ralehanf. 
Hill  V.  Matta,  12  La.  Ann.  179. 

In  an  agreement  of  co-partnership  be- 
tween two,  U.  and  W.,  "U.  bargains 
and  agrees  to  give  the  said  W.  $450  to 
manage  the  business:  "  Held,  that  this 
salary  must  be  paid  out  of  the  co-part- 
nership funds.  Weaver  r.  Upton,  7 
Ired.  L.,458. 

Where  a  person  entered  into  partner- 
ship with  several  other  persons  for  the 
purpose  of  erecting  a  dam  and  mill, 
and  after  having  spent  some  money  and 


COMPENSATION  FOR  TROUBLE. 


74 


CHAP.  VT.] 

spect  a  managing  partner  is  in  no  different  position  from  any  other 
partner,  (z)  Upon  the  same  princii)le  it  has  been  held,  that  in  tak- 
ing' the  accounts  of  three  partnerships,  viz.,  of  the  firm  A.  and  B.,  of 


several  months'  work,  loft  the  partnor- 
fihip  without  reasonable  cause  for  dissat- 
isfaction: i/eW,  that  this  was  a  disso- 
lution of  the  partnership,  and  that 
tliough  he  could  claim  no  spscific  inter- 
est in  the  mill,  which  had  been  finished 
by  the  remaining  partners,  he  might  re- 
cover a  fair  componsiit^onfor  the  money 
he  has  advanced  and  the  v/ork  he  had 
done.     Beaver  v.  Lewis,  14  Ark.  138. 

By  one  of  the  articles  of  a  partnership 
agreement,  a  pai-tner  bound  himself 
"not  to  take  out  of  the  business  or  stock 
in  trade  of  the  partnership  more  than 
$700  per  annum  in  goods  or  money,  or 
both:"  Held,  that  this  article  could 
not  be  construed  a?  an  agreement  that 
this  partner  should  have  a  salaiyof  $700 
per  annum,  in  cons '.deral  ion  of  his  giv- 
ing his  attention  to  the  bushiess  of  the 
firm.  It  was  evidently  designed  to  pro- 
tect the  capital  from  diminution  dm-ing 
the  continuance  of  the  firm,  and  the  au- 
thority to  draw  annually  a  sum  not  ex- 
ceeding $700  was  to  be  regarded  as  a 
restriction  on  the  riglits  of  the  partner 
to  appropriate  beyond  that  amount  his 
proportion  either  of  the  capital  or  profits 
until  the  partnership  should  expire. 
Trump  V.  Baltzell,  3  Md.  295;  S.  C.  1 
Md.  Ch.  517. 

Wliere  the  articles  of  partnership  pro- 
vided that  the  active  partner  should  be 
entitled  to  one-fourth  of  the  net  profits, 
and,  if  his  share  did  not  amount  to 
$3,000  at  the  end  of  any  one  year,  that 
the  other  partner  should  pay  him  what- 
ever sum  might  be  necessary  to  make  up 
that  amount;  that  each  partner  might 
invest  in  the  partnei-ship,  as  capital,  an 
amount  not  exceeding  $10,000,  but 
should  not  draw  out  during  the  year, 


without  the  consent  of  his  co-partner,  any 
portion  of  the  capital  thus  invested;  that 
each  might  from  time  to  time  draw  out 
of  the  money  of  the  partnership,  for  his 
private  use,  a  specified  sum  per  month, 
and  that  the  books  should  be  balanced 
and  a  balance-sheet  made  out  at  the 
end  of  each  year:  Held,  that  the  resi- 
dent partner  was  entitled  to  receive 
$3,000  at  the  end  of  each  year,  although 
the  business  of  theyeai-  resulted  in  a  lo!=s 
to  the  fii-m,  and  that  although  he  al- 
lowed his  share  of  the  profits,  at  the  end 
of  the  first  year  to  remain  to  his  credit 
on  the  books  of  the  firm,  it  was  not 
thereby  invested  in  the  partnership,  but 
remained  his  private  property,  and 
might  be  used  or  withdrawn  by  him  at 
any  time.  Dumont  v.  Kuepprecht,  3^ 
Ala.  175. 

A  made  a  written  agreement;  dated 
Febrnaiy  1,  1869.  with  B  and  C,  part- 
ners, to  work  for  the  firm  during  the  en- 
suing year  for  a  salaiy  of  $1,800,  and, 
in  addition,  one-fourth  of  the  net  profits 
of  the  business,  and  that  in  computing 
these  profits  no  deduction  should  be 
made  for  bad  debts,  but  interest  on  th-^ 
capital,  which  was  wholly  furnished  by 
B  and  C,  should  bo  deducted.  In  an 
action  by  A  against  them  to  recover  his 
one-fourth,  they  oflered  evidence  to 
show  that  he  had  worked  for  them  dur- 
ing the  year  preceding  Febiiiary  1. 
1869,  under  a  wTitten  agreement  for  a 
salary  of  $1,800.  and,  in  addition,  one- 
fourth  of  the  net  profits;  that  for  said 
year  they  r^-ceived  for  their  own  salaries 
from  the  net  profits  the  sum  of  $3,:i50O; 
and  that  articles  of  pai-tnership,  datt- d 
Febi-uary  1,  1809,  were  enteivd  into  b> 
tween  them,    containing    a    pronsion 


[z)  Hutchinson  v.  Smith.   5   Ir.    p]q. 
117.     There  a  managing  partner  was 


disallowed  all  salary,   commission  and 
compensation  for  tnatiiif/  customei-s. 

1027 


*r'7 


774 


CONTEIEUTION    AND    INDEMNITY. 


[book  III. 


its  successors,  A.,  B.,  find  C,  and  of  its  successors  B.  and  C,  this  last 
firm  could  not  charge  a  couiuiission  for  collecting  the  debts  due  to  the 
two  preceding  liruis.  {a)  So,  a  partner  employed  to  buy  or  sell  goods 
for  the  firm,  cannot  charge  it  with  any  commission  for  so  doing.  {!)) 


which  was  known  to  him,  that  for  the 
ensuing  year  B  should  have  a  salary  of 
$1,800  and  C  a  salary  of  $1,500,  before 
determining  the  profits  to  be  divided 
between  them:  Held,  that  the  evidence 
was  admissible,  and,  being  uncontrol- 
led, showed  that  the  salaries  of  A,  B  and 
C  were  to  be  deducted  from  the  gross 
profits,  in  order  to  determine  the  net 
profits  in  which  A  was  to  share.  Fuller 
V.  Miller,  105  Mass.  103. 

In  March,  1876,  the  plaintiff'  and  de- 
fendant, having  been  doing  business  as 
a  partnership  for  several  years,  agreed 
in  writing  to    extend    the  partnership 
business  another  year,   the  plaintiff  to 
receive  $1,500  salary,  and  "the  profits 
of  the  business  after  that  payment  to  be 
divided    equally."      Subsequently    the 
plaintiff,  by  written  indenture,  assigned 
to  defendant  all  interest,  claim  and  de- 
mand to  the  goods  belonging  to  the  firm, 
"  all  and  smgular  the  debts  and  sums 
of  money  owing  to  the  plaintiff  sever- 
ally or  jointly    with  the  defendant;  " 
'■  also  all  and  singular  bills,  bonds,  spec- 
ialties and  writings  whatsoever,  for  and 
concerning  the  debts  of  the  late  co-part- 
nership; "  and  in  consideration  thereof 
the  defendant  covenanted  to  save  the 
plaintiff  harmless  from  all  debts   and 
liabilities   of  the  firm;    and  thereupon 
the  parties  stipulated  that  the  partner- 
ship be  dissolved  and  the  agreement  of 
March,  1876,  be  cancelled:     Held,  that 
the  plaintiff  could  not  maintain  an  ac- 
tion at  common  law  to  recover  for  his 
services  under  the  agreement  of  March, 
1876,  that  having  been  cancelled,  and 
that  whatever  remedy  the  plaintiff  had 
was  upon  the  covenants  of  the  latter 


indenture.     Wright  v.  Troop,    70  Me. 
346. 

If,  by  the  terms  of  a  partn  ership 
agreement,  each  partner  is  to  devote  his 
whole  tune  and  labor  to  the  business  of 
the  firm,  pay  his  own  personal  expenses 
and  receive  an  equal  share  of  the  profits, 
a  partner  who  previously  to  the  forma- 
tion of  the  partnership,  has  entered  in- 
to contracts  and  performed  service  in 
regard  to  them,  which  contracts  became 
the  property  of  the  firm  on  its  forma- 
tion, is  not  entitled  for  compensation 
for  such  services  ;  nor  is  he  entitled  to 
compensation  for  his  services  in  closing 
up  the  affairs  of  the  firm,  after  the  pur- 
pose for  which  it  was  formed  has  been 
accomplished.  Dmilap  v.  Watson,  124 
Mass.  305. 

The  sickness  of  a  partner  is  one  of 
the  risks  incidental  to  partnership  busi- 
ness, and  does  not  give  another  part- 
ner any  claim  for  personal  services  in 
conducting  the  entire  business,  if  the 
partnership  articles  do  not  provide  for 
any;  where,  therefore,  a  surviving  part- 
ner procured  from  the  executrix  of  the 
deceased,  the  transference  to  him  of  a 
certain  partnership  claim  in  compensa- 
tion for  his  services  in  conducting  the 
entire  business  during  decedent's  ill- 
ness, and  suppressed  this  claim  from 
the  inventory  of  the  partnership  estate: 
Held  that  this  transaction  operated  as  a 
fraud  in  law.  Heath  v.  Waters,  40 
Mich.  457. 

Whether  a  partner  is  entitled  to  re- 
muneration for  ser\dces  rendered  the 
firm,  depends  upon  the  intention  of  the 
parties,  an  express  agreement  is  not  nec- 
essary, and  in  order  to  ascertam  whether 


{a)  Whittle  v.  McFarlane, 
811. 

1028 


1   Knapp,  (&)  See  Bentley  v.  Craven,   18  Eoav. 

75. 


COMPENSATION   FOR   TROUBLE. 


i  <0 


jtUAP.  VI.] 

Even  where  the  amount  of  the  services  rendered  by  the  partners 
is  exceedingly  nnequal,  still,  if  there  is  no  agreement   R'f'e^^PPlIf 
that  their  services  shall  be  remnneratcd,  no  charge  in  f;;;;'^";':;*,;]:;!^ 
respect  of  them  can  be  allowed  in  taking  the  partner-  uucquaiiy. 
ship  accounts.     In  such  a  case  the  remuneration  to  be  paid  to  either 
for  personal  labor  exceeding  that  contributed  by  the  other,  is 
considered  *as  left  to  the  honor  of  the  other;  and  where  that     *775 
]»rinciple  is  wanting,  a  court  of  justice  cannot  6up])ly  it.  (c) 


such  compensation  should  be  allowed, 
the  circumstances  which  surrounded  the 
parties,  and  their  relative  situations  to- 
wards each  other,  should  be  considered. 
Cramer  r.  Bachman,  68  Mo.  310. 

Defendant,  a  skilled  culturist,  entered 
into  partnership  with  plaintiff  for  the 
growing  of  grrapes  and  the  manufacture 
of  wine.  Plaintiff  purchased  a  tract  of 
land  for  such  purpose,  an  undivided  one- 
half  of  wh'ch  was  to  be  deeded  to  de- 
fendant, the  amount  paid  for  same  by 
plaintiff  being  refunded  to  him  out  of 
profits  reaUzed.  Nothing  fm-ther  was 
agreed  upon  at  the  time  of  the  forma- 
tion of  the  partnership.  Defendant 
built  a  dwelling-house  and  wine-cellar, 
expended  labor  and  capital  of  his  own, 
and  made  a  fruitful  vineyard  and  exten- 
sive orchard  on  the  tract.  Plaintiff  was 
engaged  almost  exclusively  m  an  inde- 
pendent business  of  his  own.  Subse- 
quently defendant,  dissatisfied  with  the 
failure  of  plaintiff  to  convey  to  hmi  the 
undivided  half  of  the  promises,  sent  the 
key  of  the  wme-cellar  to  the  plaintiff, 
and  made  preparations  to  return  to  St. 
Louis,  from  whence  he,  at  plaintift"s  re- 
quest had  come,  when  plaintiff  made 
the  deed  and  handed  defendant  a  \vrit- 
ten  agreement,  signed  by  himself  alone, 
which  -ttTfiting  gave  recognition  to  the 
idea  that  defendant  was  entitled  to  re- 
muneration for  both  prior  and  subse- 
quent labors  in  the  interest  of  the  firm. 
This  writing  the  defendant  refused  to 
sign,  not  regarding  the  compensation 
therein  specified  as  sutficient,  but  re- 
turned agam  to  his  laboi-s,  in  which  he 


continued  until  the  present  proceeding 
resulted  in  a  decree  for  dissolution.  A 
referee  having  been  appointed,  took  an 
account  and  made  report,  which  was  ap- 
proved, except  in  one  particular,  which 
was  the  allowance  to  defendant  for 
services  to  the  firm,  there  being  no  arti- 
cles of  co-partnership  and  no  ■\\Titing  or 
express  agreement  for  the  allowance  of 
such  compensation :  Held,  that  the  al- 
lowance was  properly  made.  Cramer  v. 
Bachman,  68  Mo.  310. 

If  a  partner  is  appointed  agent  of  the 
finn  for  a  special  purpose,  he  has  been 
held  to  be  entitled  to  the  usual  compen- 
sation therefor.  Philip  r.  Turner,  2  Dev. 
&  Bat.  Eq.  123;  Bradford  v.  Kmiberly, 
3  John.  Ch.  431. 

Where  a  third  person  purchases  half 
the  share  of  a  partner  and  becomes  the 
general  manager  of  the  business,  inas- 
much as  he  is  not  in  partnership  with 
the  partner  who  retains  the  original  in- 
terest in  the  finn,  he  may,  as  against 
such  partner,  claim  a  reasonable  com- 
pensation for  liis  services.  Newland  r. 
Tate,  3  Ired.  Eq.  226. 

A  partner  is  entitled  to  fair  compen- 
sation for  the  services  of  his  daughter, 
provided  she  was  employed  about  the 
business  and  rendered  valuable  service; 
but  the  apprentices  must  be  regai-ded  as 
apprentices  of  the  finn;  and  no  charge 
can  rightfully  he  made,  save  for  their 
board,  clothing,  and  other  necessary  ex- 
penses. Zinnnerman  r.  Huber,  29  Ala. 
379. 

(f)  Soe  ])er  Wigram,  V.-C,  in  Web- 
ster r.  Bray,  7  Ha.    179.     In  that  case 

1029 


•775 


COMPENSATION    FOK    TPwOUBLE. 


[BOOK  III. 


Airey  v. 
Borham. 


But  where,  as  is  usually  the  ease,  it  is  the  duty  of  each  paituer 
to  attend  to  the  partnership  business,  and  one   partner 

AVilful  inatten-  '  ,,       ,,      t  i  ,i 

tiou  to  business,  jj;,  ^reacli  of  liisdutj  willtuUy  leaves  tlie  others  to  carry 
on  the  partnership  business  unaided,  they  are,  it  would  seem,  en- 
titled to  compensation  for  their  services.'  In  Airey  v. 
Borham  (d),  two  partners  had  agreed  to  devote  their 
whole  time  to  the  partnership  business  ;  they  quarreled,  and  one 
of  them  only  afterwards  attended  to  it  ;  the  partnership  was  ulti- 
mately dissolved,  and  an  inquiry  was  directed  for  tho  purpose  of 
ascertaining  what  allowance  ought  to  be  made  to  him  for  having 
carried  on  the  business  alone. 

The  rule,  moreover,  which  precludes  a  partner  from  charging  his 
co-partners  with  payment  for  his  services,  does  not  ap- 

Rule  as  to  J-  -IT.  .  j.^      1        •  f 

services  rcn-      ,3]v  to  serviccs  rendered  in  carrymg  on  tlie  business  oi 

dered  alter  a         1    J  _         ,,        ,.         oi-.i  i  ill 

dissolution.  ^1^0  fiYin  after  its  dissolution:  and  it  Jias  been  lieia 
that  a  surviving  partner  who  carries  on  the  business  of  the  iirm  for 
the  benefit  thereof  is  entitled  to  remuneration  for  ,his  trouble  in 
so  doino-  (e);  unless  there  be  some  special  reason  to  the  contrary,' 
as  where  he  is  the  executor  of  his  deceased  partner  (/)* 


an  allowance  for  trouble  was  made  to 
the  defendant,  but  it  was  offered  by  the 
plaintiff.  In  Robinson  v.  Anderson,  20 
Beav.  98,  which  was  a  similar  case,  no 
allowance  was  offered,  nor  was  any- 
given  by  the  Court. 

1  Where  an  attorney  at  law  refuses  to 
act  as  partner  or  to  perform  the  func- 
tions of  such  in  the  prosecution  of  a 
cause  which  has  been  intrusted  to  his 
finn,  and  repudiates  his  obUgations,  he 
is  not  entitled  to  any  part  of  the  fees  sub- 
sequently earned  by  his  partners  in  the 
cause.     Denver  v.  Roane',  99  U.  S.  355. 

On  a  settlement  of  the  firm  accounts, 
a  partner  is  chargeable  with  the  value  of 
personal  services  withheld,  although  the 

(/ )  Burden  v.  Burden,  1  V.  &  B. 
172;  Stockon  v.  Dawson,  6  Beav.  371. 

*  Where  an  intestate  and  his  adminis- 
trator had  been  partners  in  building  a 
mill:  Held,  that  the  administrator  had 
no  right  to  retain  of  the  assets  for  work 
done  on  the  mill  after  the  death  of  his 
intestate.  Shelly  v.  Hiatt,  7  Jones  L. 
1030 


promise  to  render  them  was  only  a  verbal 
one,  and  the  partnership  articles  were  in 
writing.    Marsh's  Appeal,  69  Pa.  St.  80. 

{(l)  Airey  v.  Borham,  29  Beav.  620. 

2  See,  however,  Dunlap  v.  Watson, 
ante,  774,  note;  also  nexi:  note,  infra. 

(e)  Featherstonhaugh  v.  Turner,  25 
Beav.  382;  Brown  y.  DeTastet,  Jac.  284; 
Crawshay  v.  Collins,  2  Russ.  347.  See, 
also,  Mellersh  v.  Keen,  27  Beav.  242, 
where  one  partner  became  lunatic,  and 
the  business  was  continued  by  the  others. 

^A  partner  in  the  absence  of  an 
agreement  for  compensation,  is  not  en- 
titled to  charge  for  services  rendered  m 
discharging  his  duties  as  a  member  of 
the  firm  ;  and  it  makes  no  difference 

509. 

A  surviving  partner,  in  the  absence 
of  any  stipulation  entitling  him  to  com 
pensation,  being  appointed  receiver  at 
his  own  instance,  claiming  the  right  to 
wind  up  the  firm  business,  is  entitled  to 
no  compensation  as  receiver.  Berxy  v. 
Jones,  11  Heisk.  206. 


CHAT.  VI.] 


COMPENSATION    FOR    TROUULE. 


In  India  an  executor  is  allowed  a  percentage  on  the  assets  col- 
,  ,.  lected  by  him;  and  a  surviving  partner  who  is  the  ex- 

IiKlian  J  '  11  11' 

aUowancea.  ecutor  ofhis  deceased  co-partner,  has  been  allowed  this 
percentage  even  on  the  auiuunt  due  from  the  partnership  to  the 
estate  of  the  deceased,  {(j) 


whether  the  services  are  rendered  be- 
fore or  after  the  dissolution  of  the  firm. 
Brown's  Appeal,  89  Pa.  St.  139  ;  Cam- 
eron r.  Francisco,  26  Ohio  St.  190  ; 
Hellraan  v.  Mondel,  8  Am.  Law  Record, 
:"60  ;  Kimball  v.  Lincoln,  5  Bradw. 
(111.) 316.     See  ante,  p.  774  and  note. 

Nor  is  the  rule  affect  jd  by  the  fact 
that  the  partner  clo^in-^'  up  the  affairs  if 
the  fii-m  after  dissolution,  is  a  special 
partner.     Hellman  v.  Mendel,  supra. 

But  where  a  surviving  partner  is  un- 
der no  obligation  to  continue  the  busi- 
ness, but  does  so  at  his  own  peril,  if  the 
representatives  of  the  deceased  partner 
elect  to  share  in  the  profits,  a  reasona- 
ble allowance  may  be  deducted  from 
such  profits  as  a  compensation  to  the 
sur\'ivor  for  his  services.  Cameron  v. 
Francisco,  26  Ohio  St.  190. 

Where  a  firm  was  dissolved  by  the 
death  of  one  of  its  members,  and  the 
surviving  partners,  for  the  preservation 
of  the  good-will,  and  to  enable  the  en- 
tire property  and  business  of  the  firm 
to  be  sold  as  a  going  concern,  continue 
to  carry  on  the  business  at  their  own 
risk,  until  such  sale  was  effected  :  Held, 
that  the  amount  thus  saved  to  the  firm 
from  the  good- will  was  in  the  nature  of 
profits,  and  that,  on  settlement  of  the 
partnership,  an  allowance  might  be  made 
therefrom  to  the  surviving  partners  for 
tliou'  services  in  continuing  the  business 
after  dissolution.  Cameron  v.  Fran- 
cisco, 26  Ohio  "St.  100. 

A  sm'viving  partner  was  held  entitled 
to  a  reasonable  compensation  for  his  ser- 
vices in  settling  up  the  partnership  busi- 
ness in  Royster  v.  Johnson,  73  N.  C.  474, 
and  Schenke  v.  Dana,   118  Ma.ss.  236. 


Contra,  unless  stipulated  for  by  con- 
tract. Cooper  V.  Reid,  2  Hill  (S.  C), 
Ch.  549;  Cooper  i'.  Merrihew,  Riley,  Eq. 
166;  BrowTi  r.  McFarland,  41  Penn.  St. 
129;  Beatty  v.  Wray,  19  Penn.  St.  516; 
Lyman  v.  Lyman,  2  Paine  C.  C.  52. 

In  Brown  v.  McFarland,  s«^>>*a,  itwas 
held  that  the  executor  of  a  deceased 
partner  can  not  employ  the  surviving 
partner  for  that  purpose  at  the  expense 
of  the  decedent's  estate,  unless  he  is  ex- 
pressly authorized  so  to  do  by  the  tes- 
tator's will. 

In  Schenke f.  Dana,  supra,  the  surviv- 
ing partner  of  a  firm  manufacturing 
weapons  of  war,  was  held  entitled  to 
compensation  for  his  personal  services  de- 
voted, with  the  assent  of  the  administator 
of  the  decciised  partner,  to  finishing  ex- 
isting contracts  with  the  government, 
and  entering  upon  new  ones,  einploying 
the  patents  and  machinery  of  the  firm. 

In  Hite  v.  Hite,  1  B.  Mon.  177,  it  was 
held  that  compensation  might  be  al- 
lowed to  a  surviving  partner  for  per- 
formmg  perplexing  and  extraordinary 
services  m  settling  the  business  of  the 
firm,  but  only  to  an  amount  bai-ely  suf- 
ficient to  remunerate  him  for  services 
necessarily  rendered. 

Where  a  suiTiving  partner  continued 
the  business  after  the  death  of  his  part- 
ner, and  settled  up  the  business  of  the 
concern,  but  no  charge  was  made  for 
compensation  for  such  services  until 
nearly  six  yeai-s  after  a  settlement  of  ac- 
counts between  the  executors  of  the 
pai-tners:  Held,  that  such  charge  couM 
not  be  allowed.  Patton  v.  Calhoun.  4 
Graft.  138. 

Where   on  the    hearing  of  a  bill  in 


[g)  Cockerell  v.  Barber,  2  Russ.   585,       and  1  Sim.  23. 


1031 


^776 


CONTPJBUTIOiSr   AKD    INDEMNITY. 


[book  III. 


Provisional  committeemen,  altliongli  tliej  are  not  partners,  ai-e 

not,  in  the  absence  of  a  special  agreement,  entitled  to  remuneration 

from    each    otlier    in    respect   of  their  services 

Kulcs  as  to  ..  w..^       J,.  .  1       *  1  •  p     n     /7\     Ti- 

promoters  of      Ti  6     *in  promoting  the  common  ouicct  ot  alJ.  (A)    it, 

companies.  .       .  ,  ,  .      ,.  , 

liowever,  tlie  company  is  lornieu,  and  is  directed 
, by  its  act,  charter,  or  deed  of  settlement  to  pay  the  expenses  in- 
curred in  its  formation,  a  member  of  the  company  will  be  entitled 
to  be  paid  for  his  time  and  trouble  in  forming  the  company,  (i) 
Directors  of  companies  are  generally  allowed  compensation  for 
their   trouble   by  express    agreement   (k):  but   where 

Allowances  ./  j  o  \    ^  j 

to  directors.       there  is  no  such  agreement  they    cannot,  without  the 

sanction  of  the  shai-eholders,  charge  the  company  anything  for  their 

services  [l),  nor  are  they  entitled   to   extra  remuneration  for  extra 

w^ork.     In  the  York  and  North  Midland  Railway  Corn- 
York  and  n      1  Till 
North  Midland  r»anv -y.  Hudsou  (in),  the  defendant  contended  that  he 

Railway  Com-      r       ./  \      /' 

pany D.Hudson,  ^g^g  entitled  to  Certain  shares  of  the  companj^  by  way 
of  remuneration  for  the  great  advantages  he  had  conferred  upon  it, 
and  for  which,  as  he  alleged,  the  shares  in  question  M^onld  be  a 
meagre  and  inadequate  return.  But  the  Court  held  this  contention 
to  be  wholly  inadmissible,  observing  that. 


cliancery,  pra^'ing  for  an  account  be- 
tween partners,  it  appeai-ed  ttat,  after 
one  of  the  members  of  the  firm  had  made 
a  voluntary  assignment  of  his  estate  to  a 
trustee,  for  the  benefit  of  his  creditors, 
another  member  of  said  firm  paid,  out  of 
the  partnership  funds,  sundry  liabili- 
ties and  indorsements  of  the  firm,  and 
charged  m  his  mdividual  account  the 
sum  so  paid,  and  also  charged  for  his 
time  and  services  in  collecting  and  pay- 
ing out  said  money,  but  did  not  further 
intermeddle  with  the  partnersliip  prop- 
erty, except  to  preserve  it  from  injury: 
Held,  that  such  cliarges  were  properly 
made,  and  should  be  allowed.  Utley  v. 
Smith,  24  Conn.  290. 

Where  a  firm  of  attorneys  made  an 
agreement  providing  for  a  different 
mode  of  division  of  the  fees  in  cases  un- 
finished at  the  time  of  the  death  of 
either  of  them,  i'rom  that  adopted  as  to 
cases  finished  during  their  joint  lives, 
the  survivors  are  entitled  to  no  allow- 
1032 


ance  for  winding  up  the  business  other 
than  then-  shai-e  of  the  fees  as  specified 
in  said  agreement.  Denver  v.  Roane, 
99  U.  S.  355. 

(h)  Holmes  v.  Higgins,!  B.  &  C.  74; 
Goddartt;.  Hodges,  1  Cr.  &  M.  33; 
Wilson  V.  Curzon,  15  M.  &  W.  532; 
Parkin?;.  F17,  2  C.  &  P.  311. 

(i)  Garden  v.  The  Gen.  Cemetery  Co. 

5  Bing.  N.  C.  253. 

(k)  Where  there  is  such  an  agreement 
they  are  entitled  to  their  fees,  although 
the  company  proves  a  failure.  Ex  parte 
Johnson,  27  L.  J.  Ch.  803. 

(/)  Dunstan  v.  Imperial  Gas  Co.  3  B. 

6  Ad.  125. 

(»?)  16  Beav.  485.  See,  too,  Evans  v. 
Coventry,  8  DeG.  M.  &  ^.  835,  where 
dnectors  were  made  to  refund,  with 
interest,  the  difference  between  what 
they  were  entitled  to  by  the  com- 
pany's deed,  and  what  they  had  voted 
themselves,  and  retained  for  their  re- 
muneration. 


CHAP.  VI.]  OUTLAYS   AND    ADVANCES.  *777 

"When  Mr.  Hudson  accepted  the  office  of  chairman,  he  knew  that  the  salavv 
was  not  more  than  II.  per  week,  and  yet  he  was  content  to  give  his  S3rvice8  on  that 
Ibotinf,'.  He  miffht  possibly  have  considered  that  the  stjition  and  influence  ac- 
quired in  the  position  of  chairman  of  the  York  and  North  Midhmd  Kailway  was  a 
remuneration  for  the  time  and  labor  bestowed  by  him,  even  if  his  services  were  m.it 
paid  by  any  salary  at  all;  but  whether  this  were  so  or  not,  it  is  the  duty  of  every 
man  who  accepts  any  situation,  to  perform  the  duties  of  it  thoroughly  and  entirely. 
If  they  require  his  whole  time  and  attention,  it  is  his  duty  to  give  that  whole  tim*- 
and  attention  to  the  due  discharge  of  them.  This  Court  can  never  countenance  a 
person  who  is  placed  in  a  fiduciary  situation  in  retaining  for  his  own  benefit  sum.s 
of  money  which  have  come  to  his  hands,  or  have  been  acquired  by  him  in  that 
character,  although  the  acquisition  of  those  sums  is  due  to  his  own  exertions,  on 
the  suggestion  that  his  services  were  worth  more  than  what  was  paid  for 
them,  and  that  he  was  himself  entitled  *to  ascertain  and  d;^tennine  the  "  <  •  ' 
just  measure  of  (h.nr  value.  If  this  principle  were  allowed,  I  know  not 
what  there  would  be  to  prevent  any  clerk  from  retaining  the  property  of  his  mas- 
ter, on  the  plea  that  his  master  had  not  adequately  rewarded  his  great  and  meri- 
torious services."  («) 


SECTION  III.— OF  OUTLAYS  AND  ADVANCES. 

In   t.aking  a  partnership  acconnt,  each  partner  is  entitled  to  be 
allowed  ajj^ainst  the  other  everything;  he  has  advanced   outlays  and 

"  1  •  1  a(1\  ill icLS  made 

ur  brought  in  as  a  ])artnership  transaction,  and  to  by  t.no  imrtuer. 
charge  the  other  in  the  account  M'ith  what  that  other  lias  not 
brought  in,  or  lias  taken  out  more  tiian  he  ought;  and  nothing  is 
to  be  considei-ed  as  his  share  but  his  proportion  of  the  residue  on 
the  balance  of  the  account,  (o)  Although,  therefore,  a  jiartner  is 
not  entitled  to  compensation  for  trouble,  he  is  entitled  to  charge 
the  partnership  with  sums  hondjide  expended  by  him  in  conduct- 
insr  the  business  thereof.  (»y     Thus,  where  the  mana<;-    .,  , 

&  Vf/  '  »      Advances  by 

ing  director  of  a  cost-book  mining  company  advanced  directors. 

(«)  See,  also.  Imperial  Merc.  Credit  'See  King  v.  HamDton,  16  111.  190: 

Assoc.  V.  Coleman,  L.  R.  6  H.  L.  189.  Savage  r.  Carter,  9  Dana,  408. 

(o)  Per  Lord  Hardwicke  in  West  v.  Tlie  defendant,  while  returning  from 

Skip,  1  Ves.  S.  242.  Califomia,  was  taken  sick,  and  in  con- 

(p)  Burden  r.  Burden,  1  V.  &  B.  172,  sequence  thereof  was  subjectt^d  to  ex- 

where  a  sm-viving  partner,  who  was  also  penses  and  loss  of  time  after  his  return : 

executor,  was  allowed  to    charge    ex-  Held,  that  in  accounting  for  the  net 

penses  actually  incun-ed,  but  not  time  earnings  he  was  entitled  to  an  allowance 

and   trouble.     Coni]iare   Hutcheson    r.  for  the  expenses,  but  not  for  the  lurt 

Smith,  5    Ir.  Eq.   117,    ante,  p.    774,  time.     Brigham  r.  Dana,  29  Vt.  1. 

note,  {z)  Whore  it  was  provided  in  artiL-les  of 

1033 


*777 


OUTLAYS   AND   ADVANCES. 


[book  III. 


money  for  the  purpose  of  enabling  tlie  business  of  the  company 
to  be  carried  on,  he  was  held  entitled  to  be  reimbursed  by  the  com- 
])any,  there  being  no  question  as  to  his  authority  to  carry  on  the 
business  on  credit,  {(j)  So,  where  the  directors  of  a  mining  com- 
pany advanced   money  to  keep  the   mine  at  work,  and  it  would 


co-partnership,  between  the  plaintiffs 
and  defendants,  that  the  services  of  one 
member  of  the  firm,  should  be  rendered 
at  a  stipulated  price,  and  such  partner 
incun-ed  expenses  in  the  appropriate 
business  of  the  firm  at  Porto  Kico  ;  it 
was  held,  that  such  expenses  were  a 
proper  charge  against  the  co-partner- 
ship, and  that  he  had  not  forfeited  his 
right  to  the  same,  by  withholding  from 
the  other  members  of  the  firm  the  pro- 
ceeds of  the  partnership  business,  for 
the  period  of  one  month  after  his  re- 
turn to  this  country,  and  until  requested 
Ijy  his  co-partners  to  make  a  settlement 
of  said  business.  Pond  v.  Clark,  24 
Conn.  370. 

A  parfner,  thor^h  bound  to  transact 
the  out-door  business,  and  superin- 
tend the  sale  of  all  articles  manufac- 
tured by  the  partnership,  is  entitled  to 
credit  for  such  charges  for  commissions 
to  others  for  sales,  as  have  been  regu- 
larly entered  on  the  books  as  a  charge 
against  the  firm  during  its  existence, 
imless  the  entries  be  made  in  eiTor  or 
fraud.  It  is  the  construction  placed  by 
the  parties  themselves  on  their  contract. 
Pratt  V.  McHatton,  11  La.  Ann.  260. 

In  a  proceeding  between  partners  to 
settle  their  accounts,  items  for  clearing 
and  improving  their  joint  land,  and  for 
receipt  of  rents,  should  not  be  consid- 
ered ;  such  items  should  be  settled  up- 
on a  proceeding  for  partition.  Jones  v. 
Jones,  23  Ark.  212. 

In  such  a  proceeding  the  court  re- 
fused to  allow  an  mdividual  demand  of 
one  partner  against  the  other,  any 
further  than  to  extinguish  a  claim  by 
the  latter  for  partnership  funds  remain- 
ing in  the  foraier's  hands.     Jones  v. 

1034 


Jones,  28  Ark.  212. 

Where  a  partner  contracts  in  his  in- 
dividual name,  and  makes  disburse- 
ments on  account  of  such  contracts,  in 
a  contest  with  his  co- partners  in  set- 
tlmg  the  affairs  of  the  co-partnership, 
he  will  be  bound  to  prove  that  such  con- 
tracts were  made  on  account  of,  and  for 
the  benefit  of  the  finn,  in  order  to  be 
allowed  for  liis  disbursements.  Rodes 
V.  Rodes,  6  B.  Mon.  400. 

A  partner  who  undertakes  to  wind  up 
the  firm  business,  stands  in  the  place  of 
an  executor,  and  can  establish  disburse- 
ments only  by  vouchers  properly  au- 
thenticated. Clements  o.  Mitchell,  Phill. 
Eq.  3. 

K.  bought  of  F.,  for  the  account  of 
himself  and  W.,  certain  property,  pay- 
ing for  it  partly  in  cash,  and  partly  by 
his  notes,  which  were  indorsed  by  W. 
The  business  of  F.  was  continued  by  K. 
&W.,  and  afterwr;.rds  M.  purchased  a 
one-third  interest  in  the  partnership, 
being  admitted  from  the  .date  of  the 
purchase,  and  sigiiing  his  name  to  the 
notes  previously  given  to  F.  W.  paid 
one-third  of  the  whole  purchase-money, 
including  the  amount  of  the  notes,  to  F., 
and  K.  paid  the  balance.  Subsequently 
K.  sold  to  W.  &  M.  all  his  interest  in  the 
firm:  Held,  that  if  the  excess  paid  by 
K.  over  his  just  proportion  was  an  ad- 
vance to  the  firm,  his  claim  therefor  was 
extinguished  by  the  sale  of  his  interest 
in  the  finn.  If  it  was  an  advance  to  M., 
W.  could  not  be  liable  in  any  way  for  it; 
consequently  a  suit  against  the  firm  to 
recover  such  excess  must  fail.  Kimball 
V.  Walker,  30  lU.  482. 

(q)  Ex  iKU-te  Sedgwick,  2  Jui-.  N.  S. 
949. 


OH.Vl'.   VI.]  CONTKIIILTIOX    AND    INDKMNITV.  'ITS 

otherwise  Lave  been  drowned,  they  were  hehl  entitled  to  be  reim- 
bursfed,  althoii<rh  they  had  no  power  to  borrow  money  on  the  credit 
of  the  company,  (r)  And  in  another  case,  the  directors  of  a  com- 
pany wlio  borrowed  money  on  their  own  responsihility,  and  load 
fide  applied  it  in  keeping  the  com])any  at  work,  were  held  to  be 
creditors  of  the  company  for  the  amount  expended,  although  the 
shareholders  insisted  that  the  directors  had  no  power  to  bor- 
row exce]:)t  upon  '^'mortgage,  and  under  certain  restrictions,  to  *778 
which  no  attention  had  been  paid,  (s) 

So  a  partner  is  clearly  entitled  to  charge  the  firm  with  whatever 
he  may  have  been  compelled  to  pay  in  respect  of  its  Payments  on 
debts  (^);  or  in  respect  of  obligations  incurred  by  him  Ji-^u*. 
alone  at  the  request  of  the  firm,  as  where  he  is  com]K^lled  to  pay  a 
bond  given  by  himself  alone,  but  for  the  benefit  of  the  firm  and  as 
a  trustee  for  it  (•2*),'  or  where  he  sacrifices  a  debt  due  to  himself  in , 
order  to  enable  tlie  firm  to  obtain  a  debt  due  to  it.  (w) 

It  need  hardly  be  observed,  that  an  outlay  made  by  one  partner 
with  the  approbation  of  his  co-partners  and  for  the  ^.ggj^^gomi 
benefit  of  the  firm,  must  be  made  good  by  the  firm,  how- 
ever useless  the  outlay  may  have  been.  For  exami)le,  if  a  firm  or 
company  purchases  a  patent  which  is  paid  for  by  one  member  in- 
dividually, he  is  entitled  to  charge  the  purchase-money  to  the  firm 
or  company,  however  worthless  the  patent  may  ultimately  prove  to 
be.  {x)  On  the  other  hand,  if  a  ])artner  or  director  makes  an  im- 
proper outlay  or  advance  on  behalf  of  a  firm  or  company,  he  can- 
not charge  it  to  the  firm  or  company,  unless  his  conduct  is  ratified 

,   (r)  Ex  parte  Chippendale,  4  DeG.  M.  to  pay  to  a  third  person  for  indorsing 

&  G.  19.     See  ante,  p.  7G0.  for  the  firm,  the  court  refused  to  allow 

(s)  Ex  parte  Bignold,   22  Boav.  143.  it,  no  proof  being  given  that  it  had  been 

See  ante,  p.  761.  actually    paid.     Hutchinson  v.   Onder- 

(<)  Prole  f.  Masterman,  21  Beav.  61.  donk,  6  N.  J.  Eq.  277. 

A  partner  who  negligently  pays  a  debt  The  it4?ms  for  which  an  allowance  is 

elainied,  but  not  due,  cannot  charge  the  claimed  must  be  proved  with  reasonable 

payment  to  the  firm.  Re  Webl),  2  B.  certainty  before  any  allowance  can  be 

Moore,  500;  Mcllreath  r.  Margetson,  4  made  therefor.     Chandler   v.  Allen,  20 

Doug.  278;  noticed  in  the  next  section.  Hun,  424. 

(m)  Croxton's  case,  5  DeG.  &  S.  4:V2;  (r)  Lefroy  v.  Gore,  1  Jo.  &  Lat.  -571, 

SedgAvick's  case,  2  Jur.  N.  S.  949.     V.-  where  one  partner  released   a  witness 

C.  W. ;  Gleadow  v.  The  Hull   Glass  Co.  whose  evidence    was  essential    to  the 

13  Jur.  1020,  V.-C.  E.  finn. 

1  Where,  in  the  settlement  of  a  part-  (.r)  Gleadow  v.  The  Hull  Glass  Co.  1:'. 

nership  account,  one  partner  claimed  to  Jur.  1020. 


be  allowed  $500,  which  he  had  agreed 


1035 


*779  OUTLAYS  AND  ADVANCES.  [bOOK  III. 

bj  it.  This  is  well  illustrated  bj  the  cases  of  Gillan  v.  JMorrisou, 
Re  The  AVoi-cester  Corn  Exchange  Company,  and  lie  Cropper,  al- 
usefui  but  un-    ready  noticed,  (y)     But  in  connection  with  this  subiect 

authorized  ,"',.,.,  ,  t  r,       ^i  •       •     i 

omiays.  the  qualifacatiou  reudered  necessary   by  tlie  principle 

established  in  the  Geruian  Mining  Company's  case  must  not  be  lost 
sight  of.  {z) 

An  outlay  which  may  l^ave  been  very  proper  and  even  neces- 
sary for  the  conduct  of  the  partnership  business,  cannot  be 
charged  to  the  partnership  account,  if  so  to  do  would  be  incon- 
sistent with  the  agreement  into  which  the  partners  have 
*779  *entered.  In  Thornton  v.  Procter  («),  the  plaintiff  and  tlie 
defendant  had  become  partners  as  wine  merchants,  and  the 
Thorton  plaintiff,  who  for  some  time  had  principally  conducted 

Proctor.  ^]jQ  business,   bad   expended    considerable    sums    of 

money  in  treating  customers,  and  this  was  found  to  be  necessary 
in  that  trade.  The  plaintiff  had  for  several  years  kept  the  accounts 
of  the  partnership,  and  in  such  accounts  he  never  made  any  charge 
for  entertaining  customers,  or  demanded  any  allowance  on  that  ac- 
count. He,  nevertheless,  afterwards  contended  that  he  ought  to  be 
allowed,  in  taking  the  accounts  of  the  partnership,  to  debit  the 
firm  with  50Z.  a  year  for  entertainments,  and  this  was  proved  to  be 
a  reasonable  sum.  But  it  was  shown  to  be  usual,  in  cases  of  this 
sort,  to  insert  some  special  clause  in  the  articles  if  an  allowance 
was  intended  to  be  made,  and  the  articles  into  which  the  partners 
had  entered  contained  nothing  more  than  a  general  stipulation, 
that  all  losses  and  expenses  should  be  borne  equally.  It  was  ac- 
cordingly held  that  tlie  plaintiff  was  not  entitled  to  any  allowance, 
for  he  could  only  claim  it  as  being  a  gross  article  of  expenditure, 
and  he  was  precluded  from  charging  it  in  that  way  by  not  having 
included  it  in  the  yearly  accounts. 

A  partner  is  not  entitled  to  charge  tlie  firm  with  any  moneys 
No  allowance  alleged  bv  him  to  have  been  laid  out  for  the  benefit  of 
unless  proved     the  firm  if  he   declines   to  give  the  particulars  of  his 

to  have  been  i  ,.""  •  /  7  \  i 

incurred.  outlays;  he  caiinot  charge  for  sccrct  scrvicc  money(o)  , 

(j/)  Ante,  pp.  765,  767.  '  Upon  a  bill  in  equity  between  part- 

{z)  Ante.  p.  760.  ners  to  wind  up  the  partnership,  one  of 

(a)  1  Anstr.  94.     See,  too,  Hutcheson  them  who  neglects  or  refuses  to  account 

V.  Smith,    5  Ir.    Eq.   117 ;  East  India  fully  for  business  of  the  firm,  done  by 

Co.  V.  Blake,  Finch,  117.  himself  in  a  foreign  jurisdiction,  cannot 

(&)  See  the  York  and  North-Midland  as  a  penalty,  be  denied  his  reasonable 

Rail.  Co.  V.  Hudson,  16  Beav.  485.  expanses  of  doing  it,  or  sums  otherwise 

1036 


CHAP.  VI.] 


CONTRIBUTION   AND    INDEMNITY. 


rso 


nor  fur  general  expenses,  (e)  Xor  can  a  partner  cliarge  tlie  iinn 
witli  traveling  expenses  nnless  they  have  been  honrv  fide  and  prop- 
erly incurred  by  him  when  traveling  for  the  purpose  of  transact- 
ing its  business.  {(Vf 

Again,  a  partner  expending  money  for  valuations  to  carry  out  a 
transaction  between    himself    and    co-partners,  which  charfrrs  for 
they  afterwards  succeed  in  setting  aside,  caiinot  charge 
them  with  any  part  of  what  he  may  have  so  expended,  {e) 

With  respect  to  advances  by  directors,  it  has  been  held  that 
*if  a  loan  is  bond  fide  made  by  them  to  the  com- 

11  1  '    1    1  1  7         -<       *«T->rw    Loans  by  di- 

pany  and  the  money  advanced  Jias  been  bona     *7bO   reciors. 
fide  applied  to  the  purposes  of  the  company,  • 

the  company  must  repay  it.  {/)  But  the  attention  of  the  share- 
holders should  be  sj^ecially  called  to  the  fact  of  a  loan  being  made 
by  the  directors.  The  duties  of  directors  and  the  interest  of  cred- 
itors may  very  possibly  conflict  with  each  other;  and  it  is  always 
suspicions  when  a  director  claims  to  be  a  creditor  of  the  company 
entrusted  to  his  care,  in  respect  of , a  matter  of  which  the  sharehold- 
ers know  nothing,  {g) 

Xot  only  may  one  partner  make  outlays  or  advances  for  the  ben- 
efit of  the  firm,  but  the  firm  may  make  advances  and  outlays  to  or 
for  the  benefit  of  one  partner.  Under  ordinary  circumstances  such 
advances  and  outlays  will  be  equivalent  to  a  loan  by  the  firm  to  him, 


owing  to  tim  from  the  firm,  or  be 
charged  with  interest,  with  annual  rests 
on  actual  or  estimated  balances  in  his 
handt;;  but  in  estimating  the  amount, 
exiDenses,  and  profits  of  such  business, 
and  computing  interest  on  such  bal- 
ances, if  any  interest  thereon  is  charge- 
able, care  should  be  taken,  by  maldng 
presumptions  in  favor  of  his  co-partners 
against  him,  to  guard  them  from  any 
injurious  consequences  of  his  conceal- 
ment of  facts.  Hai-vey  v.  Yaniey,  104 
Maes.  436. 

(c)  The  East  Imlia  Co.  v.  Blake, 
Finch,  117. 

(fZ)  Stainton  v.  The  Can-on  Co.  24 
Beav.  356. 

''  A  partner  who,  on  going  abroad  on 
business  principally  his  own,  received  a 
compensation  of  $5,000  for  his  services, 


was  not  allowed  to  charge  his  expenses 
to  his  co-partner,  who  had,  in  the  mean- 
time, conducted  the  partnership  busi- 
ness. Mumford  r.  Murray,  5  Johns. 
Ch  1. 

(e)  Stocken  v.  Dawson,  6  Beav.   375. 

(/)  See  ante,  p.  760.  See,  also, 
Muiray's  Executoi's'  case,  5  DeG.  M.  Sc 
G.  750  ;  Ex  parte  Sedgwick,  2  Jur.  N. 
S.  949. 

{g)  As  to  loans  by  directors  of  com- 
panies governed  by  7  «&  8  Vict.  c.  1 10, 
see  Baker's  case,  1  Dr.  &  Sm.  55  ;  Mur- 
ray's Executoi-s'  case,  5  DeG.  M.  &  G. 
750  ;  Teversham  r.  llie  Cameron's  coal - 
brook.  &c.  Co.  3  DeG.  &  S.  296,  and 
Bliick  V.  Mallalue,  27  Beav.  398,  in 
which  last  case  there  was  an  express 
authority  to  borrow  from  the  directors. 

1037 


*781  LIABILITIES    AND    LOSSES.  [bOOK  III. 

and  must  be  treated  accordingly  in  taking  the  partnersliip  accounts. 
Outlays  on  ^ut  occasionally  considerable  difficulty  arises,  e.g.^  where 
e%^ol^^one°^  there  has  been  an  outlay  by  the  firm  on  property  belong- 
partner.  -^^  exclusively  to  One  of  the  partners,  but  used  b}^  tlie 

firm  for  partnership  purposes.  In  the  absence  of  all  evidence  of  any 
agreement  upon  the  subject,  justice  seems  to  require  that  in  taking 
the  partnership  accounts  the  owner  of  the  property  in  question  should 
not  be  allowed  exclusively  to  gain  the  benefit  of  the  outlay,  but  that 
the  improved  value  of  his  property  should  be  treated  as  a  partnershij) 
asset,  and  be  shared  between  him  and  his  co-partners  accordingly. 
In  Burdon  v.  Barkus,  a  managing  partner  had,  with  the  knowl- 
Burdon  V  6(^6  of  his  co-partucr,  expended  partnership  monies 

Barkus.  -j^  siidciug  a  ])it  for  partnership  purposes  on  land  which 

belonged  exclusively  to  tlie  latter  partner;  tlie  managing  partner 
had  erroneously  supposed  that  tlie  partnership  was  for  a  term  of 
years  ;  but  the  partnership  was  suddenly  and  unexpectedly  dis- 
solved, and  the  pit  thereby  became  the  sole  property  of  the 
*781  ^partner  in  whose  land  it  had  been  sunk;  but  an  inquiry 
was  directed  whether  any  allowance  should  be  made  in 
respect  of  the  outhiy  in  sinking  the  pit.  (A) 


SECTION  IV.— OF  DEBTS,  LIABILITIES,  AND  LOSSES. 

In  the  absence  of  any  agreement  to  the  contrary,  partners  are 
Mutuality  of      liable  to  share  losses  in  the  same  proportion  as  they 

protjt  and  loss  .11  i  />  «  iii- 

presumed.  are  entitled  to  share  profits.  As  a  general  rule,  there- 
fore, if  one  partner  has  been  compelled  to  pay  more  than  his  share 
of  a  partnership  debt,  or  if,  in  properl}^  conducting  the  aflfairs  of  the 
firm,  he  has  personally  incurred  a  liability,  he  is  entitled  to  be  in- 
demnified by  his  co-partners  so  far  as  may  be  necessary  to  place  all 
on  a  footing  of  equality.  (?) 

But  it  by  no  means  follows,  that  a  person  liable  to  be  sued  as  if 
Presumption  he  were  a  partner,  is,  as  between  himself  and  his  co- 
evidence,  partners,  bound  to  share  the  losses  of  the  firm;   for  liis 

(7?)  Bnrdon  v.  Barkus,  3  GifT.  412,  aff.  M.  k  G.  572;  Lefroy  v.  Gore,  1  Jo.  k 
on  app-al,  4  DeG.  F.  &  .T.  42.  Lat.  571,  and  Hamilton  r.  Smith,  7  W. 

(?)  Wright  V.  Hunter,  5  Ves.  792;  and      R.  173,  as  to  promoters  of  companies, 
see  Robinson's  Executors'  case,  6  DeG. 
1038 


CHAP.  VI.] 


CONTKIBUTION    AND    INDEMNITY. 


*7S2 


co-partners  may  liave  agreed  to  indemnify  him  altogetlier  from 
losses,  and  if  sn.ch  is  the  case,  they  cannot  require  him  to  contrib- 
ute thereto  with  them,  (k)  So,  where  the  promoters  of  a  company 
jun-ee  with  tlio  sliareliolders  that  certain  ]»reliminary  expenses  to  be 
incurred  in  ol)t:iining  surveys,  reports,  iSrc,  sliall  not  exceed  a  cer- 
tain sum,  and  tlie  promoters  spend  more  tlinn  tliat  sum,  they  can- 
not require  the  shareholders  to  make  good  tlie  ditference;  although 
the  extra  expenditure  may  have  bt-cn  Ciinsed  by  circumstances  which 
were  unforeseen,  und  over  wliic-li  tlie  ])r(»moters  had  no  control.  {I) 
The  general  principle,  however,  that  partners  must  contribute 
rateably  to   their  shares  towards  the  losses  and  General ohupa- 

debts  *of  the  iii-m  is  not  open  to  question.  *^2  {i°j;:;[tKe'' 
Their  obligation  to  contribute  is  not  necessarily  to  looses, 

founded  upon,  althouirh  it  may  be  moliKed  and  even  excluded  al- 
together by,  agreement.  (?;!)'  For  example,  where  there  is  no  agree- 
ment to  the  contrary,  it  is  clear  that  if  execution  for  a  ])artnership 
debt  conti-acted  by  all  the  partners,  or  by  some  of  them  when  act- 
ing within  the  limits  of  their  authority,  is  levied  on  any  one  part- 
ner, who  is  compelled  to  pay  the  whole  debt,  he  is  entitled  to  con- 
tribution from  his  co-partners.  {71}  So,  if  one  partner  enters  into 
a  contract  on  behalf  of  the  firm,  but  in  such  a  manner  as  to  render 
himself  alone  liable  to  be  sued,  he  is  entitled  to  be  indemnified  by 
the  firm,  pn)vided  he  has  not,  as  between  himself  and  his  co-part- 
ners, exceeded  his  authority  in  entering  into  the  contract  {o);  and 


(A-)  See  Geddes  r.  Wallace.  2  Cli.  N. 
S.  270. 

(Z)  Gillan  r.  MoiTison,  1  DeG.  &  S. 
421;  lie  The  Worcester  Com  Ex.  Co.  3 
DeG.  M.  &  G.  180,  noticed  more  fully, 
ante,  p.  765.  See,  too,  ]\Iowatt  and  El- 
liott's case,  B  DcG.  M.  &  G.  254,  and 
Carew's  case,  7  ib.  43. 

(»()  Ante,,  p.  754. 

^  Losses  sustained  to  stock  in  trade  or 
partnership  assets  purchased  with  the 
money  of  the  firm,  must  be  bome  by 
the  firm.  Saveiy  c.  Thurstcn,4  Ijradw. 
(III.)  .55. 

A  and  B  entered  into  partnership 
for  niiinafacturing  puqioscs,  under  an 
a£rn;en)enl  tl;at  the  i'orm:*r  should  fiir- 
n'sh  all  capital  necessary  for  the  pur- 
ch.asc  of  machiueiy  and  wialerial,  and 


for  carrying  on  the  partnership  busi- 
n:>ss;  that  the  latter  should  superintend 
the  business,  and  that  all  losses  should 
"be  bome  equally  by  them."  A  pur- 
chased certain  real  estate,  taking  the 
title  in  himself,  and  erected  thereon  the 
necessary  buildings  and  machineiy  at 
his  own  expense.  The  machinery  was 
damiiged  by  fire:  Held,  that  this  loss 
was  to  be  shared.  Carlisle  r.  Tenbi'ook, 
57  Ind.  529. 

(it)  McOwen  r.  Hunter,  1  Dr.  k  Vv'. 
347;  Evans  r.  Yeathard,  2  Bing.  132; 
Robinson's  Executor's  case,  6  DeG.  M. 
&  G.  572.  See,  too,  Lefroy  v.  Gore.  1 
Jo.  &  Lat.  571,  as  to  provisional  directoi-s. 

(w)  Gleadow  r.  The  Hull  Gias3  Co.  13 
Jur.  1020;  Sedgwick's  casj,  2  Jur.  N.  S. 
94'J. 

1039 


^ISS  LIABILITIES    AND    LOSSES.  [liOOK  IIL 

if,  in  such  a  case,  he  with  their  knowledge  and  consent  defend  an 
action  bronglit  against  liim,  he  is  entitled  to  be  indemnified  by  the 
firm  against  the  damages,  costs,  and  exi3enses  which  he  may  be 
compelled  to  pay.  {pj 

The  right  of  a  public  officer  of  a  banking  company  to  be  indem- 
Right  of  share-  nified  by  the  members  of  the  company  against  judg- 
h°demnified^  mcnts  obtained  against  himself  is  recognized  by  stat- 
ute (q)',  and  the  right  of  each  individual  shareholder,  against  whom 
execution  may  have  issued  for  a  debt  of  the  company,  to  indemnity 
from  the  company,  or  to  contribution  from  his  co-shareholders,  is 
also  placed  beyond  a  doubt  by  legislative  enactment  (r),  except  in 
the  case  of  companies  governed  by  the  Letters  Patent  act,  7  Wm. 
4  &  1  Yict.  c.  73,  which  is  silent  upon  this  point.  This  Act  provides 
for  limited  liability,  but  does  not  enact  that  if  one  member  of  a 
company  governed  by  it  pays  more  than  his  share  of  a  debt  of  the 
company,  he  is  to  be  reimbursed  by  tlie  company  or  the  other 
*783  shareholders;  but  his  right  to  such  ^indemnity  or  contriljutlun 
is  nowhere  taken  away,  and  may  therefore  be  assumed  to 
exist  by  virtue  of  general  principles  not  touched  by  the  statute. 

Even  if  a  loss  sustained  by  a  firm  is  imputable  to  the  conduct  of 
Losses  attribu-  one  partner  more  than  to  that  of  another,  still,  it  the 
p^armermOTe  former  acted  iond  fide  with  a  view  to  the  benefit  of 
t^an  o  ano  -  ^^^  ^^_^^  ^^^  without  culpablc  negligence,  the  loss  must 
be  borne  equally  by  all.'  Thus,  wliere  A.  represented  to  his  co- 
partner B.  that  shares  in  a  certain  company  rendered 
Ex  parte  Letts.  ^^^^  \^q\^^^.^  only  liable  to  the  engagements  of  the  corn- 
er) Browne  v.  GibLins,  5  Bro.  P.  C.  that  tlie  affairs  shall  be  settled  by  one 
491;  Croxton's  case,  5  DeG.  &  S.  432.  partner,   another  partner  will  not   be 

2  See  ante,  759,  et  seq.  and  notes  chargeable  with  the  value  of  property 

iq)  7  Geo.  4,  c.  46,  §  14.  delivered  by  him  to  the  acting  partner, 

(r)  7  Geo.  4,  c.  46,  §  14;  8  &  9  Vict.      Allison  v.  Davidson,  2  Dev.  Eq.  79. 
c.  16,  §  37,    See,  also,  the  repealed  acts,  One  partner,  closing  up  the  business 

7  &  8  Vict.  c.  110,  §  67,  and  7  &  8  Vict.      of  the  concern,  is  a  trustee  for  the  oth- 
c.  113,  §  14.  ^^^'  ^'^^  '^^  °^^^  ^^  treated  as  a  debtor 

1  Where  a  loss  accrues  to  a  partner-  to  his  co-partners  for  the  balance  of 
ship  while  the  busmess  is  under  the  sole  funds  in  his  hands,  so  as  to  throw  upon 
management  of  one  of  the  partners,  him  a  loss  by  depreciation  in  the  cun-ency 
this  fact  alone  is  not  sufficient  to  charge  at  the  time  when  he  received  the  funds, 
him  with  the  whole  loss,  but  it  must  McNair  v.  Rayland,  1  Dev.  Eq.  516. 
appear  to  have  accinied  by  his  fault  The  mere  fact  that  one  of  the  partners 

McCrae  v.  Robeson,  2  Murph.  127.  acts  as  the  cashier  to  the  firm  will  not. 

Where  it  is  the  understanding  be-      as  a  general  rule,  charge  him  with  the 
tween  the  partners,  upon  a  dissolution,      funds  he  might  receive  and  disburse  in 
1040 


CHAP.  VI.] 


LIABILITIES    AND    LOSSES. 


*7S3 


pany  to  a  limited  extent,  and  B.  tliereiipon,  and  at  A.'s  request,  au- 
thorized him  to  take  shares  on  the  partnershij)  account,  and  it  ulti- 


the  course  of  business;  otherwise,  when 
fraud  is  charged.  Walpole  v.  Renfroe, 
16  La.  Ann.  92. 

A  clerk  of  a  partnership  being  an  ac- 
credited agent  of  the  firm,  losses  grow- 
ing out  of  his  defalcation,  negligence, 
etc.,  would  fall  on  the  firm,  and  not  in- 
dividually on  the  active  partner.  Rob- 
erts r.  Totten,  13  Ark.  601). 

Where  a  partner  leaves  the  place  of 
business  of  the  firm  to  attend  to  private 
business  of  his  own,  and  also  to  pnr- 
chtise  merchan('i«  for  the  firm,  with 
money  of  the  firm,  which  he  takes  with 
him,  and  neither  he  nor  the  money  is 
heard  of  afterwards,  the  loss  of  the 
money,  in  the  absence  of  evidence  show- 
ing fraud,  negligence,  or  misconduct, 
must  fall  upon  the  partnership.  .Jenkins 
V.  Peckinpaugh,  40  Ind.  loo. 

Where  articles  of  a  tannery  co-part- 
nership provided  that  one  partner  si  o  ild 
exclusively  superintend  the  tanyard,  and 
the  other  the  books  and  financial  af- 
fairs, and  neither  intenneddle  with  the 
proper  business  of  the  other,  losses 
caused  by  a  violation  of  such  provision 
must  be  borne  by  the  intermeddling 
party;  but  where  a  loss  arose  from  the 
employment,  by  the  bookkeeping  jiivrt- 
ner,  of  an  inexpert  artisan  to  build  vats, 
on  proof  that  the  yard  partner  knew  and 
assented  to  the  act,  equity  will  consider 
the  provision  waived.  Haller  r.  Wil- 
liamowicz,  23  Ark.  066. 

Plaintiff  agreed  to  furnish  the  entire 
capital  of  a  partnership,  out  of  which 
defendant  was  to  manage  the  concern, 
and  receive  one-third  of  the  profits,  with 
a  monthly  sum  for  his  personal  ex- 
penses. From  plaintiff's  failure  to  ad- 
vance the  entire  capital,  the  partnership 
was  dissolved,  with  a  loss  equal  to  the 
amount  advanced  :  Held,  that  defend- 
ant was  not  bound  for  any  part  of  the 
loss,  nor   the   amounts   withdrawn   for 


his  monthly  expenses.  Bonis  r.  Louv- 
rier,  8  La.  Ann.  4. 

One  partner  is  liable  to  his  co-partner 
for  any  loss  occasioned  by  his  unauthor- 
ized indorsement  of  a  note  in  the  name 
of  the  partnership,  although  th-^  note  be 
afterwards  paid  by  the  finn.  Smith  r. 
Loring,  2  Uiiio,  440. 

Where  a  party  having  the  legal  title 
agrees  with  another  to  convey  him  one- 
half  of  the  title,  in  consideration  of  his 
completing  a  mill  upon  the  property, 
and  afterwards  tak^s  charge  of  and 
completes  the  work,  if  he  rents  the  mill 
or  could  have  done  so,  and  refuses  or 
neglects  when  good,  responsible  tenants 
can  be  had,  he  will  be  required  to  ac- 
count to  the  other  party  for  half  of  a 
fair  rent.    Grove  v.  Miles,  85  111.  85. 

A  partner  who  purchases  for  the  firm 
a  large  lot  of  hogs  at  a  price  prohibited 
by  the  partnership  agreement  is  liable 
to  the  other  partners  for  the  excess. 
Lovney   r.  Gillen waters,  11  Heisk.  1;W. 

A  partner  depositing  or  holding  part- 
nership funds,  to  compel  his  co-partner 
to  have  an  account  taken,  is  not  liable 
to  make  good  to  him  a  loss  thereof,  en- 
suing through  no  fault  of  his  own.  Mor- 
rison r.  Smith,  81  111.  221. 

If  one  or  more  of  the  members  of  a 
firm  divert  the  funds  of  the  finn  to  other 
uses,  such  partner  is  liable,  in  making 
up  the  account,  to  be  charged  with  all 
the  detriment  thus  suffered  by  the  firm. 
Pierce  r.  Daniels,  25  Vt.  624. 

Where,  for  the  convenience  and  by 
the  consent  of  the  firm,  one  partner  de- 
posits the  funds  of  the  firm  in  his  owni 
name  and  to  his  own  account,  and  they 
are  charged  upon  the  firm  books  to  such 
jiartner.  in  order  to  intlicate  in  whose 
bauds  they  are,  but  are  not  under  the 
exclusive  control  of  the  partner  in  whose 
name  they  are  deposited,  the  other  part- 
ner procuring  checks  at  all  tim's  when 
f«  1041 


^783 


LIABILITIES    AND    LOSSES. 


[book  IIL 


matel}^  turned  out  tliat  the  liability  of  the  shareholders  was  not 
limited,  and  A.  and  B.  were  made  contributorics,  it  was  held  that, 


desired  for  use  in  the  business  of  the 
firm,  the  firm,  and  not  the  partner 
holding-  the  funds,  must  bear  the  loss  re- 
sulting- from  the  insolvency  of  the  bank 
in  which  they  were  deposited.  Campbell 
v.  Stewart,  34  111.  151. 

Where,  however,  one  partner  mixes 
partnership  funds  with  his  own,  makes 
deposits  of  them  in  bank  in  his  own 
name,  appropriates  them  to  his  own 
use,  assuming  the  absolute  and  entire 
control,  and  the  bank  becoming  insol- 
vent, receives  its  notes,  and  has  them 
registered  in  his  own  name,  without  the 
consent  or  knowledge  of  liis  co-partner, 
by  reason  whereof  the  partnership  funds 
are  lost,  such  partner  is  responsible  to 
the  co-partner  for  his  share  of  the  fund, 
and  must  bear  the  loss  alone.  Lefever 
V.  Underwood,  41  Pa.  St.  505. 

Where  a  partnership  intrusts  money 
to  a  member  of  the  firm  to  be  used  in 
the  partnership  business,  and  such 
member,  without  the  knov/ledge  or 
consent  of  his  co-partners,  forms  a  new 
partnership  relation  with  another  per- 
son to  engage  in  like  business,  and  pays 
over  the  money  to  the  new  firm,  whereby 
it  is  lost,  he  thereby  becomes  liable  to 
account  to  the  members  of  the  old  firm, 
as  for  money  converted  to  his  own  use. 
Reis  V.  Hellman,  25  Ohio  St.  180  ;  S.  C. 
1  Cincin.  30. 

Where  two  members  of  a  partnership, 
formed  for  the  pui-pose  of  speculating  in 
lands,  loaned  money  of  the  firm,  in  good 
faith,  to  a  manufacturer  as  an  induce- 
ment to  establish  mills  on  their  lands, 
whereby  the  lands  were  expected  to  be 
enhanced  in  value,  and  afterwards  the 
mills  proved  a  bad  enterprise  and  a  part 
of  the  debt  was  lost,  a  court  of  chancery  ' 
refused  to  reUeve  a  third  partner,  who 
did  not  assent  to  the  loan,  from  bearing 
his  share  of  the  loss.  Blair  v.  Johnston, 
1  Head,  13. 

1042 


When  a  partner  quits  the  partnership 
that  he  may  buy  for  himself  what  the 
partnership  has  a  right  to  purchase,  or 
that  he  may  make  a  profit  for  his  own 
advantage,  and  to  their  prejudice,  he  is 
answerable  to  the  community  for  the 
loss  and  damage;  and  so,  if  he  quits  at 
an  unreasonable  time,  which  occasioned 
a  deprivation  of  profits  to  the  commu- 
nity, he  must  repair  and  make  good 
such  loss.  Howell  v.  Harvey,  5  Ark, 
270. 

A  culpable  neglect  in  one  partner,  in 
pursuing  the  claims  of  the  concern,  may 
render  him  liable  to  the  other  partner 
for  the  amount  which  has  been  lost  by 
his  neglect.  Jessup  v.  Cook,  6  N.  J.  L. 
434. 

Where  it  does  not  appear  to  have  been 
more  the  duty  of  one  partner  than  an- 
other to  collect  debts  due  to  the  partner- 
ship, and  the  partner  who  undertakes  to 
collect  them  has  placed  them  in  the 
hands  of  a  competent  attorney,  and  has 
acted  in  good  faith,  he  ouglit  not  to  be 
held  responsible  for  the  i  egli  ,>-  mt  or  ir- 
regular acts  of  such  attorney  (or  other 
competent  agent),  although  the  suit  was 
brought  in  the  name  of  the  individual 
partner  instead  of  the  names  of  the  joint 
owners.  Aiken  v.  Ogiivie,  12  Lx.  Ann. 
353. 

Where  a  partnership  has  b?en  dis- 
solved, in  making  up  the  account,  one 
partner  cannot  be  charged  with  debts 
due  to  the  concern,  because  he  has  not 
collected  them,  or  because  he  refused  to 
permit  them  to  be  set  off  against  debts 
due  trom  the  other  partner.  Ho  lister 
V.  Barkley,  11  N.  H.  501. 

The  fact  that  the  books  of  a  partner- 
ship remain,  after  a  dissolution,  in  the 
hands  of  one  of  the  partners,  does  not, 
in  the  absence  of  a  special  undertak  ng 
to  collect  the  debts,  render  him  liaMe  to 
his  co-partner,  for  omitting  to  collect  a 


CHAP.  \^.] 


LIABILITIES    AND    LOSSES. 


*783 


Cragg  V.  Ford. 


as  between  themselves,  B,  could  not  throw  the  loss  on  A.  alone,  {s) 
Again,  in  Cragg  v.  Ford  (t),  the  plaintiff  and  the  de- 
fendant were  partners,  and  the  defendant  was  the  man- 
aging partner.  The  partnershij)  was  dissolved,  and  the  winding 
np  of  its  affairs  devolved  on  the  defendant.  Part  of  the  assets 
consisted  of  bales  of  cotton,  and  the  plaintiff  requested  that  these 
might  be  immediately  sold.  The  defendant,  however,  delayed  to 
sell  them,  and  they  were  ultimately  sold  at  a  much  lower  ])rice 
than  they  would  have  fetched  if  they  had  been  sold  wiieu  the 
plaintiff  desired.     The  plaintiff"  contended  that  the  loss   sustained 


debt.  McRae  v.  McKenzie,  2  Dev.  &  B. 
Eq.  232. 

The  unsettled  claims  of  a  co-partner- 
ship, shortly  after  its  dissolution,  were, 
by  the  mutual  consent  of  the  partners, 
placed  for  collection  in  the  hands  of  G., 
who  after  collecting'  a  part  of  them,  paid 
over  all  the  proceeds  except  $100  to  the 
defendant,  and  the  court  found  that  the 
plaintiff  had  received  more  than  his 
share  of  the  partnership  properly,  and 
the  defendant  afterwards  requested  G. 
to  suspend  making  further  collections, 
that  his  account  might  be  made  up,  and 
a  settlement  made  by  the  auditors,  who 
were  then  investigating  the  partnership 
account  ;  and  that  in  consequence  of 
misunderstanding  the  object  and  pur- 
port of  the  request,  G.  ceased  making 
further  collections,  and  some  of  said 
claims  became  uncollectible :  Held,  that 
the  directions  given  by  the  defendant  to 
G.  did  not  render  him  liable  for  any  loss 
which  might  result  from  suspending 
such  collections,  and  that  the  defendant 
was  not  chargeable  with  the  money  and 
accounts  in  the  hands  of  G.  Day  v. 
Lockwood,  24  Conn.  185. 

F.  owed  T.,  and  gave  him  a  note  for 
$7,000.  The  firm  of  T.  and  W.  made 
large  advances  to  F.  on  his  individual 
credit.  For  greater  security  a  letter  of 
credit  to  T.  and  W.  Avas  procured  by  F. 
from  V.  and  0.,  on  which  T.  and  W. 
made  other  advances  to  F.,  amounting 
to  about  £760.    These  they  charged  to 


F.,  V.  and  0.  jointly.  V.  deliverwl 
provisions,  etc.,  sufficient  to  pay  the  debt 
charged  jointly  against  V.,  0.  and  F., 
and  he  expected  they  would  be  so  ap- 
plied, but  F.  and  W.  credited  them  to 
F.  iitdividuaUi/,  and  certain  other  pay- 
ments made  were  so  credited  by  T.  and 
W.,  who  found  in  .Tuly,  1799.  that  the 
sum  credited  F.  individually  exceeded 
his  individual  liability  by  some  £1,200, 
an  amount  more  than  sufficient  to  di;^ 
charge  the  joint  debt  due  from  F.,  V. 
and  0.  Against  the  remonstrance  of 
his  partner  (W.)  T.  applied  £iOd  of 
this  £1,200  on  the  $7,000  note  due  him 
personally  from  F.,  and  suffered  the 
joint  debt  against  F.,  V.  and  0.  to  be- 
come barred  by  the  statute  of  limita- 
tions, and  lost.  In  an  action  for  an  ac- 
count, etc.,  between  the  partners  (\V. 
V.  T.)  :  Held,  that  because  the  de- 
fendant T.  had  misapplied  the  provisions 
delivered  to  the  company  to  pay  the 
joint  debt,  to  the  payment  of  a  private 
debt  due  from  F.  to  him  personally,  and 
had  then  suffered  the  joint  debt  to  be- 
come barred  by  the  statute  of  limita- 
tions, and  lost,  the  amount  of  such  joint 
debt  remaining  unpaid  was  a  proper 
charge  in  favor  of  W.  and  against  T. 
Tomlinson  v.  Ward,  2  Conn.  390. 

{s)  Ex  i)arte  Letts  and  Steer,  26  L. 
J.  Ch.  455.  See,  too,  Lingard  v.  Brom- 
ley, IV.  &  B.  114. 

(0  1  Y.  &  C.  C.  C.  280. 

1043 


*784  CONTEIBUTION    AND    INDEMNITY.  [bOOK  III. 

by  the  postpanement  of  the  sale  ought  to  be  borne  by  the  defend- 
ant alone.  But  the  Court  held  that  the  plaintiff",  if  he  had  chosen, 
might  himself  have  sold  the  cotton;  and  that,  as  the  defendant,  in 
delaying  the  sale,  had  acted  hond  fide  and  in  the  exercise  of  his 
discretion,  the  loss  ought  not  to  be  thrown  on  him  alone,  but  ought 
to  be  shared  by  the  plaintiff. 

But  if  a  partner  is  guilty  of  a  breach  of  his  duty  to  the  firm, 
Losses  attribu-  and  loss  results  therefrom,  such  loss  must  fall  on  him 
partne?'s'mis-  alone.'  As  was  said  by  the  Court  in  Bury  v.  Allen  {u), 
negligence.  "  Suppose  the  case  of  an  act  of  fraud,  or  culpable  neg- 
ligence, or  wilful  default  by  a  partner  during  the  partner- 
*784:  ship  to  the  damage  of  its  ^property  or  interests,  in  breach 
of  his  duty  to  the  partnership:  whether  at  law  compellable, 
or  not  compellable,  he  is  certainly  in  equity  compellable  to  compen- 
sate or  indemnify  the  partnership  in  this  respect."  In  conformity 
with  this  rule,  the  justice  of  which  cannot  be  disputed,  it  has  been 
decided  that  if  a  claim  is  made  against  a  firm  for  payment  of  a 
debt  alleged  to  be  due  from  it,  but  which  is  not  so  in  point  of  fact, 
and  one  partner  chooses  to  pay  it,  he  cannot  charge  such  payment 
to  the  account  of  the  firm,  {x)  So,  if  one  partner  does  that  which, 
though  imputable  to  the  firm  on  the  principles  of  agency,  is  in 
truth  his  act  alone,  and  a  fraud  upon  his  co-partners,  they  are  en- 
titled, as  between  themselves  and  him,  to  throw  the  whole  of  the 
consequences  upon  him.  (y)  So,  if  one  partner,  without  the  au- 
thority of  his  co-partners,  wilfully  does  that  which  is  illegal,  he 
must  indemnify  them  from  the  consequences,  (s) 

When  it  is  said  that  losses  incurred  by  the  unauthorized,  cul pa- 
Adoption  by  bly  negligent,  or  fraudulent  conduct  of  one  partner 
n^clfargeabie  must  be  borne  by  him  alone,  it  is  assumed  that  his  con- 
^''"-  duct  has  not  been  ratified  by  the  firm,  and  that  the  loss 

2 See  Murphy  t).  Crafts,  13  La.  Ann.  [x)  i?e  Webb,  2  B.  Moore.  500;   Mc- 

519,  and  the  cases  cited  in  the  next  note  Hreath  v.  Margetson,   4    Doug.  ^  278, 

fj,bove.  where  a  payment  was  made   bond  fide 

The  obUgations  of  one  partner  to  an-  and  on  the  faith  of  false  and  fraudulent 

other,  in  the  management  of  the  part-  representations.       Qucere  if  the    same 

nership  business,  is  the  exercise  of  good  rule  would  apply  if  the  debt  being  due 

faith,  and  of    ordinary  care   and  pru-  was  barred  by  the  statute  of  limitations, 

dence,  and,  if  loss  happens  through  the  See  Stahlschmidt  i?.  Lett,  1  Sm.  &  G .  415. 

ordinary  negligence  of  a  partner,   he  (y)   See   Robertson  v.   Southgate,    6 

must  bear  the  loss.     Carlin  v.  Donegan,  Ha.  540. 

15  Kan.  495.  (^)  See  Campbell  v.  Campbell,  7  CI. 

{^l)  1  Coll.  604.  &  Fin.  166,  ante,  p.  771. 
1044 


CHAl'.  VI.]  LIABILITIES   AND    LOSSES.  *785 

has  not  been  treated  by  the  partners  themselves  as  a  partnersliip 
loss.  A  loss  which  is  properly  chargeable  to  the  account  of  one 
partner  only,  becomes  chargeable  to  the  hrm  if  the  partners  have 
knowingly  allowed  it  to  be  so  charged  in  their  accounts,  and  have 
thus  taken  it  upon  themselves.  A  strong  instance  of  this  is  af- 
forded bv  the  case  of  Crao^i":  v.  Foi\l  (a),  already  re- 

•^  ,  °^  '       .    ,       "^  Craggv.  Ford. 

ferred  toon  another  point.     There  the  plaintifi'and  the 
defendant  were  partners;  the  defendant  had  engaged  in  adventures 
not  authorized  by  the  partnership  articles.     The  plaintiff  protested 
against  this,  but  although  the  adventures  ended  in  loss,  and  that 
loss   was    charged    against  the    firm    in    the    partnersliip 
♦books,    the  plaintiff  did  not  at  the  time  object,  or  insist     *785 
that  the  loss  should  be  borne  by    the    defendant.      "When, 
however,  the  partnership  was  dissolved,  and  its  accounts  were  made 
up,    the  plaintiff  refused  to  allow   the   losses   in    question    to  be 
charged  against  the  firm.      But  the  Court  held  that,  under  all  the 
circumstances  of  the  case,  the  Master  who  had  charged  the  losses 
against  the  partnership  had  not  done  wrong;  and  exceptions  w^hicli 
had  been  taken  to  his  report  by  the  plaintiff  were  overruled. 

It  has  been  already  pointed  out  that  directors  of  a  company  are 
as  between  themselves  and  the  company  trustees  with  Application  of 
large  discretionary  powers  (J)  ;  and  that  whilst  on  the  pHV('rpk's''o" 
one  hand  they  are  liable  for  losses  arising  from  acts  t-^^P"'"^'^- 
which  are  not  warranted  by  their  trust,  and  for  losses  arising  from 
their  own  culpable  negligence  (c),  they  are  on  the  other  hand  not 
liable  to  indemnify  the  company  from  losses  arising  from  ac's  done 
by  thera  ho7id-  Jide,  and  within  the  scope  of  their  authorit}''  {d) 
The  decisions  which  tend  to  show  that  directors  acting  Jc;?«/?(ft', 
but  beyond  their  powers,  are  entitled  to  indemnity  from  the  share- 
holders, have  also  been  noticed,  (e)  It  remains  therefore  merely  to 
add  in  this  place  that  if  losses  not  pro])erly  chargeable  to  the  com- 
pany or  the  shareholders,  without  their  consent,  are  ciiarged  to 
them  in  the  accounts  and  reports  in  such  an  open  and  fair  wa}-  as  to 
enable  them  to  see  and  understand  wliat  is  done,  and  these  accounts 
and  reports  are  not  objected  to,  but  arc,  on  the  contrary,  approved 

(a)  1  Y.  &  C.  C.  C.  285  ;  but  see  as  (b)  Book  iii.  c.  2,  §  3,  anie,  p.  587,  et 

to  losses  arisinf^r  from  illegal  acts,  the      seq. 
observations  of  Lord  Eldon  on  AVatts  r.  (r)  Ante,  p.  592,  593. 

Brook,  in  Aubert  v.  Maze,  2  Bros.  &  P.  {(I)  Ante,  p.  760. 

871.  (f)    Ante,  p.  760. 

1045 


*786  CONTRIBUTION    AND    INDEMNITY.  [bOOK  III. 

and  adopted  by  tlie  sluireliolders,  it  will  be  too  late  for  them  after- 
wards to  dispute  the  propriety  of  what  they  may  thus  have  sane- 
tioned.  (/)  Jkloreover,  those  shareholders  who  do  not  choose  to  at- 
tend meetino^s  of  wliich  they  have  notice,  cannot  complain  of  their 
i'niorance  of  what  they  might  have  known  had  they  attended,  {g) 


•^78G  *SECTION  V.— OF  INTEREST. 

The  principles  upon  which,  in  taking  partnership  accounts,  in- 
interestin  &c-  tcrest  is  allowed  or  disallowed,  do  not  appear  to  be 
plrtneis^'^*^"^  wcU  Settled.  The  state  of  the  authorities,  is,  in  fact, 
not  such  as  to  justify  the  deduction  from  them  of  any  general  prin- 
ciple upon  this  important  subject. 

Bv  the  common  law,  in  the  absence  of  a  special  custom  or  agree- 
ment, a  loan  does  not  bear  interest  (A)  ;  and,  notwith- 

General  rule  '  ^    '  . 

as  to  interest,  standing  many  dicta  to  the  contrary,  the  same  rule  ap- 
pears to  have  prevailed  in  equity,  {i)  This  rule  is,  no  doubt,  attribu- 
table to  the  old  notions  on  the  subject  of  usury ;  but  although  the  usury 
laws  are  abolished  the  rule  remains,  and  the  consequence  is  that  inter- 
est is  frequently  not  payable  by  law  when  in  justice  it  ought  to  be 

At  the  same  time,  by  the  custom  of  merchants  interest  has  long 
been  payable  in  cases  where  by  the  general  law  it  was  not  ;  and 
mercantile  usage  and  the  course  of  trade  dealings  are  held  to  au- 
thorize a  demand  for  interest  in  cases  where  it  would  not  otherwise 
be  payable,  {k)  In  applying  therefore  the  general  rule  against  the 
allowance  of  interest  to  partnership  accounts,  attention  must  be 
paid  not  only  to  any  express  agreement  which  may  have  been  en- 
tered into  on  the  subject,  but  also  to  the  practice  of  each  particular 
firm,  and  to  the  custom  of  the  trade  it  carries  on. 

As  a  o-eneral  rule  partners  are  not  entitled  to  interest  on  their 
respective  capitals  unless  there  is  some  agreement  to 

TntorGSt  OQ 

capital.  that  effect,  or  unless  they  have  themselves  been  in  the 

(/)  Ex  iMiie  Chippendale,   4  DeG.  Picton,  4  ib.  723;  Page  r.  Newman,  9  B. 

m/&  G.  19,  might  perhaps  have  been  &  C.  738;  Gwyn  v.  Godby,  4  Taunt.  346. 

properly  decided  on  this  ground  alone.  (/)  See  Tew  v.  The  Earl  of  Winterton, 

(g)  See  ante,  p.  550,  and  Turquand».  1  Ves.  J.  451;  Creuze  v.  Hunter,  2  ib. 

Marshall,  4  Ch.  376  ;  Lane's  case  1  De  157;  Booth  v.  Leycester,  1  Keen,  247, 

G.  J.  &  Sm.  504.  See,  also,  22  Beav.  165.  and  3  M.  &  Cr.  459. 

{h)  See  Gallon  r.  Bragg,  15  East,  223;  (A-)  See  Ex  imrte  Chippendale,  4  Do 

Higgins  V.  Sargent,  2  B.  &C.  349;  Shaw  v.  G.  M.  &  G.  36. 

1046 


CHAP.  VI.] 


INTEREST. 


*786 


habit  of  charging  sncli  interest  in  their  accoiints(?):'  and  even  where 
one  partner  has  brought  in    liis  stipuLated  capital  and  tlie  other 


(Z)  See  Cooke  v.  Benbow,  3  DeG.  J. 
&  Sm.  1 ;  Miller  v.  Cnug,  6  Beav.  433, 
where  interest  was  allowed,  that  having 
at  one  time  been  in  accordance  with  the 
usage  of  those  who  carried  on  the  busi- 
ness; and  Pirn  v.  Hams,  Ir.  Rep.  10  Eq. 
442,  where  the  decision  was  based  on 
the  terms  of  the  contract. 

'Tutt  V.  Land,  50  Geo.  350;  Desha  v. 
Smith,  20  Ala.  747;  Day  v.  Lockwood, 
24  Conn.  185  ;  Tirrell  v.  Jones,  39  Cal. 
655.  See,  also,  Whitconib  v.  Converse, 
119  Ma,ss.  36;  Moss  v.  McCall,  75  111. 
190;  Brown's  Appeal,  89  Penn.  St.  139. 

A  partner  cannot  claim  interest  on  his 
advances  towards  the  capital  stock, 
even  though  he  took  a  note  therefor,  by 
its  terms  carrying  interest.  Jones  v. 
Jones,  1  Ired.  Eq.  332. 

The  law  will  not,  in  the  absence  of  an 
express  stipulation  between  the  parties, 
compel  one  partner  to  pay  interest  to  his 
co-partners  on  the  amount  by  which 
their  capital  exceeds  his.  Desha  v. 
Smith,  su2)ra. 

A  and  B  were  partners.  A  furnished 
more  capital  than  B,  and  imder  an 
agreement  with  B  received  interest  on 
the  excess.  A's  health  failing,  B 
claimed  to  withhold  i'urther  payment  of 
the  interest,  in  view  of  the  diminished 
value  of  A's  services.  It  was  referred, 
and  settled  in  favor  of  A.  B  was  still 
unsatisfied,  but  continued  to  use  the  ex- 
cess of  capital  as  before,  and  it  did  not 
appear  that  A's  sei-vicee  were  less  valu- 
able than  B's:  Held,  that  B  was  bound 
by  the  decision  of  the  referee,  and  A  en- 
titled to  the  interest.  Piper  v.  Smith,  1 
Heatt,  93. 

Where  the  articles  provided  that  "if 
the  wants  and  necessities  of  said  busi- 
ness demand  an  increase  of  capital,  and 
the  same  be  supplied  by  the  said  A  (a 
partner)  the  firm  stipulate  to  pay  him 
interest  therefor    at  the  rates,"  -etc.: 


Held,  that  the  simple  fact  that  said 
partner  did  not  withdraw  the  whole  of 
his  share  of  the  profits  for  the  first  year, 
without  an}'  agreement  or  notice  to  the 
co-partner  that  the  capital  was  to  be 
increased  to  that  amount,  did  not  give 
such  partner  a  right  of  interest  on  such 
excess.     Tutt  v.  Land,  50  Ga.  339. 

Where  a  partnership  agreement  pro- 
vided that  the  defendants  should  con- 
tribute a  certain  amount  of  money  as  a 
"  working  capitol,"  and  that  such  capi- 
tal should  draw  mterest  at  seven  per 
cent.,  and  during  the  continuance  of 
the  partnership  business  more  capital 
was  needed,  and  the  defendants  ad- 
\'^nced  it  on  the  promise  of  their  co- 
partner, that  whatever  money  they  put 
in  they  should  get  back  with  interest: 
Held,  that  on  an  accounting  at  the  suit 
of  their  co-partner's  assignee,  they 
should  be  allowed  interest  on  the  addi- 
tional money  so  advanced,  as  well  as 
on  the  amount  originally  contributed. 
Gilhooly  r.  Hart,  8  Daly,  176. 

Where  the  original  articles  of  a  co- 
partnership contain  no  such  proWsion, 
it  is  not  proper,  in  taking  an  account, 
to  charge  each  partner  with  interest  on 
his  individual  account,  and  to  credit 
each  one  with  interest  on  moneys  paid 
in,  unless  a  subsequent  agreement  to 
that  eft'ect  is  clearly  and  satisfactorih' 
proved.  But  an  agreement  between 
partners  that  interest  shall  be  computed 
on  each  one's  account,  and  on  the  monej' 
jiaid  in  by  him,  will  not  justify  comput- 
ing interest  on  the  individual  accounts 
from  the  dates  of  the  several  charges 
up  to  the  close  of  the  busiaiess,  inde- 
])endent  of  whether  the  amounts  drawn 
out  exceed  the  just  share  of  the  profits 
to  the  respective  dates,  due  the  several 
partners.  Such  an  agreement,  if  proved, 
will  be  underetood  to  mean  that  each 
partner  will  be  charged  with   the  in- 

1047 


187 


INTEREST. 


[nOOK  III. 


*787  ''^lias  not,  the  former  will  not  be  entitled  to  interest  on  the 
winding  np  of  the  partnership  if  it  has  not  been  previously 
charged  and  allowed  in  the  accounts  of  the  firm  (?n)';  and  where  a 
person  is  paid  for  his  services  by  a  share  of  profits,  interest  on  cap- 
ital cannot  be  charged  against  him,  unless  there  is  some  agreement 
to  that  effect,  (y^)'  Moreover,  where  interest  on  capital  is  payable, 
the  interest  stops  at  the  date  of  dissolution  (o),  and  undrawn  profits 
are  not  necessarily  to  be  treated  as  bearing  interest  like  the 
capital.  {]?) 

An  advance  by  a  partner  to   a  firm  is   not   treated  as   an  in- 
interest  on  ad-    crcasc  of  his  Capital,  but  rather  as  a  loan  on  which  in- 

vances  to  the  ^   ,    ,       ^  •  ^  ^    ^  •    i.  t.   • 

firm.  terest  ought  to  be  paid;  and  by  usage,  interest  is  pay- 

able on  money  bond  fide  advanced  by  one  partner  for  partnership 
purposes;  at  least  when  the  advance  is  made  with  the  knowledge 
of  the  other  partners,  {g)^      Again,  directors  who   advance  money 


terest  on  liis  individual  account  in  ex- 
cess of  his  share  of  the  profits,  and 
credited  with  interest  on  moneys  ad- 
vanced over  and  above  his  indebtedness 
to  the  firm.  Moss  v.  McCall,  75  111. 
190. 

(w)  HiU  V.  King,  3  DeG.  J.  &  Sm. 
418. 

1  Where  partners  agree  to  invest  equal 
amounts  of  money  in  their  common  bus- 
iness, and  one  advances  a  larger  sum 
than  the  other,  he  has  been  held  enti- 
tled, upon  settlement  to  an  allowance  of 
interest  on  one-half  the  excess  so  ad- 
vanced by  him  from  the  date  of  its  ap- 
propriation to  the  use  of  the  firm.  Rey- 
nolds V.  Mardis,  17  Ala.  82. 

Where  a  partnership  is  formed  by 
three,  two  of  whom  are  to  furnish  the 
capital,  which  they  do  furnish,  the  other 
to  furnish  no  part  thereof,  in  the  ab- 
sence of  any  agreement  to  that  etfect 
either  express  or  to  be  implied  from  the 
conduct  of  the  parties,  those  fumishmg 
the  capital  wUl  not  have  the  right  to 
chai-ge  the  firm  with  interest  paid  by 
them  in  then-  own  names  with  which 
to  carry  on  the  business  of  the  firm. 
Tapping  v.  Paddock,  92  111.  92. 

(»))  Rishton    v.   Grissell,   6   Eq.  326, 

1048 


where  the  capital  was  borrowed  at  in- 
terest. 

2  Tirrell  v.  Jones.  39  Cal.  655. 

(o)  Barfield  v.  Loughborough,  8  Ch. 
1;  Watney  v.  Wells,  2  Ch.  250;  Pil- 
ling r.  Pilling,  3  DeG.  J.  &  Sm.  162, 
contra,  on  this  point  is  practically  over- 
ruled. 

{p)  Dinham  v.  Bradford,  5  Ch.  519. 
See,  also,  Rishton  v.  Grissell,  10  Eq. 
393,  as  to  interest  on  arrears  of  a  share 
of  profits. 

{q)  See  Ex  ^;«r/e  Chippendale,  4  De- 
G.  M.  &  G.  36,  and  the  cases  in  the 
next  note.  See,  also,  Omychmid  v. 
Barker,  Coll.  on  Partn.  231,  note;  Den- 
ton V.  Rodie,  3  Camp.  496.  But  see  con- 
tra, Stevens  v.  Cook,  5  Jur.  N.  S.  1415. 

'^  See  Moms  v.  Allen  14  N.  J.  Eq. 
44;  Hodges  v.  Parker,  17  Vt.  242. 

See,  however,  Lee  v.  Lashbrooke,  8 
Dana,  214. 

An  ordinary  partner,  though  entitled 
to  interest  on  his  advances,  cannot 
claim  conventional  interest  without  his 
co-partner's  written  agreement  to  pay 
it;  nor  is  such  an  agreement  proved  in 
an  ordinary  partnership  by  a  charge  of 
conventional  interest  in  the  books  kept 
by  the  partner  claiming  it,  and  in  the 


CHAP.  VI.] 


CONTKIHL  .'.''X    AND    INDKMNITV 


r88 


for  the  purposes  of  their  company  under  circumstances  whicli  en-j 
title  them  to  repayment,  are  also  entitled  to  charge  the  company 
with  interest  on  their  advances,  (r)  The  rate  of  interest  given  in 
such  cases,  is  simply  interest  at  5  per  cent.  {s\  unless  a  different} 
rate  is  pa3'able  by  the  custom  of  the  ])articular  trade (/),  or  has  beenj 
charged  and  allowed  in  the  books  of  the  particular  partnership.  (w)j 

Inasmuch  as  what  is  fair  for  one  partner  is  so  int<restou 

for  another,  *and  the  firm  when  debtor  is  charged     *788  an'Mm'iau"^ 
with  interest,  it  seems  to  follow  that  if  one  ])art-  *"  ''""'*• 

ner  is  indebted  to  the  firm  either  in  respect  of  money  borrowed,  or 
in  respect  of  balances  in  his  hands,  he  ought  to  be  charged  with 
interest  on  the  amount  so  owing,'  even  though  on  the  balance  of 
the  whole  account,  a  sum  might  be  due  to  him.  (x)  Except,  how- 
ever, where  there  has  been  a  fraudulent  retention  (y),  or  an  im- 
proper application  (s)  of  money  of  the  firm,  it  is  not  the  ])ractice 
of  the  Court  to  charge  a  partner  with  interest  on  money  of  the  firm 
in  his  hands  (a);  for  example,  under  ordinary  circumstances  a  part- 


accounts  rendered  from  time  to  time  to 
his  co-partner.  Mourain  v.  Delamre,  4 
La.  Ann.  78. 

Articles  of  co-partnership  between 
plaintiffs  and  defendants,  in  a  bill  in 
chancery,  brou<4ht  for  the  settlement  of 
a  co-partnership  account,  stipulated  that 
the  plaintiff's  were  to  furnish  the  funds 
and  credits  necessary  for  conducting  the 
partnership  business  and  that  "  all  ac- 
counts, paid  by  either  party  for  neces- 
sary disbursements  in  the  business  of 
the  company,  were  to  be  charged  to  the 
concern."  A  committee,  to  whom  the 
cause  was  refeiTcd,  found  a  balance  of 
$1,597.16  for  interest,  in  favor  of  the 
plaintiff's  on  disbursements  made  in 
the  year  1850.  It  appeared  that  in  1854 
the  defendant  was  informed  of  the  re- 
sult of  such  business;  at  all  times  had 
access  to  the  accounts  on  the  partnership 
book,  in  which  he  was  interested,  and 
sometimes  mspocted  them,  but  made  no 
objection  to  such  charge,  until  the  hear- 
ing of  the  cause  in  1857:  Held,  that  it 
was  then  too  late  for  the  defendant  to 
object  to  such  charge  of  interest,  for  the 
first  time.    Pond  v.  Clark,  24  Conn.  370. 


(r)  Ex  parte  Chippendale,  4  DeG.  M. 
&  G.  36  ;  Ex  parte  Bignold,  22  Beav. 
167;  Magdalena  Steam  Navigation  Co. 
Johns.  690;  Troup's  case,  29  Beav.  393. 

(s)  Eximtie  Bignold,  22  Beav.  167; 
Troup's  case,  29  ib.  353.  See,  also, 
Hart  V.  Clarke,  6  DeG.  M.  &  G.  254. 

{t)  As  to  compound  interest  in  the  case 
of  bankers,  see  Bate  v.  Robins,  32  Beav. 
73;  Ferguson  v.  Fyfe,  8  CI.  and  Fm.  121. 

(»)  As  in  lie  Magdalena  Steam  Nav. 
Co.  Johns.  690,  where  6  per  cent,  was 
allowed. 

1  See  Gridley  r.  Connor,  2  La.  Ann.  87. 

[x)  See  Beecher  v.  Guilljuni,  Mose- 
ley,  3. 

(//)  As  in  Hutcheson  v.  Smith,  5  Ir. 
Eq.  117,  where,  however,  the  partner 
retaining  the  money  was  also  a  receiver 
appointed  hy  the  Court. 

{z)  As  in  Evans  v.  Coventry,  8  DeG. 
M.  &  G.  8.35. 

f^O  See  Webster  v.  Bray,  7  Ha.  591, 
where  interest  on  balances  in  the  hands 
of  the  defendants  was  asked  for  but  not 
given.  See,  too,  Stevens  v.  Cook,  5  Jur. 
N.  S.  1415;  Turner  v.  Burkinshaw,  2 
Ch.  488. 

1049 


'^TSS  CONTRIBUTION    AND    INDEMNITY.  [bOOK  III. 

ner  is  not  chari^ed  witli  interest  on  sums  drawn  out  by  liim  or  ad- 
Rhodes  r.  vanced  to  him.  {by  In  a  case(c),  A.  and  B.  were  part- 
Rhudes  ners;  A.  died,  and  his  son  and  executor  C.  succeeded 


(&)  Cooke  V.  Benbow,  3  DeG.  J.  & 
Sin,  1;  Meymott  v.  Meymott,  31  Beav. 
445.     See  the  cases  in  the  next  note. 

■-'  In  taking  partnership  accounts,  the 
question  whether  interest  shall  be  al- 
lowed or  disallowed  must  depend  on  the 
circumstances  of  each  particular  case. 
Gyger's  appeal,  62  Penn.  St.  73;  Buck- 
ing-ham V.  Ludlam,  29  N.  J.  Eq.  345. 
Interest  will  be  disallowed  before  disso- 
lution, and  allowed  after  dissolution,  on* 
overdrafts  made  by  one  partner,  where 
there  are  special  circumstances.  Buck- 
ingham V.  Ludlam,  supra. 

As  a  general  rule,  interest  will  not  be 
allowed  upon  partnership  accounts  until 
after  a  balance  is  struck  on  settlement 
between  the  partners,  unless  the  part- 
ies have  otherwise  agreed  or  acted  in 
their  partnership  concerns.  Gilraan  v. 
Vanghan,  44  Wis.  646;  Gage?'.  Parma- 
lee,  87  lU.  330.  See,  also,  McCormick 
V.  McCormick,  1  Neb.  440;  Brown's 
appeal,  89  Penn.  St.  139. 

Or  unless  it  appears  that  the  partner 
having  such  balances  has  made  a  profit 
by  retaining  them.  Colgin  v.  Cummins, 
1  Port.  148. 

Or  there  has  been  great  delay  not  sat- 
isfactorily accounted  for.  RusseU  v. 
Green,  10  Conn.  269. 

Where  a  partner  agi-ees  in  writing  to 
exhibit  a  partnership  account  on  a  cer- 
tain day  and  make  a  settlement,  and  on 
that  day  refuses  and  withholds  the 
books,  he  is  properly  chargeable  with 
interest  from  such  day  in  any  balance 
found  against  him  on  a  bill  for  an  ac- 
count, up  to  the  date  of  the  first  decree. 
Scroggs  v.  Cunningham,  81  111.  110. 

While  it  is  a  general  rule  that  one 
partner  is  not  chargeable  with  interest 
on  moneys  of  the  firm  in  his  hands, 


until  a  balance  has  been  struck  or  an 
accounting  had,  yet  where  one  partner 
kept  the  account  books  and  knew,  or 
ought  to  have  known,  the  precise 
amount  in  his  hands  belonging  to  the 
firm,  and  made  at  one  time  what  pur- 
ported to  be  a  full  statement  of  the 
business,  which  was  incorrect  :  Held, 
that  there  was  no  eiTor  in  charging  him 
with  interest.  Dimond  v.  Hender«on, 
47  Wis.  172. 

In  general,  where  articles  of  co-part- 
nership permit  the  partners  to  with- 
draw certain  sums  annually,  without 
containing  any  stipulation  in  regard  to 
interest  thereon,  interest  will  not  be 
allowed.     Miller  v.  Lord,  11  Pick.  11. 

Where  heu's  were  allowed  to  surcharge 
and  falsify  a  partnership  account  be- 
tween their  intestate  and  the  defendant, 
interest  was  refused  on  the  errors  in 
the  accounts,  which  were  owing  to  the 
mistakes  of  both  parties,  there  having 
been  no  want  of  good  faith,  and  no 
habit  of  charging  interest  between  the 
parties.     Dexter  v.  Arnold,  3  Mas.  284. 

An  entiy  as  to  interest  on  yearly  bal- 
ances in  the  books  is  presumed  to  have 
been  made  with  the  assent  of  all  the 
partners,  and  bmds  each  as  if  made  by 
himself.  Pratt  v.  McHatton,  11  La. 
Ann.  260. 

On  sums  received  by  a  partner  during 
the  course  of  business,  he  is  not,  in 
Louisiana,  liable  for  interest  mider  Civ. 
Code,  2829.  He  is  liable  only  from  a 
liquidation  of  the  partnership,  as  a 
defaulter  under  Civ.  Code  2984.  Hil- 
hgsberg  v.  Burthe,  6  La.  Ann.  170. 

Where,  on  the  dissolution  of  a  part- 
nership, a  balance  is  found  due  from 
one  partner  to  the  other,   and  the  foi 
mer  retains  it,  he  is  liable  for  interest 


(c)  Rhodes  v.   Rhodes,  Johns.    633,      but  betbar  rcpDrted  in  6  Jur.  N.  S.  603. 
1050 


CHAP.  VI.] 


CONTRIBUTION    AND    INDEMNITY. 


rs8 


him  in  partnership  with  13.  B.  afterwards  retired  in  favor  of  his  own 
son  D.  At  the  time  of  B.'s  retirement,  a  considerable  ?um  was  due 
to  him  from  A.'s  estate  in  respect  of  moneys  drawn  out  by  A.  This 
sum  was  treated  as  a  debt  of  the  new  tirm  of  C.  and  D.,  and  had  not 
been  paid  off.  B.  having  died,  his  executors  claimed  interest  from  the 
time  of  his  retirement;  but  the  claim  was  disallowed  on  the  ground 
that  no  agreement  to  pay  interest  had  been  entered  into,  and  the  claim 
was  opposed  to  the  course  of  dealing  between  the  partners  themselves. 
"Where  one  ])artner  claims  a  benefit  obtained  by  his  co-partner 
and  succeeds  in  establishing  his  claim,  the  claimant  is  interest  where 
charged,  as  the  price  of  the  relief  afforded,  not  only  wimt  ims  T.een 

.,,  n  iiii-  obtiiiiK-d  by 

With  tlie  amount  actually  expended  by  his  co-partner  one  punner. 


from  the  time  of  dissolution  until  pay- 
ment. Honore  v.  Colmesnil,  7  Dana, 
199;  Bowling:  v.  Dolyns,  5  id.  4;]4; 
Taylor  v.  Young,  2  Bush,  428;  Holden 
V.  Peace,  4  Ired.  Eq.  223. 

A  partner,  who  on  the  dissolution  of 
the  partnership  holds  the  assets  and 
property  of  the  firm,  and  is  entrusted 
with  the  duty  of  winding'  up  the  affairs 
of  the  partnership,  is  chargeable  with 
interest,  as  between  himself  and  his  co- 
partner, if  he  mmgl  es  the  money  of  the 
finn  with  his  own  or  neglects  unreason- 
ably to  settle  his  account.  Dunlap  v. 
Watson,  124  Mass.  305. 

Where  complainants,  members  of  a 
partnei-ship,  had  just  grounds  for  filing 
a  bill  against  their  co-partner  for  a  dis- 
solution of  the  partnership,  and  a  large 
balance  was  found  due  to  them,  the  de- 
fendant should  be  decreed  to  pay  inter- 
est from  the  time  of  filing  the  bill,  ajid 
the  costs;  and  where  no  objection  to 
the  amount  allowed,  the  auditor  was 
made  in  the  court  below,  although  such 
amount  appears  very  extravagant,  and 
no  proof  or  data  appears  in  the  record, 
by  which  the  court  of  appeals  can  cor- 
rect it,  the  court  will  not  undertake  to 
fix  the  amount.  Moou  v.  Story,  8 
Dana,  226. 

On  a  bill  by  one  partner  against  an- 
other for  an  accoimt  after  a  dissolution, 
t  appeared  that  the  complainant  never 


advanced  any  capital,  and  that  his 
whole  interest  consisted  in  his  share  of 
the  profits  of  the  concern :  Held,  that 
though  the  defendant  continued  the 
business  after  the  dissolution  as  before, 
the  share  of  the  complainant  not  being 
paid  to  him,  he  should  pay  interest  to 
the  complainant  on  his  share,  and  not  a 
share  of  the  profits  which  accrufd  sub- 
sequently to  the  dissolution.  .Reybold  r. 
Dodd,  1  Harr.  401. 

Partners  resided  in  different  places, 
and  a  large  balance  due  to  the  partner- 
ship had  accrued  in  the  hands  of  one  of 
them  in  1827,  but  no  account  was  ren- 
dered by  either  during  the  exist(  nee  of 
the  partnei-ship,  which  dissolved  in  1S30. 
No  settlement  nor  attempt  to  obtain  a 
settlement  was  then  had,  and  the  debtor 
pai-tner  died  in  1832,  and  no  settlement 
was  had  untU  18:37:  Held,  that  the 
parties  had  been  both  remiss  in  their 
duty,  and  that  the  estate  of  the  debtor 
partner  was  not  chargeable  with  interest 
on  the  balance  due  until  the  settlement 
in  1837,  when,  although  the  suit  was 
pending,  the  amount  due  Wiis  ascer- 
tained, and  might  have  bprn  paid  into 
coiu-t.  B.'acham  v.  Eckibnl,  2  Sandf. 
Ch.  116. 

A  surviving  partner  is  liable  for  mter- 

est  on  a  balance  in  his  hiuids  from  the 

time  when  the  lousiness  might  have  been 

settled  up.    Hite  v.  Hite.  1  B.  Mon.  177. 

1051 


""789  IKTEKKST.  [book  III. 

in  obtaininc^  the  benefit,  but  with  interest  on  that  amount  at  the 
rate  of  51.  per  cent,  [d)  On  the  other  hand,  if  one  j^artner 
789*  has,  in  breach  of  *t]iegood  faith  due  to  liis  co-partners,  ob- 
tained money  which  he  is  alterwards  compelled  to  account 
lor  to  the  firm,  he  will  be  charged  with  interest  upon  tlie  amount 
at  the  rate  of  4:1  per  cent,  (e) 

In  Evans  v.  Coventry  (y),  directors  were  charged  with  interest 
Interest  ^^  ^^-  P^i"  Cent,  on  the  money  of  the  company-  improper- 

agamst^directr  Ij  applied  by  them  in  paying  themselves  salaries,  in 
^^^'  paying    dividends  out  of  capital,  and  in  buying    up 

shares:  and  in  other  cases  when  they  have  been  charged  with  assets 
of  the  company  which  they  have  misapplied,  or  with  profits  made 
by  themselves,  to  which  the  company  is  entitled,  they  have  usually 
been  charged  with  interest  at  4  per  cent,  {g) 

Where  a  partnership  has  been  dissolved  by  the  death  of  one 
Confused  ac-  partner,  and  the  Surviving  partner  keeps  the  accounts 
counts.  Ijj  such  a  way  as  to  render  it  impossible,  until  after  the 

lapse  of  a  considerable  time,  to  ascertain  the  balances  due  to  him- 
self and  his  deceased  partner,  neither  the  surviving  partner  nor  his 
representatives  can  claim  interest  on  tlie  sum  ultimately  found  due 
to  him  or  his  estate.  (A)  * 

(d)  See  Harb  v.  Clarke,  6  DeG.  M.  &  '  Where  one  partner  had  charge  of  the 
G.  254;  see,  too,  Perens  v.  Johnson,  3  firm  books,  and  they  were  kept  so  that 
Sm.  &  G.  419.                                                it  was  impossible  to  tell  the  true  state 

(e)  See  Fawcett  v.  Whitehouse,  1  R.  of  accounts :  Held,  that  every  presump- 
&  M.  132.  tion  to  his  disadvantage  was  proper, 

(f)  8  DeG.  M.  &  G.  835.  and   that  he  was  properly  chargeable 
ig)  See    Joint    Stock    Discount    Co.      with  interest  upon  any  money  found  due 

V.  Brown,  8  Eq.  407;  Parker  1?.  McKenna  from  him  to  the  firm,  though  there 
10  Ch.  123.  had  been  no  balance  struck.     Dimond 

{h)  Boddam  v.  Ryley,  1  Bro.   C.   C.      v.  Henderson,  2  N.  W.  Rep.  N.  S.  73. 
239;  2  ib.  2;  and  4  Bro.  P.  C.  561. 
1052 


CUAP.  VII.] 


DIVISION    OF    PROFITS. 


r9o 


*CIIAPTER  VII. 


*790 


OF  TIIK  DIVISION  OF  PROFITS  AND  OF  DIVIDENDS. 

The  realization  and  division  of  profit  is  the  ultimate  object  of 
every  partnership;  and  the  right  of  every  partner  to  a  j,. .,  = 
share  of  the  profits  made  by  the  firm  to  which  he  l)e-  P''"''^- 
longs,  is  too  obvious  to  require  comment.  Where  there  is  no  right 
to  share  profits,  there  can  be  no  partnership,  and  almost  all  tiie 
other  rights  possessed  by  partners  ma}'  be  said  to  be  incidental  to 
the  right  in  question. 

The  times  at  which  the  profits  are  to  be  divided,  the  quantum  to 
be  divided  at  anv  one  time,  the  sums,  if  anv,  which  are  „..       ,      , 

'  '  .,  ■I  1  imes,  (kc,  of 

to  be  placed  to  the  debit  of  the  firm  in  favor  of  any  ii'^»sioii. 
particular  ]>artner  for  salary,  interest  on  capital,  etc.,  before  anv 
profits  are  to  be  divided,  these  and  all  similar  matters  are  usually 
made  the  subject  of  express  agreement;*  but  where  no  such  agree- 
ment has  been  made,  and  no  tacit  agreement  relative  to  them  can 
be  inferred,  the  principles  laid  down  in  the  preceding  chapter  must 
be  applied,  (a)    With  respect  to  the  times  of  division  and  quantum 


'  Where  the  defendants  in  1850  entered 
into  a  contract  with  a  firm  in  Porto  Ri- 
co, for  the  transactingr  of  businef3s  be- 
tween Porto  Rico  and  New  York,  by  the 
tenns  of  which  it  was  provided  tliat 
each  of  the  defendants  sliould  be  enti- 
tled to  one-third  of  the  protits  of  such 
business,  and  in  1851,  they  entered 
into  articles  of  co-partnership  with  the 
plaintiffs,  by  which  it  was  provided 
"  that  the  plaintiffs  should  be  interested 
in  said  business,  and  that  all  shipments, 
made  in  pursuance  of  said  contract, 
should  be  on  joint  account ;  that  the 
plaintiffs  should  be  one-third  interested 
and  that  the  defendants  should  repre- 


sent the  then  two-thirds  interest;  "  it 
was  held  that  the  share  of  th?  plaintiffs 
in  the  profits  of  the  entire  business  trans- 
acted under  said  contracts,  was  not — as 
was  claimed  by  the  defendants — one- 
third  of  three-fourths,  but  ono-third, 
thereof.     Pond  v.  Clark,  24  Conn.  o70. 

G.  guaranteed  his  partner,  B.  $10,0;.">C 
profits  the  first  j'ear  "notwithstanding 
losses  to  any  extent,  "  and  at  the  end 
of  the  3Tar  the  partnership  was  dissolved 
and  no  profits  made  :  //<■/(/,  that  B.  was 
entitled  to  receive  from  G.  the  $10,000. 
Grant  v.  Bryant,  101  :\rass.  567. 

(a)  As  to  the  mode  of  a.scertaining 
profits  where  a  pei-son  not  a  partner  is 
1053 


*791 


DIVISION    OF    TROFITS. 


[UOOK  III. 


to  be  divided  at  any  given  time  it  is  conceived  that  the  majority 
must  govern  the  minority  where  no  agreement  upon  the  subject  has 
been  come  to  (5);  for  these  are  matters  of  purely  internal  regula- 
tion, and  with  respect  to  such  matters  a  dissentient  minority  have 
only  one  alternative,  viz.,  either  to  give  way  to  the  majority,  or,  if 

in  a  position  so  to  do,  to  dissolve  the  partnership. 
*791  *Profit  is  the  excess  of  receipts  over  expense;  and  in  wind- 
ing up  a  partnership  or  company,  nothing  is  properly 
biel^sVoflt.''''  divisible  as  profit  which  does  not  answer  this  descrip- 
tion.' But  for  the  purposes  of  business,  and  of  facilitating  annual 
divisions  of  profits,  a  distinction  is  made  between  ordinary  and 
extraordinary  receipts  and  expenses;  and  whilst  all  extraordinary 
expenses  are  frequently  defrayed  out  of  capital,  and  out  of  money 


entitled  to  a  share  of  them,  see  Rishton 
V.  Grissell,  5  Eq.  326,  and  10  Eq.  393  ; 
Geddea  v.  Wallace,  2  BU.  270. 

(fc)  See  Stevens  v.  South  Devon  Rail. 
Co.  9  Ha.  326,  and  Corry  r.  London- 
derry, &c.  Co.  29  Beav.  263,  as  to  de- 
claiing  dividends  before  paying  debts  ; 
Browne  v.  Monmouthshire,  <S:c.  Co. 
13  Beav.  32,  as  to  paying  dividends  be- 
fore works  are  finished. 

1  Where  parties  purchase  on  joint  ac- 
count and  for  speculation  a  lot  of  goods, 
with  the  understanding  that  they  shall 
share  equally  the  profits  and  losses 
which  may  result  from  the  sale  thereof, 
the  advances  and  expenses  are  to  be 
first  paid  before  there  can  be  any  divi- 
sion of  the  profits.  It  partakes  of  the 
nature  of  a  partnersliip.  Doane  v. 
Adanxs,  15  La.  Ann.  350. 

Interest  on  the  capital  invested  is  not 
to  be  deducted  in  ascertaining  the  "  net 
profits,"  but  only  losses  and  expenses 
of  business.  Tutt  v.  Land,  50  Ga.  339, 
350.    See  ante,  786,  note. 

The  plaintiffs  sub- let  part  of  theur 
store  to  the  defendant  to  carry  on  a 
certain  business.  Afterwards  an  agree- 
ment was  entered  into  whereby  the 
plaintiffs  were  to  assist  the  defendant 
in  his  business,  the  latter  to  assume  the 
whole  rent,  furnish  the  capital,  defray 

1054 


the  expenses,  and  pay  the  plaintiffs  one- 
fourth  of  the  net  profits:  Held,  that  in 
ascertaining  the  profits,  the  defendant 
was  entitled  to  a  credit  for  loss  of  stock 
by  fire  (Meserve  v.  Andrews,  106  Ma«s. 
419;  Gill  V.  Geyer,  15  Ohio  St.  399), 
but  not  for  expenses  incuiTed  without 
the  knowledge  of  the  plaintiffs,  in  de- 
fending a  criminal  prosecution  for  car- 
lying  on  the  business,  which  did  not 
arise  through  any  act  directly  or  mdi- 
rectly  of  the  plaintiffs.  Meserve  v.  An- 
drews, supra. 

A  partner  who  has  withdrawn  assets 
and  invested  them  in  a  new  enterprise 
without  his  co-partners'  consent,  is 
chargeable  only  with  their  proportion- 
ate share  of  the  profits  thereof.  Brown 
V.  Schackleford,  53  Mo.  122. 

Under  articles  of  partnership  which 
stipulatsd  that  the  cash  receipts,  after 
deducting  one-half  the  profits,  are  to  be 
paid  to  one  partner,  and  that  the  othet 
partners  are,  at  the  expiration  of  the 
partnership,  to  take  their  proportion  of 
the  outstanding  claims  as  part  of  the 
profits,  the  latter  are  not  required  to 
take  the  whole  of  their  profits  out  of  the 
claims.  The  last  clause  of  the  stipula- 
tion relates  to  such  part  of  the  profits 
as  are  represented  by  the  claims. 
Moore  v.  Thieber,  31  Ark.  113. 


CHAP.  VII.]  DIVISION    OF    PICUFITS.  *792 

raised  by  borrowiii*^.  the  ordinarv  exitciisos  arc  defrayed  out  of  the 
returns  of  the  business;  and  tlic  jirulits  divisible  in  any  year  arc 
ascertained  by  comparing  tlie  ordinaiy  receipts  with  the  ordinary 
expenses  of  that  year.  It  is  obvious  that,  unless  some  such  ])rin- 
ciple  as  this  were  liad  recourse  tf),  there  could  be  no  di\ision  ot 
profits,  even  of  the  most  lioui'ishing  business,  whilst  any  of  its 
debts  were  unpaid,  and  any  of  its  ca])ital  sunk.  What  hjsses 
and  expenses  ought  to  be  treated  as  onJinary,  aiul  tlierefore  jiay- 
able  out  of  current  recei])ts,  and  what  ought  to  be  treated  as  extra- 
ordinary, and  payable  legitimately  out  of  capital  or  money  bor- 
rowed, is  a  question  on  which  opinions  may  often  honestly  differ;  and 
one  which,  when  open  to  honest  diversity  of  opinion,  a  majority 
of  members  can  lawfully  determine.  The  power  of  a  majority, 
however,  in  such  matters  is  limited  by  the  principle  that  funds 
raised  for  one  purpose  caimot  be  applied  to  another  without  the 
consent  of  all  the  subscribers;  and  although  in  cases  of  iionest 
doubt  the  power  of  a  majority  to  decide  how  a  particular  expense 
or  loss  shall  be  borne  can  hardly  be  denied  (<?),  such  power  cannot 
be  lawfully  exercised  for  the  dishonest  purpose  of  making  it  appear 
that  profits  have  been  made,  when  in  truth  the  current  receipts 
have  been  less  than  the  current  expenses.  (rZ)^  But  if  the  current 
receipts  exceed  the  current  expenses,  the  writer  apj^reliends  that 
the  difference  can  be  divided  as  profit,  although  the  ca])ital  may  be 
spent  and  not  be  represented  by  saleable  assets. 

Under  ordinary  circumstances,  and  in  the  absence  of  any  agree- 
ment to  the  contrary,  moneys  earned  ought  to  be  treated  as  profits 
of  the  year  in  which   they  are  paid,  and  not   as  cnse'^  where 

profits  ^of  the  year  in  which  they  are  earned  {e);  '^192  uvrnTiti^n^i^ 
and  in  ascertaining  the  profits  of  a  comjiany  for  imi-mper. 

the  purpose  of  making  a  dividend,  debts  incurred  in  the  ordinary 
course  of  business  ought  to  be  deducted,  but  not  debts  incurred 

(r)  See  Gregory  v.  Patchett,  33  Beav.  its,  purchased  real  estate.     On  a  bill  by 

59").  a  guarantor,  who  had  paid  the  prico  of 

{d)  See  Bloxam  v.  Metropolitan  Rail.  the  goods,  the  court  ordered  a  resale  of 

Co.  3  Ch.  337.  the  land  purchased  by  the  partner,  to 

*  Partners  in  a  commercial  adventure  reimburse  the    guarantor.      Greene   r. 

made  a  stat^^ment  of  the  supposed  prof-  Ferrie,  1  Dessau.  1()4. 
its  before  the  profits  were  ascertained,  (r)  See  y^e/- Turner.  L.  T.,  in  Maolaren 

and  1)efore  payment  for  the  goods  pur-  r.  Stainton,  3  DeG.  F.  tt  .1.  214.     Com- 

chased  for  the  adventure,  and  one  of  pare  Browne  v.  Collins,  12  Eq.  o^G. 
the  partners,  with  his  share  of  the  prof- 

1055 


*793  DIVIDENDS    OUT    OF    CAPITAL.  [rOOK  III. 

bj  exercising  special  powers  of  borrowing.  {/)  Assets,  more- 
over, may  be  estimated  at  a  value  which  they  may  never  realize,  [rj) 
It  has  also  been  held  that  dividends  may  be  paid  by  a  company 
before  its  works  are  finished  (A),  and  although  its  debts  may  be 
nnpaid.  The  creditors  of  a  company  may  be  willing  to  allow 
tlieir  principal  moneys  to  continue  unpaid,  provided  they  are 
punctually  paid  the  interest  upon  them;  and  if  a  company,  after 
defraying  all  current  ex])enses  and  the  interest  of  its  debts,  has  a 
surplus  arising  from  its  current  receipts,  there  is  no  principle  either 
of  law  or  morality  which  requires  that  such  surplus  shall  be  accu- 
mulated, or  forbids  its  division  as  profit  amongst  the  sliareholders. 
Whetlier  dividends  shall  be  paid  whilst  debts  remain  unpaid,  or 
whether  the  whole  or  any  part  of  the  surplus  of  receipts  over  ex- 
penditure shall  be  accumulated  or  divided,  are  questions  which  it  is 
competent  for  the  majority  of  shareholders  to  decide,  {i) 

Expenses  incidental  to  the  formation  of  a  company  are  frequently 
paid  oif  by  installments  spread  over  a  number  of  years,  dividends 
being  paid  in  the  meanwhile  (I");  and  if  this  is  done  openly,  there 
seems  to  be  nothing  illegal  in  it.  And  it  is  conceived  that  divi- 
dends may  be  paid  even  by  a  limited  company,  if  its  income  ex- 
ceeds its  expenditure,  although  its  whole  capital  may  have  been 
sunk  in  starting  the  company,  and  could  not  be  recovered  if  the 
company  were  wound  up. 

Payment  of  Expcuscs  properly  chargeable  to  capital,  but  paid  out 

cIpitaL^'^  ^'^      of  income,  may  afterwards  be  charged  to  capital  so  as 

to  increase  a  dividend.  In  other  words,  the  income  account 
*793     may,  in  such  *a  case  be  recouped  by  tlie  capital  account,  and 

tlie  two  accounts  be  set  right  by  paying  a  dividend  out  of 
capital.  (T)  But  except  in  a  case  of  this  sort,  payments  out  of  capi- 
tal cannot  be  profit;  and  to  pay  what  are  called  profits  or  dividends 
out  of  capital  is,  under  whatever  disguise,  tantamount  to  returning 
so  much  capital  to  the  partners  or  shareholders,  to  whom  such  pay- 
ments are  made.     In  ordinary  partnerships  there  is  nothing  to  pre- 

(/)    Corry  v.    Londonderry  Co.    29  29  Beav.  263. 
Beav.  263.  (^0  Seeder  Martin,  B.  in  Bale  v.  Cle- 

(r/)  Stringer's  case,  4  Ch.  475;  Ranee's  land,   4  Fos.    &   Fin.    144.     See,    also, 

case,  6  Cli.  104.  Bardwell  v.  Sheffield  Waterworks  Co. 

(/»)  Browne  v.   Monmouthshire,   &c.  14  Eq.  517. 
Rail.  Qo.  13  Beav  32.  (?)   Mills  v.   North   Rail,    of  Buenos 

(0  Stevens  i'.  South  Devon  Rail.  Co.  Ayers  Co.  5  Ch.   621.     Compare   Hr.ol'-> 

9  Ha.   313;  Coiry  v.   Londonderry  Co.  v.  Great  Western  Rail.  Co.  3  Ch.  2G2. 

lOoG 


CKAP.  VII.]  DmSION   OF    PROFITS.  *794 

\ent  tlie  partners  from  witlKlriiwing  and  diiiiinisliing  tlieir  capitals 
wliolly  or  in  ]»iirt  if  tliev  all  think  proper  to  do  so;  nor  is  tlierc  any 
k'^al  reason  wli}'  ])artners  slionld  not,  if  tliey  please,  borntw  money 
on  the  credit  of  the  lirm,  and  divide  it  wholly  or  in  ])art  among  them- 
selves. ]jut  neither  course  conld  be  jtnrsucjd  withunt  the  consent 
of  all  the  partners.  "With  respect  to  companies,  however,  there  are 
reasons  why  capital  and  money  borrowed  should  not  be  apjdied  in 
making  payments  to  shareholders,  even  although  thej^  may  all  con- 
sent. In  the  first  place,  such  an  application  of  the  monej*  is  calcula- 
ted to  deceive  the  public,  and  can  hardly  be  made  for  any  honest  pur- 
pose; and  in  the  next  place,  capital  raised,  or  money  borrowed,  in 
'order  to  carry  on  the  business  of  the  company,  cannot  be  properly 
applied  for  such  a  wholly  different  purpose  as  that  of  paying  divi- 
dends to  the  shareholders.  (;//)  Even  if  all  the  shareholders  can  ren- 
der such  a  course  legal,  a  majority  cannot;  and  the  more  ditRcult 
theoretical  question  whether  all  can  is  of  little  ]tractical  conse- 
quence. (71)  AVith  respect,  indeed,  to  companies  governed  by  the 
Companies  clauses  consolidation  act  (<?),  or  by  the  Table  A.  to  the 
Companies  act,  1802  {p),  payment  of  dividends  otherwise  than  out 
of  profits  is  expressly  prohibited,  and  will  be  restrained  by  injunc- 
tion, {q) 

Independently  of  anv  statute,  if  a  comnanv 
pledges  its  funds  "^ior  the  payment  ot  debts,  and  *il)i  uy  of  directors. 
the  directors  misa})j)ly  those  funds  by  knowingly 
paying  dividends  out  of  capital,  they  are  compellable  to  re^^lace 
not  only  the  amount  of  dividends,  which  they  themselves  have 
actually  received  in  respect  of  their  own  shares,  but  also  the  whole 
amount  of  the  dividends  which  they  have  caused  to  be  paid  to  the 
other  shareholders,  and  also  interest  thereon,  {r)  But  neither 
directors  nor  shareholders  are  liable  to  refund   dividends  declared 

(m)  See  ante,  p.  600,  ct  seq.  1  Ch.    D.  6S2.     Compare   BardwoU   r. 

(«)  See  Macdoughall  v.  Jersey  Tmpe-  Sheffield  Waterworks   Co.    14   Eq.  517, 

rial  Hotel  Co.  2  Hera.  &  M.  52?;  Faw-  as  to  payment  of  dividends  before  capi- 

cett  V.  Laurie,  1  Dr.  &  Sm.  192;  James  tal  is  productive. 

V.  Eve,  L.  R.  6  H.  L.  335.  (/•)  Evans  v.  Coventry,  8   DeG.  M.  & 

(0)  8  &  9  Vict.  c.  16,  §  121.  G.  835.     See  the  decree,  clause  4.    The 

{p)  Table  A.,  art.  73.  decree  was  made  without  prejudice  to 

{q)  See  ante,  note  (n)  and  Bloxam  v.  the  right  of  the  directors  to  recover  the 

Metropolitan  Rail.  Co.  3  Ch.  337;  Hoole  dividends  back  from   those  who  had  re- 

r.   Great    Western  Rail.    Co.  ib.   262;  ceived  them.      Compare  Turquand  t'. 

Holmes  v,  Newcastle,  &c.  Abattoir  Co.  Marshall,  4  Ch.  376. 

«7  1057 


*T95  EXCLUSION    FEOM   TKOFITS.  [bOOK  HI. 

and  paid  on  a  hand  fide  valuation  of  assets  although  such  assets 
may  ultimately  prove  valueless.  (<s) 

Moreover,  directors  who  for  fraudulent  purposes  and  in  order  to 
induce  shareholders  and  the  public  to  believe  that  the  affairs  of  a 
company  are  in  a  favorable  position,  have  recourse  to  the  scanda- 
lous expedient  of  declaring  dividends  out  of  profits  when  there  are 
no  profits  wherewith  to  pay  them,  and  pay  the  dividends  declared, 
either  out  of  the  capital  of  the  company  or  out  of  money  bor- 
rowed for  the  purpose,  are  guilty  of  a  criminal  offense,  punishable 
both  at  conjmon  law  if)  and  by  statute  {%i)^  and  are  liable  to  an 
action  for  damages  at  the  instance  of  persons  induced  to  take  shares 
on  the  faith  of  such  misrepresentation.  («) 

Where  there  is  no  agreement,  express  or  tacit,  to  the  contrary, 
E  iiaiity  of  ^^^®  profits  realized  by  an  ordinary  partnership  are 
shares.  divisible  amongst  its  members  in  equal  shares,  although 

their  capitals  may  be  unequal,  (y)' 

A  resolution  on  the  part  of  a  majority  of  partners,  or  on  the 
Exchisionof      part  of  the  directors  or  shareholders  of  a  companv,  to 

partner  from  i  n      i  i  f>  t  •         t  i»     i 

share  of  profits,  exclude  a  partner  Or  siuireliolder  irom  his  share  oi  tlie 
profits,  can  only  be  defended  where  the  right  to  make  such  a  reso- 
lution has  been  clearly  conferred  by  the  agreement  of  all  the  part- 
ners ;  or,  in  the  case  of  a  company,  by  the  act,  charter,  or  deed 
■^795  of  ^settlement  by  which  it  is  governed.  A  resolution  to 
exclude  a  partner  or  shareholder  from  his  share  of  profits  is 
very  like  a  resolution  to  forfeit  his  share,  and  is  illegal  unless  spe- 
cially authorized,  {zf 

(s)  See  Stringer's   case,   4  Ch.   475;  agreed  to  pay  the  residue  at  the  end  of 

Ranee's  case,  Bib.  104.  twelvemonths.     The  partners  purchased 

(f)  See  per  Lord  Campbell,  in  Bumes  real  estate,    machineiy  and  materials, 

V.  Pennell,  2  H.   L.   C.   497;  R.  v.  Es-  and  engaged  in  business.     The  partner- 

daile,  1  Fos.  k  Fin.  213.  sliip  debts  and  liabilities  were  paid  out 

(«)  See  infra,  p.   814,  on  fraudulent  of  the  personal  property  belonging  to 

accoimts.  the  finn.     The  real  estate  was  left  unin- 

{x)  Bale  V.  Cleland,   4  Fos.   &  Fin.  cumbered  of    partnership  debts.     The 

117,  and  other  cases,  ante,  p.  324.  jDartners  sold  the  real   estate  belonging 

(«/)  See  ante,  p.  676.  to  the  finn:     Held,  that  the  partner  who 

1  Three    persons    became    partners.  had  paid  only  one-half  of  his  stock  was 

Tlie  capital  stock  agreed  upon  was  nine  not  entitled  to  share  equally  with  his 

thousand   dollars.    The    partners  were  co-partners   in    the  partnership  assets. 

each  to    pay  three   thousand    dollars.  Smith  v.  Hazlet'^n,  34  Ind.  481. 

Two  of  the  partners  paid  in  substan-  {z)  See  atite,  p.  745;   and  Griffith  v. 

tially  their  shares  of  capital  stock.     The  Paget,  5  Ch.  D.  894. 

other  paid  one-half   of  his  stock,  and  *  Several   persons  engaged  in  a  part- 

1058 


CHAP.  YII.]  EXCLUSION    FROM    PROFITS.  *79o 

A  court  will  protect  a  partner  or  shareholder  whose  share  of 
profits  is  wronLjfully  withheld,  and  compel  his  co-partners  or  ci-. 
shareholders  to  account  to  him  for  such  share,  (a) 

In  Adley  v.  The  "VVhitstable  Company  {7j),  an  incorporated  com- 
pany of  oyster  fishers  and  dredtjers  made  a  by-law  to  Adieyr. 
the  efiect,  that  if  any  member  should  sell  oysters,  ex-  Compuny. 
cept  those  taken  from  the  company's  grounds,  he  should  forfeit  10^., 
and  be  excluded  from  all  share  in  the  profits  which  the  company 
might  make  after  the  penalty  was  incurred  and  before  it  was  paid. 
A  member  infringed  the  by-law  and  refused  to  pay  the  penalty,  and 
was  thereupon  excluded  Irom  all  share  of  the  profits  of  the  company. 
But  on  a  bill  filed  by  him  against  the  company,  it  was  held  that  the 
by-law  was  invalid  (c);  that  the  company  had  no  right  to  exclude 
any  of  its  members  from  their  share  of  profits  on  any  such  ground 
as  that  in  question;  and  that  it  was  no  defense  that  the  profits  of 
which  the  plaintiff  sought  a  share  were  actually  gone,  having  been 
divided  amongst  the  other  members.  An  objection  that  the  par- 
ties, if  any,  accountable  to  the  plaintiflT,  were  the  oflicers  of  the  com- 
pany, who  paid  those  profits,  and  not  the  company  itself,  was  also 
overruled,  and  a  decree  was  made  in  the  plaintitf 's  favor. 

Prima  facie  all  the  shareholders  in  a  company  are  entitled  to 
share  profits  ^«rij!?a 55 w  in  proportion  to  the  number  of  Dividends  ray- 
shares  they  respectively  hold:   and  a  resolution  bv  a  aiconiing  to 

•'  >■  •>  '  -  number  of 

majority  that  dividends  shall  be  paid  to  some  of  the  shares, 
shareholders  in  preference  to,  or  to  the  exclusion  of  the  others,  is 
clearly  illegal  unless  it  is  warranted  by  something  more  than  the 
will  of  those  who  make  it.  (c?) 

nersliip  for  the  pui-pose  of  buying  lands  ber  of  the  firm,  actively  engaged  in  its 

from   Indians,   and  reselling  them,  the  business,  be  excluded  from  a  participa- 

pai-ties  to  be  interested  in  the  profits  in  tion  in  its  ben(?fits  for   want  of  funds, 

the  proportion  that  they  each  invested  without  notice.     Patterson  p.  Wai*e,  10 

their  money  in  the  purchase  of  land:  Ala.  444. 

/fe/r/,  that  funds  arising  from  the  resale  (rt)  See  jaos/,   c.    10,    §3,    under  the 

of  land  in  the  hands  of  any  of  the  part-  head  Account. 

ners,  being  the  profits  of  the  land  resold,  (i)  17  Ves.  ol5;  19  ib.  304.  and  1  Mt.'r. 

was  the  money  of  the  company,  open  to  107. 

re-investment;  and  whilst  such  a  fund  (c)   An  action  was    directed    to    be 

existed,   adequate  to  the  demand,  no  brought  to  try  this  question. 

partner  could  be  considered  in  default  (rf)  See  Adley  r.  Whitstable  Co.    17 

if  his  propoi-tion  of  it  was  suflficient  to  Ves.  315,  and  the  cases  in  note  (^). 

meet  the  exigency.    Nor  could  a  mom- 

1059 


*797  PREFERENCE    SHARES.  [bOOK  III. 

Maughanr.  Cases,  liowever,  of  an   exceptional  character 

Leamington  «.w„„  .  •      it.  -i  i         ^i         j-  n        • 

Gascompauy.  *796  may  arise,  as  is  *snown  by  tlie  lollowmg  in- 
stance :  In  Manglian  v.  Leamington  Gas  Com- 
pany (e),  certain  shareholders  in  a  gas  company  were  entitled  to  divi- 
dends np  to  10  per  cent.,  and  certain  other  shareholders  were  only  en- 
titled to  dividends  np  to  7  per  cent.  The  surplus  profits,  if  any,  were 
to  be  applied  first,  in  making  up  the  dividends  of  past  years  to  these 
amounts,  and  secondly,  in  reducing  the  charges  for  gas.  The  profits 
not  being  suflScient  to  pay  a  dividend  of  10  per  cent,  on  the  one 
set  of  shares,  and  also  a  dividend  of  7  per  cent,  on  the  other  set,  it 
was  resolved  to  pay  a  dividend  of  8  per  cent,  on  the  first,  and  7  per 
cent,  on  the  second.  It  was  contended  that  this  resolution  was  il- 
legal, and  that  the  dividend  ought  to  be  declared  in  the  proportion 
of  10  to  7;  and  a  suit  was  instituted  to  enforce  this  view.  But  the 
Court  declined  to  interfere;  considering  that,  according  to  the  true 
construction  of  the  statutes  relating  to  the  company,  the  above  pro- 
portions might  be  departed  from  when  the  profits  were  insufficient  to 
pay  both  classes  of  shareholdei-s  their  maximum  amounts  of  dividend. 

It  is  by  no  means  unusual  for  companies  who  have  expended 
Preference  their  Original  capital,  to  raise  (under  some  power  spe- 
shares.  cially  Conferred   upon  them  for  the  purpose)  further 

capital  by  the  issue  of  "  preference  shares,"  i.e.,  of  shares  the  hold- 
ers of  which  are  to  be  entitled  to  share  profits,  up  to  a  given  amount, 
in  preference  to  the  other  shareholders.  The  right  to  do  this  has 
been  already  examined.  (/") 

Where  preference  shares  have  been  issued  by  competent  authority, 
the  terras  upon  which  they  have  been  issued  must,  of  course,  be 
adhered  to;  and  it  has  been  decided  in  several  cases  that,  unless 
there  is  some  agreement  or  enactment  to  the  contrary,  preference 
shareholders  are  entitled  to  be  paid  out  of  tlie  profits  of  the  com- 
pany their  dividends  to  the  amount  guaranteed,  before  the  other 
shareholders  receive  anything:  so  that  if  the  profits  divisible  at  a 
given  time  are  notsufiicient  to  pay  the  guaranteed  dividends  in  full, 
the  deficiency  must  be  made  good  out  of  the  next  divisible  profits; 
the  ordinary  shareholders  talcing  no  profits  until  all  arrears  of 
*797  guaranteed  dividends  have  been  paid  to  the  preference  *share- 
holders.  (g)     This  rule,  however,  has  been  altered  by  statute, 

[e)  15  W.  R.  333.  {g)  See  Webb  v.  Earle,  20  Eq.  556, 

(/)  Ante,  p.  Q21.  and  other  cases  cited  ante,  p.  618.     In 

1060 


CHAP.  VII.]  DIVISION    OF   TEOFITS.  *798 

SO  far  as  concerns  companies   governed  by  the  Companies  clauses 
consolidation  act.  (A) 

No   resolution   of  a   company  can  possibly  vary    the  rights  of 
the  holders  of  different  classes  of  duly  created  shares.   Rijciits  of  pre- 

-VT  1       '  -I         '  p  1111  f    f*^'"*-""*^^  shure- 

JNo  resolution  can  deprive  preference  shareholders  of  hoidure. 
their  right  to  be  paid  the  sums  guaranteed  out  of  the  coni|)any's 
profits  as  soon  as  there  are  any.  So  long  as  there  are  no  prufits, 
the  preference  shareholders  get  nothing,  for  they  are  not  creditor* 
of  the  company  [i) ;  but  as  soon  as  there  are  any  jji-ofits  to  divide. 
they  must  be  applied  in  payment  of  wh.itever  is  required  to  make 
up  to  the  preference  shareholders  the  sums  guaranteed  to  them,  in- 
cluding all  arrears,  if  that  is  the  bargain  with  thein.  {j)  Where 
funds  were  guaranteed  to  a  company  in  order  to  enable  it  to  pay 
dividends,  and  the  company  was  ordered  to  be  wound  up,  those 
funds  were  held  to  be  general  assets,  and  not  to  belong  to  the 
shareholders  individually.  (Jc) 

Where  there  are  several  classes  of  shares  on  which  unequal  sums 
have  been  paid  up,  the  profits  of  the  company  ought  paTnentof 
frimci facie  to  be  divided  amongst  the  shareholders  in  sharesuf^un- 
proportion  to  the   sums   paid  up  on   their   respective  e^iuai a™"""t- 
shares,  and  not  in  proportion  to  the  nominal  values  of  such  shares.  (Z) 

With  respect  to    the  payment  of  dividends,  it  may  be  useful  to 
observe  that — 

1.  Dividends  must  be  paid   in  money;  not  in  shares  unless  all 
the  shareholders  so  agree,  (m) 

2.  Where  shares  are  charged   by  a  judge's  order  under  1  A:  2 
Yict.  c.  110,  the  dividends  must  nevertheless  be  paid  to  the  judg 
ment  debtor,  for  he  is    the   person  entitled   to 

them  at  *law  (w),  and  his  receipt  discharges  the     *79S  oimrging 

•  ,         /    \       mi  n  order. 

company  even  m  equity,  {p)     Ihe  payment  of 

Bangor  v.  Port  Macloc  Slate  Co.  20  Eq.  (/.•)  Tie  Stuart's  Trusts,  4  Cli.  D.  21:'. 

59,  the  preference  was  held  to  extend  to  (I)  See  Somes  r.  Cun-ie,    1   K.   k   .1. 

capital  also.  605;  Ex  parte  Maude,  6  Ch.  51;  see  ^ 

(/()  26  &  27  Vict.  c.  118,  §  14,  noticed  &  9  Vict.  c.  16,   §  120;  25  &  26  Vict.  c. 

ante,  p.  617.  89,  Table  A.  No.  72. 

(i)   Preference  shareholders  are  not  (w)  See  Hooler.  Great  Western  Rail, 

entitled  on  a  winding  up  to  any  prefer-  Co.  8  Ch.  262. 

ence  in  the  division  of  assets  if  there  (n)  See  Fowler  r.  Churchill,  11  M.  k 

are  no  profits;    London   India  Rubber  W.  57;  Churchill  r.  Bank  of  England. 

Co.  5  Eq.  519.  ib.  ;V2;l 

(J)  See  notes  {q)  and  (/) ;  ante,   p.  (o)  See  Bristed  i\  Wilkins,  3  Ha.  2o5. 
618,  note. 

lOGl 


*799  KECEIPTS    FOR    DIVIDENDS.  [BOOK  III. 

dividends  to  a  particular  shareholder  may,  however,    be  restrained 
under  5  Vict.  c.  5,  §  4.  (  j)) 

3.  Where  a  deed  of  transfer  has  been  forged,  and  the  company  has 
.  ^  registered  it  believino;  it  to  be  »ennine,  the  company 

Forged  trans-  =>  °  o  '  i       " 

fers.  must  nevertheless  pay  the  dividends  to  the  true  owner, 

and  is  not  entitled  to  make  him  and  the  transferee  interplead,  {g) 

4.  Where  shares  are  registered  in  the  name  of  a  married  woman^ 
Married  *^^  dividends  ought  to  be  paid  to  her  and  her  husband, 
women.  qj.  ^f,  jj^^j .  j^^^^  ^q^  ^q  \^qy  without  him,  unless  the  shares 
belong  to  her  for  her  separate  use.  (r) 

Having  made  these  general  observations  on  the  payment  of  divi- 
Dividends.of      dcuds,  it  is    Di'oposed  to  notice  shortly  the  legislative 

particular  com-  .  ,  i  •      j. 

panics.  enactments  beanng  upon  the  same  subject. 

No  shareholder  in  a  company  governed  by  the  Letters  Patent 
7Wm  4&1  ^^^  '^^  entitled  to  any  share  of  the  profits  of  the  coni- 
vict.  c.  73.         pany  unless  he  is  registered  as  a  shareholder,  {s) 

The  Companies  clauses  consolidation  act  declares  that  a  company 
8&9Vict  e  governed  by  it  shall  not  be  bound  to  see  to  the  execu- 
'^^-  tion  of  any  trust,  and  that  the  receipt  of  the  porson,  or 

of  any  one  of  the  persons  in  whose  name  a  share  may  be  regis- 
tered, shall  be  a  discharge  to  the  company  for  all  moneys  paid  in 
respect  of  sucli  share,  notwithstanding  any  trusts  to  which  it  may 
be  subject,  {t)  Interest  upon  all  mortgage  and  bond  debts  must 
be  paid  in  preference  to  any  dividends  (?/),  which  are  to  be  de- 
clared only  at  general  meetings  of  the  shareholders,  {x)  It  is  the 
business  of  the  directors,  previously  to  every  meeting  at  which  it 
is  proposed  to  declare  a  dividend,  to  ])repare  a  scheme  show- 
*799  ing  the  profits  which  have  accrued  *since  the  last  meeting 
at  which  a  dividend  was  declared,  and  apportioning  such 
profit,  or  so  much  of  it  as  they  may  consider  applicable  to  the  pur- 
poses of  dividend,  among  the  shareholders,  {y)     No  dividend  is  to 

( p)  See  ante,  p.  697.  the  non-joinder    of   her  husband    not 

((?)  Dalton  V.  Midland  Kail.   Co.   12  having  been  pleaded  in  abatement. 

C.  B.  458,  and  13  ib.  474.     See,   as  to  is)  7  Wm.  4  &  1  Vict.  c.  73,  §  20. 

the  remedy  of  the  true  owner  in  equity,  (0  8  &  9  Vict.  c.  16,  §  20. 

Cottam  V.  Eastern  Counties  Rail.  Co.  1  (t<)  Ib.  §  48. 

J.  &  H.  243;  Johnston  v.  Renton,  9  Eq.  {x)  Ib.  §91. 

181.  {y)  lb.  §  120.      As  to  withholding 

(r)  See  Dalton  v.   Midland  Rail.  Co.  dividends  from  preference  shareholders, 

13  C.  B.  474,  where  a  mamed  woman  see  ante,  p.  797,  notes  (</)  and  {Ji). 

sued  alone  for  dividends  and  recovered, 

1062 


CHAP.  VII.]  EECEIITS    FOR    DIVIDENDS.  *799 

be  paid  out  of  capital.  (3)  The  directors  are  authorized  to  set 
apart  out  of  the  profits  such  sum  as  they  may  think  proper  to  meet 
contingencies,  or  for  repairs  and  improvements,  {a)  Xo  share- 
holder is  entitled  to  be  paid  any  dividends  unless  he  is  registered, 
and  has  paid  all  calls  due  from  him  to  the  company.  (6) 

The  Companies  act,  18G2,  is  silent  upon  the  subject  of  dividends. 
By  Table  A.,  however,  it  is  provided  that  the  directors  companies 
may,  with  the  sanction  of  the  members,  declare  a  divi-  ^^''  ^*-- 
dend  to  be  paid  to  them  in  proportion  to  their  shares  *  ^  ' 
(No.  72).  But  no  dividend  is  paya])le  except  out  of  profits  (No. 
73);  and,  before  recommending  any  dividend,  the  directors  may 
set  aside  out  of  the  profits  such  a  sum  as  they  think  proper  as  a  re- 
serve fund  to  meet  contingencies,  or  for  equalizing  dividends,  or  for 
repairing  or  maintaining  the  works  connected  with  the  business  of 
the  company  (No.  74).  Moneys  due  from  any  member,  for  calls 
or  otherwise,  may  be  deducted  from  the  dividends  payable  to 
him  (Table  A.,  No.  75).  Dividends  unclaimed  for  three  years  may 
be  forfeited  for  the  benefit  of  the  company  (No.  76).  No  dividend 
bears  interest  (No.  77).  If  several  ]>er6ons  are  registered  as  joint 
holders  of  any  share,  the  receipt  of  any  one  of  them  for  the  divi- 
dends payable  in  respect  of  such  share  is  to  be  ejSectual  (No.  1). 

{z)  lb.  §  121.  (6)  lb.  §§  8  and  123. 

(a)  lb.  §  122. 

1063 


*800  PAETNEKSHIP  ACCOUNTS.  [BOOK  III. 


*800  *CHAPTER  YIII. 

ON  THE  ACCOUNTS  OF  PARTNERSHIPS  AND  COMPANIES. 

In  the  present  Chapter  it  is  proposed  to  consider,  (1),  the  mode 
in  which  partnership  accounts  are  kept;  (2),  the  duty  of  keeping 
and  the  right  of  inspecting  the  accounts  of  partnerships  and  com- 
panies; and  (3),  the  consequencesof  publishing  false  and  fraudulent 
accounts.  The  subject  of  opening  accounts  will  be  referred  to  in  a 
subsequent  chapter. 


SECTION   I.— OF  THE  MODE  OF  KEEPING  PARTNERSHIP  ACCOUNTS. 

It  is  usual  among  mercantile  men  to  treat  all  the   accounts  of  a 
partnership  as  accounts  of  the  firm,  and  to  deal  with 

Partnership  J  r  ^ 

accounts.  ^he  accounts  of  individual    partners    as    if    they  were 

simply  debtors  or  creditors  of  the  firm.  The  property  brought  into 
the  concern  is  credited  to  the  stock  account  of  the  firm,  and  is  then 
distributed  through  the  ledger  accounts  ;  and  in  these  ledger  ac- 
counts the  several  articles  and  persons  are  made  debtors  to  stock 
for  the  several  items  passed  into  those  accounts.  Each  partner  has 
his  own  separate  account  opened  with  the  firm  (usually  in  a  pri- 
vate ledger),  and  is  credited  with  everything  he  brings  into  it,  and 
is  debited  with  everything  he  draws  out  of  it.  Upon  a  rest,  the  net 
profits  are  determined,  and  are  divided  between  the  partners  in  the 
proper  proportions,  and  the  share  of  each  partner  is  carried  to  the 
credit  of  his  own  separate  account.  The  partners  are  creditors  of 
the  firm  for  all  its  stock,  and  they  are  debtors  to  it  for  all  its  de- 
ficiencies. When  they  first  bring  in  their  capital,  the  firm  is  in 
the  private  ledger  made  debtor  to  each  of  them  for  his  proportion 
of  capital.  Whenever  stock  is  taken,  and  a  sur])lus  appears,  that 
surplus  is  divided  according  to  the  shares,  and  is  carried  to  the 
10G4 


CHAP.  VIII.]  PARTNERSHIP    ACCOUNTS.  *SUl 

♦accounts  of  the  respective  partners.      If,  instead  of  a  sur-     •^"801 
plus,  a  deficiency  a])pear:5,  the  loss  is  apportioned  in  the  same 
way.  {a) 

Each  partner  being  thus  treated  like  an  ordinary  creditor  and 
debtor,  in  respect  of  what  he  brings  in  and  what  he  draws  out;  tiie 
balance  standing  to  his  credit  or  to  his  debit,  as  the  case  may  bo, 
in  thei)rivate  ledger,  shows  how  his  account  with  the  Jinn  stands. 
Upon  payment  of  tluit  balance  by  tlie  iirm  to  him,  if  the  bahxnci; 
is  in  his  favor,  or  by  him  to  the  Iirm,  if  the  bahince  is  against  him, 
his  account  with  the  firm  is  ck)sed  and  settled. 

Each  partner's  share  of  a  profit  to  be  divided,  or  of  a  loss  to  be 
made  good,  is  ascertained  by  a  simple  rule  of  three  mo<ic  of  a^eer- 
calculation.  It  the  partners  liave  agreed  to  share  pronts  ntr^  share  of 
and  losses  equally,  the  share  of  each,  of  any  particular  ^'^^ 
profit  or  any  particular  loss,  is  ascertained  by  dividing  the  whole 
profit  or  whole  loss,  as  the  case  may  be,  by  the  number  of  partners. 
If,  however,  the  partners  share  profits  and  losses  in   proportion  to 
their  respective  capitals,  then  as  the  united  capitals  are  to  the 
whole  profit  or  whole  loss,  so  will  each   ])artner's  share  of  capital 
be  to  his  share  of  such  profit  or  loss. 

In  order  to   illustrate  the  principle  upon  which  partnership  ac- 
counts are  kept  let  it  be  supposed  that  A.,  B.,  and  C.   ^^^^^^^^ 
are  partners,  with  a  capital   of  3000Z.  subscribed  by 
them  equally;   that  they  share  profits  and   losses  in  proportion  to 
their  respective  capitals,  and  that  A.   has  drawn  out  500^.  and  B. 
has  advanced  100?.     There  are,  then,  three  cases  to  be  considered. 


Case  1. — Where  there  are  no  profits  or  losses. 

The  accounts  will  then  stand  thus  (J): — 

1.  Pai-tnersliip  Account. 

Dr.  to  stock.        .        .        .   3000  0  0      Cr.  by  A.'s  sum  withdrawn  .     500  0  0 
to  B.  for  advance      .        .     100  0  0  by  balance     .        .         .   2600  0  0 


£3100  0  0  £3100  0  0 


(«)  See  Cory  on  Accounts,  ed.  2,  p.  71      intorost.     In  cases  2  and  3  interest  is 
cf  geq,  supposed  to  be  ciilculated. 


{b)  In  this  case  no  notice  is  taken  of 


1065 


*S02 

Examples.        *802 

Dr.  to  sum  withdrawn 
to  balance         . 


PAKTNEKSHIP   ACCOUNTS. 

*2.  A.'s  Account. 

.     .     500  0  0      Cr.  by  capital 
.     .     500  0  0 


[book  III. 


.   1000  0  0 


£1000  0  0 

•  • 

•  • 

•  • 

due  a3 

•  • 

£1000  0  0 

Dr. 

to  balance     .        • 

3.  B.'s  Account. 

Cr.  by  capital 
.   1100  0  0            by  advance 

.  1000  0  0 
.     100  0  0 

£1100  0  0 

£1100  0  0 

Dr. 

to  balance     .        • 

4.  C's  Account. 

Cr.  by  capital 
.   1000  0  0 

.    1000  0  0 

£1000  0  0 

£1000  0  0 

Dr.  to  balance  as  above 
(from  1)        , 

5.  Balance  Sheet. 

Cr.  by  balance 

.  2600  0  0            above  to  A. 

B. 

C. 

.  500  0  0 
.  1100  0  0 
.   1000  0  0 

£2600  0  0 


£2600  0  0 


Case  2. —  Whe7'e  there  is  a  profit  to  he  divided. 

The  accounts  will  then  stand  as  under,  if  the  profit  is  supposed 
to  be  1000?.,  and  interest  at  5  per  cent,  is  charged  on  all  sums 
brought  in  and  taken  out  by  each  partner,  and  on  his  capital. 


Dr.  to  stock 


1.  Partnership  Account. 

.   3000  0  0      Cr.  by  A.'s  sum   withdrawn 


to  interest  on  ditto  for  one 
year  .         .         .         .     150  0  0 

to  B.  for  advance  with  in- 
terest for  one  year  .    .     105  0  0 

to  profit         .        .        .    1000  0  0 

£4255  0  0 


with    interest   for    one 

year    .        .        .         .     625  0  0 


by  balance    . 


.   3730  0  0 


£4255  0  0 


1066 


CHAl'.  VIII.] 


TARTNERSHIP   ACCOUNTS. 
*2.  A's  Account. 


S03    Eiuniples. 


Dr.  to  sum  withdrawn  with  Cr.  by  capital.         .         .     ,   1000  0  0 

interest  for  one  year     .   .     525  0  0  by  interest  on  ditto.     ,  .       50  0  0 

to  balance.        .        .     .     858  6  8  by  Ja' share  of  profit.    ..    3:33  6  8 


£i:J8;3  6  8 


£1383  6  8 


Dr. 


balance. 


8.  B's  Account. 

Cr.  by  capital.        .        .     .  1000  0  0 

by  interest  on  ditto .       .       50  0  0 

by  ailviince  aiid  interest 

1488  6  8  thereon.         .         .      .     105  0  0 

by  H  share  of  profits.     .     333  6  8 


£1488  6  8 

Acco^ 
Cr. 

ce  S 
Cr 

£1488  6  8 

Dr. 

to  balance  . 

4.  C.'s 
,  1383  6  8 

mit. 

.  by  capital.         .        .     .  1000  0  0 
by  interest  on  ditto.      .   .       50  0  0 
by  >3  shai-e  of  profits.     .     33:3  6  8 

£1383  6  8 

£138:3  6  8 

Dr.  to  balance  as  above 
(from  1). 

5.  Balan 
.  3730  0  0 

heet. 

.  by  balance  due  as  above 

to  A 858  6  8 

"  B 1488  6  8 

*'  C 1383  6  8 

£3730  0  0 

£:37;30  0  0 

Case  3. —  Where  there  is  a  loss  to  he  made  good. 

Then  if  the  loss  is  supposed  to  be  5000Z.,  and  interest  is  calcula- 
ted as  in  the  last  example,  the  accounts  will  stand  thus: — 


Dr.  to  stock. 


to  interest  on    ditto    for 
one  year.         .         .     .     150  0  0 

to  B.  for  advance  with  in- 
terest for  one  year.       .     105  0  0 
to  balance.        .        .       .  2270  0  0 

£5525  0  0 


1.  Fartnershij)   Account. 
.  3000  0  0      Cr.  bv  loss  . 


.  5000  0  0 


by   A.'s   snm   withdrawn 

with  interest  for  one  year    525  0  0 


£5525  0  0 


1067 


*805  PAKTKERSHIP   ACCOUNTS. 

Examples.        *804:  *2-  ^-'^  Account. 

Dr.  to    sum  withdrawn  with                      Cr.  by  capital 

interest  for  one  year  .         525    0  0             by  interest  on  ditto 

to  }i  share  of  loss    .  .  1666  13  4            by  balance        .       . 


[book  III. 


1000  0  0 

.   .      50  0  0 

.  1141  13  4 


Dr.  to  }{  share  of  loss 


Dr.  to  }i  share  of  loss 


£2191  13  4 

£2191  13  4 

3.  B.'s 

JcCOMWf. 

.  1666  13  4 

Cr.  by  capital 
by  interest  o 
by   advance 

est 
by  balance 

.     .  1000    0  0 
n  ditto  .    .      50    0  0 
with  inter- 

.    .     105    0  0 
.    .     511  13  4 

£1666  13  4 

£1666  13  4 

4.  C.'s 

Account. 

.  1666  13  4 

Cr.  by  capital 
by  interest  < 
by  balance 

.     .  1000    0  0 

Dn  ditto  .   .       50    0  0 

.     .       .     616  13  4 

£1666  13  4 

5.   Balance  Sheet. 
Dr.  to  balance  due  as  above  Cr.  by     balance     as    above 


£1666  13  4 


from  A. 
"  B. 
"   C. 


.  1141  13  4 
.  511  13  4 
.     616  13  4 

£2270    0  0 


(from  1) 


.  2270    0  0 


£2270    0  0 


The  balances  ultimately  arrived  at  in  the  foregoing  accounts  are 
Effect  of  each  the  suius  payable— in  the  first  two  cases  by  the  firm  to 
^ilownCTccu  the  individual  partners,  and  in  the  last  case  to  the  firm 
itor  or  debtor,  i  ^^lem — in  order  to  wind  up  the  afi*airs  of  the  firm. 
But  it  must  not  be  imagined  that  the  balances  in  question  are  debts 
owing  to  each  partner  by  his  co-partners.  The  balances  are  owing 
by  and  to  thejirm,  and  each  partner  being  included  in  the  firm  is, 
to  the  extent  of  his  share,  his  own  debtor  and  his  own  creditor. 

Accountants  are  quite  right  in  debiting  each  partner  in  his  ac- 
.      ^  *       .    count  with  the  firm  with  the  whole  of  whatever  be 

In  'wnat  sense  -, .   ,         ^  .  •  i     ^i  i     i 

draws  out,  and  in  creditmg  him  with  the  whole 
805*     of  whatever  he  brings  in.*     *"  But,"  as  observed 


a  partner  is 
debtor  to  or 
creditor  of 
the  licai. 


^  Advances  to  the  firm  by  one  of  its 
members  do  not  constitute  debts  of  the 
firm,  but  merely  matters  of  account   be- 

1068 


tween  the  partners  to  be  settled  in  the 
final  adjustment  of  the  partnership. 
Wilson  V.  Soper,  13  B.  Mon.  411. 


CHAP.  VIII.] 


PARTNERSHIP    ACCOUNTS. 


*SO0 


by  Lord  (Tottenham,  "tliough  these  terms  'debt(^r'  and  'creditor' 
are  so  used,  and  sufficiently  explain  wliat  is  meant  by  the  use  of 
them,  nothing  can  be  more  inconsistent  with  the  known  law  of 
Partnershi]),  tlian  to  consider  the  situation  of  either  party  as  i!i 
any  degree  resembling  the  situation  of  those  wliose  a])})ehation  has 
been  so  borrowed.  The  sup]»osed  creditor  has  no  means  of  obtain- 
ing payment  of  his  debt  ;  and  the  supposed  debtor  is  liable  to  no 
proceedings  either  at  law  or  in  equitj- — assuming  always  that  no 
separate  security  has  been  talcen  or  given,  (c)  The  supposed  credit- 
or's debt  is  due  from  the  firm  of  which  heis  a  partner;  and  the  sup- 
posed debtor  owes  the  money  to  himself  in  common  with  his  part- 
ners." {cT) 

The  final  adjustment  of  a  ]iartnersliip  account  frequentlv  gives 
rise  to  questions  of  some  difticultv.     One   is,   whether  ritimate  ad- 

-  ...  1  •    1  11         "     ^    ^  ^  1  justrnfiit  of  nc- 

tlie  prmciples  on  wluch  proiits  and  Josses  have  been  counts, 
previously  ascertained  are  to  be  adhered  to,  or  whether  they  are  to 
be  more  or  less  departed  from;  another  is,  whether  on  a  final  ad- 
justment of  accounts  anything  can  be  regarded  as  profit  or  loss  un- 
til the  capitals  of  the  partners  have  been  repaid  or  exhausted  as 
the  case  may  be.  In  order  to  solve  these  and  similar  questions  re- 
gard must  always  be  had  to  the  terms  of  the  partnership  ar- 
ticles; but  an  express  agreement  with  *refere!ice  to  the  tak-  *SOG 
ing  of  accounts  may  be,  and  frequently  is,  only  applicable 


{c)  The  remedies  available  by  one 
partner  against  another  will  be  exam- 
ined hereafter.    See,  also,  ante,  p.  206. 

{d)  Richardson  r.  The  Bank  of  Eng- 
land, 4  M.  &  Cr.  171-2.  Suppose  that 
a  firm  consists  of  three  partners,  A  B 
and  C;  that  their  respective  capitals 
are  a,  b,  c,  and  that  they  share  profits 
and  losses  in  proportion  to  those  capi- 
tals. Then  a-\-b-\-c  will  be  the  joint 
capital  of  the  three  partners;  and  if  M. 
represents  the  amount  of  loss  or  gain 
to  be  shared,    A's  share  of  such  loss  or 

M 
gain  will  be  ■_ — ^ X  a;  B's  share 


precisely  the  same  principle,  if  the 
firm  is  indebted  to  A  in  a  sum  a', 
A  will  owe  himself  in  respect  of  this 


debt 


fl-ffc-fc 


X  fl;  B    will    owe  A 


a+i+c 


—    b;     and     C    will    owe 


X    c.      So   if    B    is   in- 


a-\-b+c 

debted  to  the   finn   in   a  sum  h'  ;    B. 
will    owe   himself  in    respect    of  this 

V 
debt  X   b ;    he     will   owe 


a-\-b-\-c 
M 


will  be 


a+b-\-c 
M 
share  will  be 


X   6;    and     C's      ^ 


fl+fc+C 

b' 


a-\-b-\-c 
h' 


X  a ;  and  will    owe    C 


a-\-b-\-c 


X    c.      Upon 


a-\-b-\-c 


X  c. 


1069 


*806 


PARTNERSHIP   ACCOUNTS. 


[book  III. 


to  the  case  of  a  continuing  partnership,  and  may  not  be  intended 
to  be  observed  on  a  final  dissolution  of  tlie  firm,  or  even  on  the  re- 
tirement of  one  of  its  members,  (e)  A  similar  observation  applies 
to  the  mode  in  which  the  partners  themselves  have  been  in  the 
habit  of  keeping  their  accounts:  that  which  has  been  done  for  the 
purpose  of  sharing  annual  profits  or  losses  is  by  no  means  necessa- 
rily a  precedent  to  be  followed  wdien  a  partnership  account  has  to 
be  finally  closed.  Bearing  these  observations  in  mind,  the  follow- 
ing rules  are  submitted  as  those  which  ought  to  be  followed 
upon  a  final  settlement  of  partnership  accounts,  where  there  is 
nothing  else  to  serve  as  a  guide. 

In  adjusting  the  accounts  of  partners,  losses  ought  to  be  paid, 
Rules  to  be  ^^'^^  ^"^  '^^  profits,  next  out  of  capital,  and  lastly  by 
observed.  having  recourse  to  the  partners  individually  (/*)*;  and 

the  assets  of  the  partnership  should  be  applied  as  follows: 


(e)  See,  for  examples,  London  India 
Rubber  Co.  5  Eq.  519;  Blisset  v.  Daniel, 
10  Ha.  493;  Wade  v.  Jenkins,  2  GifF. 
509;  Wood  v.  Scoles,  1  Cli.  369;  and  as 
to  interest,  ante,  p.  787,  note  (o);  com- 
pare Re  Barber,  5  Ch.  687. 

(/)  See  Crawshay  v.  Collins,  2  Russ. 
347,  and  Richardson  v.  Bank  of  Eng- 
land, 4  M.  &  Cr.  173. 

^  By  a  partnership  agreement,  A  was 
to  furnish  $20,000  and  B  was  to  man- 
age the  business,  keep  the  stock  up  to 
the  original  value,  and,  on  dissolution 
to  deliver  up  to  A  the  remaining  stock, 
to  the  value  of  $20,000,  "  losses  by  bad 
debts,  decay  of  goods,  and  inevitable 
accidents,  excepted.  "  The  partnership 
was  to  continue  five  years,  unless  dis- 
solved by  B's  death.  The  profits,  after 
paying  rent,  taxes,  and  necessary  expen- 
ses, were  to  be  equally  shared:  Held, 
that  the  losses  by  bad  debts.  &c.,  were 
to  be  deducted  from  the  profits,  and  not 
from  the  stock  of  $20,000,  so  long  as 
there  was  a  surplus  over  that  amount. 
Leach  v.  Leach,  18  Pick.  68. 

Defendants  owned  and  published  a 
"Shipping  Register."  They  agreed 
with  certain  insurance  inspectors  to 
share  equally  with  such  inspectors  50 

1070 


per  cent,  of  the  profits  of  the  "  Register" 
in  consideration  of  which  the  inspectors 
were  to  furnish  information  for  the 
' '  Register.  ' '  Upon  the  execution  of 
this  agreement  plaintiff  and  defendants 
formed  an  association  st3ded  the  "Amer- 
ican Lloyds.  "  An  accoimt  having  been ' 
had,  plaintiff  sued  for  his  share  of  ths 
50  per  cent,  profits.  Defendants  plead- 
ed non-performance  by  plaintiff,  on  a 
full  payment  by  defendant  on  a  counter- 
claim for  damages  caused  by  plain- 
tiff's alleged  confederacy  wii.h  the 
owners  of  a  rival  publication.  Upon 
the  trial,  among  the  facts  adduced,  the 
defendants  showed  that  by  reason  of 
alleged  unskillfulness  or  negligence  a 
claim  was  made  against  the  association 
which  might  exhaust  the  entire  amount 
of  its  assets:  Held,  that  it  is  undoubt- 
edly the  rule  that  the  property  of  a 
partnership  shall  be  first  applied  to  the 
payment  of  the  debts  of  the  concern  be- 
fore there  can  be  any  division  of  the 
assets.  This  rule  applies  even  though 
there  is  a  person  to  be  compensated  for 
services  out  of  the  profits.  But  the  de- 
fendants cannot  msist  upon  the  appli- 
cation of  this  rule  to  the  present  case, 
because:    1.  The  claim  is  not  admitted 


CHAP.  VIII.] 


PARTNERSUIP   ACCOUNTS. 


^S07 


1.  Ill  paying  tlie  debts  and  liabilities  of  the  firm  to  non-part- 


ners: 


2.  In  paying  to  each  partner  rateably  wliat  is  due  from  the  firm 
to  him  for  advances  as  distinguished  from  ca])ital; 

3.  In  paying  to  each  partner  rateably  what  is  due  from  the  tirni 
to  him  in  respect  of  capital; 

4.  The  ultimate  residue,  if  any,  will  then  be  divisible  as  profit 
between  the  partners  in  equal  shares,  unless  the  contrary  can  be 
shown. 

If  the  assets  are  not  sufficient  to  pay  the  dcltts  and  liabilities  to 
non-partners,  the  partners  must  treat  the  difference  as  a  loss  and 
make  it  up  by  contributions  inter  se.  If  the  assets  are  more  than 
sufficient  to  pay  the  debts  and  liabilities  of  the  partnership  to  non- 
])artners,  but  are  not  sufficient  to  repay  the  partners  their  respective 
advances,  the  amount  of  unjtaid  advances  ought,  it  is  conceived, 
to  be  treated  as  a  loss,  to  be  met  like  other  losses.  In  such  a 
case  the  advances  ought  *to  be  treated  as  a  debt  of  the  firm,  *S(i7 
but  payable  to  one  of  the  partners  instead  of  to  a 
straiii^^er.  (r/)  If  after  paying  all  the  debts  and  liabilities  of  the 
firm  and  tiie  advances  of  the  partners,  there  is  still  a  surplus,  but 
not  sufficient  to  pay  each  partner  his  capital,  the  balances  of  capi- 
tals remaining  unpaid  must  be  treated  as  so  many  losses  to  be  met 
like  other  losses.  (A)' 


by  the  defendants  to  be  a  valid  claim, 
but  they  deny  liability  therefor.  2.  The 
defendants  have  rendered  their  account 
without  noticing  such  claim,  and  they 
had  previously  acted  on  accounts  so 
rendered  as  fixing  the  amount  of  com- 
pensation. 3.  No  suih  defense  is  set 
up  in  the  answer,  and  it  is  not  therefore 
available  in  the  present  action.  Luce 
V.  Hartshoni,  7  Lans.  3;?il. 

An  agreement  was  made  between  C. 
and  y.,  co-partners,  that  the  pni-tner- 
ship  existing  between  thorn  should  be 
dissolved;  that  C.  should  take  all  the 
real  estate  and  personal  prop>Tty  of  the 
firm  at  a  certain  value,  nothing  Ijeing 
said  about  the  taxes  then  existing 
against  the  p"operty;  thatC.  should  piy 
the  indelitedntss  of  the  firm  included  in 
a  cotain  Kst;  and  that  the  liability  of 


the  firm  not  included  in  the  list  should 
be  paid  out  of  money  collected  from  the 
outstanding  debts  due  the  firm :  Held, 
that  the  taxes  should  be  paid  out  of  the 
co-partnership  fmids.  Young  v.  CI  at.-, 
12  Nev.  31. 

((})  See  Wood  r.  Scoles,  1  Ch.  3G9. 

(h)  See  the  next  two  notes. 

■  Two  persons  (H.  Sc  C).  both  of  whom 
then  resided  in  the  State  of  New  York, 
entered  into  written  articles  of  co-part- 
non^hip,  by  which  they  agi-eed  to  trans- 
act as  partners  at  Keokuk,  Iowa,  the 
wholesale  and  retail  diy-goods  business. 
H.  k  C.  severally  agreed  to  contribut.^ 
and  did  contribute}  $2,000  of  capital 
each,  in  cash.  H.  agi*eed  to  devote  him- 
self diligently  at  Keokuk  to  the  said 
partnership  business,  except  when  th.> 
purchasing  of  goods  or  other  necessary 

1071 


•807 


PAETNERSiriP   ACCOUNTS. 


[book  III. 


The  only  case  which  practically  gives  rise  to  difficulty,  is  when 
Equality  ofinss  partners  have  advanced,  or  agreed  to  advance,  unequal 

and  ilK'<iuality      ^        ,  ,  n  ^     ^  ht. 

ofcapiuii.  capitals  and  to  sliare  pronts  and  losses  equally,     it 

nothing  more  than  this  is  agreed,  a  deficiency  of  capital  must  be 
treated  like  any  other  loss;  and  the  assets  remaining  after  payment 
of  all  debts  and  advances  must  be  distributed  amongst  the  partners 
so  as  to  make  each  partner's  loss  of  capital  equal;  and  if  the  assets 
are  not  sufficient,  there  must  be  such  a  contribution  amongst  the 
partners,  or  some  of  them,  as  to  put  all  on  an  equality,  (if     But, 


business  of  the  finn  required  liim  to  be 
absent  from  Keokuk.  C.  agreed  to  at- 
tend to  that  part  of  the  business  which 
could  be  conducted  in  the  city  of  New 
York,  as  far  as  he  was  able,  without  in- 
terfering in  any  way  with  his  duties 
there  as  clerk  of  any  firm  by  whom  he 
might  be  employed.  It  was  stipulated 
that  H.  should  be  entitled  to  receive  and 
be  paid  "  %  parts  of  the  profits  of  said 
partnership,"  and  the  said  C.  ")<f 
part."  The  agreement  did  not  in  terms 
make  any  provision  in  respect  to  losses. 
No  profits  were  made,  but  the  losses  ab- 
sorbed $3,120.20  of  the  capital  contrib- 
uted :  Held,  that  neither  party  had 
any  claim  against  the  other  for  the 
money  lost,  and  that  the  $879.80  re- 
maining of  the  capital  should  be  equally 
divided  between  the  partners:  Held, 
also,  that  by  a  just  construction  of  the 
articles,  it  was  agreed  thereby  that  H. 
should  receive  }4  profits  for  his  extra  ser- 
vices if  profits  were  made;  and  if  none 
were  made,  he  was  not  to  be  compen- 
sated therefor,  and  that  losses  were  to 
be  equally  borne.  Hasbrouck  v.  Childs, 
3  Bosw.  105. 
/•  It  was  expressly  agreed  that  C.  and 
W.,  two  out  of  four  partners  were  to 
receive  interest  on  the  capital  by  them 
respectively  contributed.  The  firm  was 
dissolved  by  mutual  consent,  and  W. 
closed  up  the  firm's  business,  which  re- 
sulted in  a  loss  :  Held,  on  biU  in  equity 
by  W.  against  the  other  partners  that 
the  capital  constituted  a  debt  of  the 

1072 


partnership  to  pay  which  all  the  part- 
ners were  bound  to  contribute  equally, 
and  that,  one  of  them  being  insolvent 
the  others  were  bound  to  contribute 
equally  to  make  up  the  loss.  Whit- , 
comb  V.  Converse,  119  Mass.  38. 

When,  under  a  partnership  contract 
the  proceeds  of  the  enterprise  consti- 
tute the  primary  fund  from  which  a 
partner  is  to  be  reimbursed  for  excess 
in  advances,  and  the  partnership  is,  by 
consent,  terminated  before  th  'y  are  suf- 
ficient, the  partner  who  has  advanced 
in  excess  of  the  amount  due  from  hiin 
may  maintain  his  action  for  the  excess. 
Men-iwether  v.  Hardeman,  51  Tex.  436. 

{i)  Nowell  V.  Nowell,  7  Eq.  538;  An- 
glesea  Colliery  Co.  2  Eq.  379,  and  1  Ch. 
555;  Ex  jMrfe  Miiude,Q  Ch.  51.  Com- 
pare Holyford  Mining  Co.  Ir.  Rep.  3 
Eq.  208. 

2  See  Taylor  v.Coffing,  18111.422;  Ma- 
ley  V.  Brine,  120  Mass.  324. 

Where,  by  articles  of  co-partnership, 
A  contributes  money,  and  B  his  per- 
sonal services,  in  the  event  that  there 
are  no  profits,  and  the  capital  furnished 
by  A  is  lost:  Held,  that  B.  cannot,  in 
the  absence  of  any  agreement  to  the 
contrary,  be  called  upon  to  bear  any 
proportion  of  the  loss  of  the  capital. 
Cameron  v.  Watson,  10  Rich.  Eq.  64. 
Early  v.  Durborow,  1  Pa.  Leg.  Gaz. 
Rep.  127. 

C,  one  of  four  partners,  was  to  con- 
ti-ibute  to  the  business  $25,000,  and 
"  such  time  as  he  may  be  able  to  give," 


CHAP,  VIII.j 


I'AKTXEKSIIIP    ACCOUNTS. 


*S08 


if  the  true  nicaniiip:  of  the  partners  is  that  nil  del)ts  shall  he  paid 
out  of  the  as?ets,  and  that  any  sni-])]ns  assets  remaining  after  ])ay- 
nient  of  dehts  filial!  he  divided  hetwceii  the  ])artners  in  ])roportion 
to  their  interests  therein  or  to  theii-  ea])itals,  ellect  nuist  l)e  given 
to  such  an  agreement,  and  those  partners  who  agree  to  bring  in 
most  capital  will  lose  m(^st.  (Jc) 


SECTION  II.— OF  THE  DUTY  TO  KEEP  AND  THE  RIGHT  TO  INSPECT 
PAKTNERSH IP  ACCOUNTS. 

1.  //*.  ordinnru  partnerffJiips. 

It  is  one  of  the  clearest  rights  of  every  ])artner  to  have  accurate 
accounts  ke])t  of  all  money  ti-ansaclions  relating  to  the   Duty  to  keep 

,  r  1  ,  .  proper  uc- 

bnsiness  of  the.  partnership,  and  to  liave  tree  access  to  counts 
all  its  books  and  accounts.  (Z/     So  important  is  it  to  every 
^partnership  that  proper  accounts  shall    be  ke])t  and  be  ac-     *808 
cessible  to  all  the  partners,  that  wlicnever  any  written  arti- 
cles of  partnership  are  entered   into,  clauses   are   inserted  for   the 


i-ecei\nng  interest  on  the  §2o,000;  W., 
another  partner,  $oO,000,  and  all  his 
time,  receiving  interest  on  the  $50,000, 
and  B.  and  A.,  the  two  others,  to  con- 
tribute of  their  time.  Each  partner 
was  to  receive  one-fourth  of  the  net 
profits.  The  business  resulted  in  a  loss, 
and  B.  became  insolvent:  Held,  that 
the  capital  constituted  a  debt  of  the 
partnership  to  which  all  were  bound  to 
contribute  equally,  and  that  the  loss  was 
to  be  borne  equally  by  C.  W.  and  A. 
Whitcomb  v.  Converse,  119  Mass.  ;>8. 

Articles  of  co-partnership  between  S. 
T.  and  two  others,  stipulated  that  the 
latter  should  furnish  !?('), 000,  /.  e.,  each 
$;'>,000,  the  profits  and  losses  to  be  di- 
vided equally  among  the  three  co-part- 
ners, share  and  share  alike:  Held,  1, 
that  as  the  consideration  of  S.  T.'s  be- 
ing entitled  to  3^  of  the  profits  did  not 
appear,  it  was  a  matter  of  fact  for  the 
jury  to  determine,  on  oral  evidence,  of 
what  it  consisted,  whether  it  was  mere- 


ly that  he  was  to  contribute  one-third 
of  the  labor,  or  was  to  furnish  skill, 
credit,  attention  and  services  m  carrying 
on  the  business. 

2.  If  the  two,  under  such  agreement, 
besides  capital,  were  to  furnish  their 
skill  and  sei-vices,  the  question  whether 
if  a  loss  of  capitiU  occuiTcd  in  the  busi- 
ness, S.  T.  is  not  bound  to  pay  one-third 
of  the  deficiency,  is  also  a  mattt-r  of  fact 
for  the  juiy,  and  it  is  error  for  the  court 
to  decide  it. 

Qiai'ir,  whether  on  the  facQ  of  such 
agreement  merely,  each  partner  is  not 
in  case  of  a  loss  of  capital  boimd  to  con- 
tribute his  proportion  to  make  it  good 
to  the  others.  Yoke  v.  Barnet,  3  W.  iV 
S.  81. 

(A-)  Wood  V.  Scoles,  1  Ch.  369,  is  an 
instance  of  such  a  case. 

(/)  See  per  Lord  Eldon  in  Rowe  r. 
Wood.  2  Jac.  (fe  W.  558-9,  and  in  Good- 
man V.  Whitcomb,  1  ib.  593. 

*  See  next  page,  post,  and  note. 

fi  1073 


*809  PAKTNEKSIJIP    ACCOLNIS.  [bOOK    III. 

purpose  of  reniovlno-  wliatever  doubts  there  niii^lit  otherwise  be 
upon  the  subject.  The  usual  nature  and  the  cjeneral  effect  of  such 
and  to  allow      clauscs  will  be  adverted  to  in  tlie  next  chapter,  and  the 

ihem  to  be  .  .  •  1 1        i  i         t  i 

examined.  ri^dit  to  discovcry  m  an  action,  will  also  be  discussed 
liereaftcr.  In  the  present  jilaee,  it  will  be  sufficient  to  observe, 
that  it  is  the  duty  of  every  ])artner  to  keep  ])recise  accounts  and  to 
have  them  always  ready  for  inspection,  {in)  One  partner  has  no 
rio;ht  to  keep  the  partnership  books  in  his  own  exclusive  custody, 
or  to  remov^e  them  from  the  place  of  business  of  tlie  partner- 
ship. {ii)  In  the  absence  of  an  express  agreement  to  the  contrary, 
every  partner  has  a  right,  without  the  permission  of  his  co-part- 
ners, to  inspect,  examine,  and  make  extracts  from  all  the  books  of 
the  firm(6');  and  no  partner  can  de])rive  his  co-partners  of  this 
right  by  keeping  the  partnership  accounts  in  a  private  book  of  his 
own,  containing  other  matters  with  which  they  have  no  con- 
cern, {p)  At  the  same  time,  if  a  person  entitled  to  a  share  of  the 
profits  of  a  business  expressly  agrees  that  he  will  accept  the  bal- 
ance sheets  prepared  by  others  as  correct,  and  will  not  investigate 
the  books  or  accounts  himself,  he  will  be  bound  by  that  agree- 
ment, {q) 

If  no  books  of  account  at  all  are  kept,  or  if  they  are  so  kept  as 
Effect  of  keep-  ^^  ^®  unintelligible,  or  if  they  are  destroyed  or  wrong- 
of ^destrovhf  "'^  f^^^^J  withheld,  and  an  account  is  directed  by  a  court, 
*^^™-  every  presumption  will  be  made  against  those  to  whose 

negligence  or  misconduct  the  non-production  of  proper  ac- 
*809     counts  is  due.  (r)'     If  *all  the  persons  interested  in  the  ac- 

(»0  Rowe  V.  Wood,  2  Jac.  &  W.  558.  (r)  See  Walmsley  r.  Walnr4ey,  3  .Jo. 

See,  too,  1  ib.  593,  and  3  V.  &  B.  36.  &  Lat.  556;  Gray  v.  Halgh.   20  Beav. 

(ri)  See  Taylor  v.  Davis,  3  Beav.  388,  219. 
note;  Greatrex  v.  Greatrex,  1  DeG.  &  S.  '  See  Bovans  v.  Sullivan,  4  Gill,  383; 

692;  Charlton  v.  Poulter,  19  Ves.  148,  Gage  v.  Parmelee,   87  111.  329;  Dimond 

note.       .  V.  Henderson,  47  Wis.  172. 

(o)  See  Stuart  v.  Lord  Bute,  12  Sim.  The    powers    of    the    partners    are 

460;  Taylor  v.  Rundell,  1  Ph.  222  and  1  co-ordinate,  whether    the     partnership 

Y.  &  C.  C.  C.  128.      This  right  was  not  is  inactive  operation   or  subsist  only 

enforceable  at  law  even  in  an  action  by  for    the  purpose    of    winding  up  the 

one  partner  against  another,  Ward  v.  affairs    thereof  and  it   is    the  duty  of 

Apprice,  6  Mod.  264.  each  partner  to  keep   precise  accounts 

{p)  See  Freeman  v.  Fan-lie,  3  Mer.  of  all  his  own  transactions  for  the  firm 

43;  Toulmin  v.  Copland,  3  Y.  «&  C.  Ex.  and  to  have  them  at  all  times  ready 

655.  for    inspection.       Hall  r.  CLigatt,    48 

{q)  See  Tumey  v.  Bayley,  4  DeG.  J.  Md.     22 i.       Se-.     also,     Beachara   v. 

&  S.  332.  Eckford,  2  Sandf.  Ch.  116. 

1074 


rATlTXERSIIIP    ACCOUNTS. 


*S0!» 


CHAP.   VIII.] 

ciiuiit  are  in  p'lrl  ddi''to,  \.\iU  rule  Ciuinot  be  a]>j>lie(l;  but  it  is  the 
(lutv  of  continuing  or  surviving  partners  so  to  keep  the  accounts 


If  there  has  baen  a  total  faihire  to  do 
this  it  attbrds  a  good  re:xsoii  for  a  court 
of  equity  to  decline  to  supply  them, 
without  a  sufficient  reason  or  excuse  for 
the  omission.  A  court  of  equity  will 
not  gropa  its  Wiiy  in  utter  darkn  'ss  and 
undertako  to  create  and  establish  a 
claim  upon  mere  contingencies,  or  the 
preponderance  of  mere  possibilities  or 
probabilities.  There  is  no  duty  devolv- 
ing on  it  to  assume  the  impraeiicable 
task  of  adjusting  the  relative  rights  of 
partners  when  the  proof  is  utterly  de- 
ficient and  inconclusive.  Hall  r.  Clag- 
ett,  48  Md.  224.  See,  also,  Bevans  v. 
Sullivan,  4  Gill,  382. 

The  presumption  of  law  arising  from 
the  non-pro.luction  or  destruction  of  ev- 
idence by  one  party  can  not  relieve  the 
opposite  party  from  the  burden  of  prov- 
ing his  case.  It  will  justify  the  admis- 
sion of  secondary  evidence  and  when 
the  evidence  is  conflicting,  then  the 
presumption  will  have  its  full  opera- 
tion and  weight.  Gage  v.  Pai-melee, 
supra. 

As  to  what  extent  the  rule  in  edium 
spollatoris  will  apply  to  a  partner's 
partial  destruction  of  records  of  his 
outside  ventures,  on  the  hearing  of  a 
bill  for  an  account,  see  Pomeroy  v.  Ben- 
ton, 57  Mo.  5:31.  , 

On  a  bill  by  a  fraudulent  partner  for 
an  account,  the  master  may  charge  him 
on  any  evidence  which  is  competent  or 
admissible  as  proof  of  the  item  ;  he  can- 
not hold  the  injured  partner  to  such  de- 
gree of  proof  as  would  justify  a  charge, 
under  ordinarj'  circumstances,  against  a 
customer  or  partner  ;  there  must,  how- 
ever, be  some  proof.  Askew  v.  Oden- 
heimer,  Baldw.  880. 

In  Dimond  r.  Henderson,  sup.,  it  ap- 
pearing that  goods  sold  by  weight  or 
meivsure  were  taken  from  the  store  to  be 
used  in  plaintifl"s  family  without  having 


Ijeon  weighed  or  measured,  and  that  the 
accounts  as  shown  by  the  books  could 
thf'M-fore  not  be  relied  upon  as  accurat- 
in  that  respect,  the  referee  for  trial  di<l 
not  eiT  in  resorting  to  other  sources  for 
information  in  order  to  get  at  the  real 
amount  and  value  of  goods  so  used. 

A  member  of  a  firm  whose  duty  it  is 
to  keep  the  accounts,  and  who  claims 
that  he  has  omitted  to  enter  credits  to 
which  he  is  entitled,  will  be  required  to 
make  the  most  satisfiictory  proof  of  the 
mistakes  he  asks  to  have  corrected. 
Van  Ness  v.  Van  Ness,  32  N.  J.  Eq. 
G69. 

The  accounts  of  the  partners  with  the 
firm  should  not  be  blended  with  the  in- 
dividual accoimts  between  the  partners 
themselves.  Honore  v.  Colmesnil,  1  J. 
J.  Marsh.  517. 

Where  a  mother  and  son  verbally  con- 
tract a  planting  partnei-ship,  and  live 
together  a  long  time,  until  her  death,  it 
will  not  be  presumed  that  they  kept 
regular  accounts,  nor  will  his  failure  to 
do  so  make  him  or  his  heirs  liable. 
Theall  r.  Lacey,  5  La.  Ann.  548. 

When  a  partner  takes  possession  of 
all  the  stock,  books,  etc.,  and  in  a  settle- 
ment furnishes  no  evidence  of  the  in- 
solvency of  the  debtors  or  unsuccessful 
diligence  in  collecting  the  claims,  they 
will  be  regarded  as  wish  in  his  hands. 
Bush  r.  Guion.  G  La.  Ann.  798. 

"  CouiIb  of  equity  adopt  very  en- 
larged views,  in  regard  to  the  rights 
and  duties  of  agents  ;  and  in  all  cases, 
where  the  duty  of  keeping  regular  ac- 
counts and  vouchers  is  imposed  upon 
them,  they  will  take  care,  that  the 
omission  to  do  so  shall  not  be  used  as  a 
meansof  escaping  n^sponsibility  or  of  ob- 
taining undue  recompense.  If,  there- 
fore, an  agent  does  not,  under  such  cir- 
cumstances, keep  regular  accounts  and 
vouchei-s,  he  will  not  be  allowed  tlie 
1075 


*S09 


companies'  accounts. 


[book  iir. 


of  the  firm,  as  at  any  time  to  show  the  position  oi  the  firm  when  a 
ciiange  among  its  members  occurred,  (s) 


2.    In  Companies. 

In  large  partnerships  and   companies,  the  duty  of  keeping  ac- 
,    ,       counts   necessarily  devolves  upon   the   managers  and 

Accounts  of  -^  1  mi         •    1 

companies.  directors,  OP  pcrsons  superintended  by  them.  The  riglit 
of  the  shareholders  to  inspect  such  accounts  is  also  necessarily  lim- 
ited ;  for  if  every  shareholder  were  at  liberty  to  examine  the  ac- 
counts whenever  he  desired  to  do  so,  it  would  be  impracticable  for 
the  accounts  ever  to  be  kept  or  made  up  in  a  proper  manner.  The 
Shareholders'     right   of  sharelioldcrs  to  inspect   accounts  is    usually 

right  to  in-  ,.  r^     i    i  .         i      i.     •  i.  •  „  ^ 

spectthem.  qualified  by  express  agreement;  but  it  requires  no 
express  agreement  to  conier  the  ri^ht,  for  that  is  a  consequence  of 
partnership  :  and  where  there  is  no  agreement  to  the  contrary,  the 
writer  apprehends  that  the  shareholders  are  entitled  to  have  them 
produced  at  their  meetings  and  to  appoint  persons  to  inspect  and 
examine  them.  If  a  company's  deed  of  settlement  provides  for  the 
inspection  of  its  accounts  by  the  shareholders  at  certain  times  and 
subject  to  certain  restrictions,  then,  it  seems,  the  shareholders  are 
not  entitled  to  inspect  the  accounts,  otherwise  than  subject  to  the 
restrictions  mentioned,  it)     Nor  does  a  right  to  inspect  the  books 


compensation  which,  otherwise  would 
belong  to  his  agency.  Upon  similar 
grounds,  as  an  agent  is  bound  to  keep 
the  property  of  his  principal  distinct 
from  his  own,  if  he  mixes  it  up  with  his 
own,  the  whole  will  be  taken,  both  at 
law  and  in  equity,  to  be  the  property  of 
the  principal,  until  the  agent  puts  the 
subject-matter  under  such  cu-cumstances 
that  it  may  be  distinguished  as  satis- 
factorily as  it  might  have  been  before 
the  unauthorized  mixture  on  his  part. 
In  other  words,  the  agent  is  put  to  the 
necessity  of  showing  clearly  what  part 
of  the  property  belongs  to  hun  ;  and  so 
far  as  he  is  unable  to  do  this,  it  is 
treated  as  the  property  of  his  principal. 
Courts  of  equity  do  not  in  these  cases 
proceed  upon  the  notion  that  strict  jus- 
tice is  done  between  the  parties ;  but 
1076 


upon  the  ground  that  it  is  the  only  jus- 
tice that  can  be  done  ;  and  that  it  would 
be  inequitable  to  suffer  the  fraud  or 
negligence  of  the  agent,  to  prejudice  the 
i-ights  of  his  principal. "  Stoiy  on 
Equity  Jurisprudence,  sec.  468,  Every 
word  of  the  above  is  applicable  to  the 
case  of  a  partner  acting  as  the  agent  of 
the  firm.  KeUy  v.  Greeuleaf,  3  Story, 
105, 

(s)  See  Ex  parte  Toulmin,  1  Mer.  598, 
note;  Toulmin  v.  Copland,  3  Y.  &  C, 
Ex.  655;  and  as  to  losing  all  right  to 
interest  by  keeping  the  accounts  im- 
properly, see  Boddam  v.  Ryley,  1  Bro, 
C.  C.  289,  and  2  ib.  2;  and  4  Bro,  P,  C, 
561,  noticed  ante,  p.  789, 

[t)  See  Baldwin  v.  Lawrence,  2  Sim. 
&  Stu,  18,  In  HaU  v.  Connell,  3  Y,  & 
C,  Ex,  707,  the  Court  disregarded  the 


CIIAl'.  VIII.]  KIGHT    OF    INSPECTION.  *81<J 

of  a  company  necessarily  extend  to  tlie  minutes  of  tlie  meetings  uf 
tlie  directors,  (a) 

It  has  been  decided  that  a  sliareliolder  wlio,  by  the  terms  of  a 
company's  special  act,  is  entitled  at  all  seasonable  times  to  inspect 
the  books  of  the  company,  and  who  has  applied  Mandamus  to 

for  an  *in^pection  and  has  been  refused,  is  not     *810  P^^';^.|,\jqq 
entitled  to  a  mandamus  against  the  company  to 
allow  inspection,   unless,  before  inspection  was    refused  him,  he 
stated  lor  what  purpose  he   desired  to  see  the  books,  and  unless 
such   purpose   was,   in   the   opinion  of  the   Court,   a   reasonable 
pur|»ose,    and    unless  the   refusal   proceeded    from    the  managing 

body.  («) 

AVhen  a  person  obtains  from  a  court  of  justice  an  order  to  in- 
spect for  some  purpose  connected  with  a  pending  liti-  inspection  in 
gation,  he  is  bound  to  conduct  himself  in   a  peaceable,   abaction, 
decorous,  and  gentlemanly  manner,  and  not  to  make  public,  or 
communicate  to  strangers  to  the  litigation  the  contents  of  the  doc- 
uments he  Tnay  have  liad  produced  to  him.  (y) 

The  directors  of  a  company  have  no  power,  by  any  resolution  of 
their  own.    to   exclude  one  or  more   of  their  number  Right  of  a 

nn^ii   v..  .1,       v^  director  to  see 

from  access  to  the  company's  books.  This  has  been  accounts.  &c. 
decided  in  suits  against  directors  who,  in  answers  to  interrogatories 
as  to  the  contents  of  the  books,  have  sworn  ignorance  of  those  con- 
tents, and  inability  to  ascertain  them,  in  consequence  of  orders 
given  by  the  other  directors  to  the  officers  having  charge  of  the 
books  not  to  allow  them  to  be  seen.  This  answer  is  insufficient,  for 
the  directors  interrogated  must,  if  necessary,  enforce  their  right  to 
examine  the  books,  and  time  will  be  afforded  them  for  that  pur- 
pose, {z) 

Some  acts  of  rarliament  relating  to  companies,  contain  express 

restrictive  clauses;  but  see  AVUliams  v.  tion  for  calls  the  Court  will  not  order 

The  Prince  of  Wales  Life  Co.  23  Bcav.  the  company  to  produce  its  books  in  or- 

338,  and  rt»/e,  note  {q);  and  as  to  the  dor  to  enable  the  shareholders  to  fis^h 

application  of  special  rules  after  a  wind-  out  a  defense,  Birm.,  Bristol,  &c.  Co.  r. 

uig-up  order,  see  Yorkshire  Fibre  Co.  9  White.  1  Q.  B.  182. 

i]q.  650.  (.'/)  Williams  v.  Prince  of  Wales'  Life 

(i<)  R.  V.  Maraguita  Mining  Co.  1  E.  Ass.  Co.  23  Beav.  338. 

&  E.  289.  {-)   See  Tavlor  r.  Rundoll,  1  Y.  ct  C. 

(x)  R.  V.  The  Wilts  and  Berks  Canal  C.  C.  128,    and   1    Ph.   222.     See,    too, 

Co.,  3  A.   &  E.  477:    R.  v.  The  Grand  Stuart  r.  Lord  Bute,  12  Sim.  460;    Tur- 

Canal  Co.  1  Ir.  Law  Rep.  337.     See,  too,  quand  r.  Marshall,  6  Eq.    112,   which, 

R.  V.  Clear,  4  B.  <fe  C.  899.      In  an  ac-  however,  was  reversed,  4  Ch.  376. 

1077 


■^811  companies'  accounts.  [book  III. 

enactments  upon  tlie  subieet  of  accounts,  and  especially 

statutory  en-  »  '>  ' 

actments  reia-     as  to  tlieu' audit  and  the  rii-'lit  of  the  shareholders  to 

tmg  to  conipa-  -^ 

iiies' accounts,  examine  them.  These  enactments,  so  far  as  they  aie 
contained  in  public  general  statues  now  in  force,  are  confined  to 
companies  governed  by  the  Companies  clauses  consolidation  act,  8 
&  9  Yict.  c.  16,  and  the  Companies  act,  1SG2,  and  the  Life  Assur- 
ance Companies  act,  1870. 


*811      *^*  ^0  companies  governed  bj/  the  companies  clauses  consolidation  act. 

The  8  &  9  Yict.  c.  16,  contains  several  provisions  relating  to  the 
appointment  and  duties  of  auditors,  and  to  the  keeping 

Accounts  ot  i  J  ^      n'  \   •    \ 

companies         and  inspection  of  accounts,  the  general  enect  of  which 

governed  by  i  '  o 

8&9Vict.  c.  iG.  is  as  follows.  («)  Two  auditors  (or  such  other  number, 
if  any,  as  the  company's  special  act  may  require)  are  to  be  elected 
by  the  shareholders,  and  one  auditor  is  to  go  out  of  ofiice  every 
year,  but  may  be  re-elected.  The  directors  are  to  deliver  to  the 
auditors,  accounts  and  balance  sheets  before  every  ordinary  meet- 
ing of  shareholders,  and  the  auditors  are  to  examine  the  same,  and 
either  report  upon  them  or  simply  confirm  them,  and  the  auditors' 
report  or  confirmation  is  to  be  read  at  the  meeting,  {h)  Tlie  direct- 
ors are  required  to  have  proper  accounts  kept  of  all  moneys  received 
or  expended  on  account  of  the  company,  and  to  appoint  a  book- 
keeper to  keep  the  accounts.  The  books  of  the  company  are  to  be 
balanced  at  the  periods  prescribed  in  the  company's  special  act; 
and  if  no  period  is  prescribed,  fourteen  days  at  least  before  each 
ordinary  meeting.  On  the  books  being  so  balanced,  a  balance 
sheet  is  to  be  made  up  and  signed  by  the  cliairman  or  deputy 
chairman  of  the  directors,  and  such  balance  sheet  is  to  exhibit  a 
true  statement  of  the  capital,  stock,  credits  and  property  of  every 
description  belonging  to  the  company,  and  the  debts  due  by  the 
company,  and  a  distinct  view  of  the  profits  or  loss  which  may  have 
arisen  on  the  transactions  of  the  company  in  the  course  of  the  pre- 
ceding half-year.  The  books  so  balanced,  and  the  balance  sheet, 
are  required  to  be  open  for  the  inspection  of  the  shareholders  at- 

(a)  §§  101-108  and  116-119,  and  as  to  also,  30  &  31  Vict.  c.  127,  §30. 

taking  security  from  officers  entrusted  [h)  the  audit  does  not  bind  the  share- 

with  money  belonging  to  the  company,  holders.     Bloxam  v.  Metropolitan  Rail, 

and  to  the  summary  method  of  making  Co.  3  Ch.  337. 
them  account,   see  §§109-114.      See, 

1078 


CUAl'.  VIII.J  EICrllT    OF    INSI'KCTIOX.  *S12 

tlie  ]»riiicij)iil  office  or  place  of  bu-;iness  of  the  company  for  four- 
teen days  before,  and  one  montli  afcer  every  ordinary  meeting,  if 
no  other  periods  are  prescribed  by  the  conii)any's  special  act,  and 
during  those  ])eriods  the  shareholders  have  a  right  to  see  tlie 
books  and  to  *take  copies  and  extracts  therefrom;  but  they  *S12 
are  not  entitled  to  demand  an  ins])ection  of  such  books  at  any 
other  time,  unless  in  virtue  of  an  order  signed  by  three  directors,  (e) 


As  regards  con>paules  gorerued  hg  the  compames  act,  18G2. 

The  companies  act,  18G2,  contains,  as  will  be  seen  hereafter,  some 
enactments  relating  to   the  production  of  books  and    .         .    , 

o  I  Accounts  of 

accounts  to  inspectors  specially  appointed;  but,  with  ';ove\!f"jfby 
some  excejitions,  to  be  noticed  presently,  the  act  leaves  '*ie  act  of  itci 
each  company  to  make  what  regulations  it  pleases  repecting  the 
keeping,  inspection,  and  auditing  of  accounts  on  ordinary  occasions. 
By  the  regulations,  however,  in  Table  A.,  appended  to  the  act  id), 
the  directors  are  to  cause  true  accounts  to  be  kept  of  the  stock  in 
trade,  receipts,  expenditure,  credits  and  liabilities  of  the  com}>any. 
These  books  are  to  be  kept  at  the  registered  office  of  the  comj)any, 
and  are  to  be  open  to  the  inspection  of  the  shareholders  during  the 
hours  of  business,  subject  to  any  reasonable  restrictions,  as  to  the 
time  and  manner  of  inspection,  that  may  be  imposed  by  the  com- 
]>any  in  general  meeting,  (e)  The  directors  are  required  to  lav  be- 
fore the  shareholders,  once  a  year  at  least,  a  statement  of  the  in- 
come and  expenditure  of  the  company  (/"),  and  also  a  balance  sheet 
containing  a  summary  of  the  property  and  liabilities  of  the  com- 
]»any,  and  a  printed  copy  of  such  balance  sheet  is  to  be  sent  to 
every  shareholder,  {g) 

The  accounts  of  the  company  and  the   balance  sheets  are  to  be 
examined  by  one  or  more  auditors,  the  lirst  of  whom  ^^^^ 
are  to  be  appointed  by  the  directors,  but  the  others  by 
the  company  at  a  general  meeting.  (Ji)     If  no  election  is  made,  the 

(c)  See,  also,  as  to  loan  capital  ac-  such  of  those  companies  as  have  other 

counts  of  railway  companies,  29  tfc  30  regulations  inconsistent  with  them. 

Vict.  c.  108.  (f)  25  &  26  Vict.  c.  89,  Table  A.  No. 

(rf)  By  25  &  26  Vict.  c.  89,  §  15,  the  78. 

i-egulations  in  Table  A.   apply  to  all  (/)  lb.  Nos.  79  and  80. 

companies  limitt'd  by  shares,  and  fonned  (.7)  lb.  Xos.  81  and  82 

under  that  act,  with   the  exception  of  {h)  lb.  Nos.  80  and  84. 

1079 


•^813  companies'    ACCOUNTS.  [book  III. 

Board  of  Trade  is  empowered,  n]K)n  the  application  of  one-fifth 
in  number  of  the    sharehokler.-,  to    appoint  an  auditor  to 
*813     "^bepaid  bj  the  company,  {i)     The  auditors  are  at  all  reason- 
able times  to  have  access  to  the   books   and   accounts  of  the 
company,  and  are  empowered  to  employ  accountants  at  the  expense 
of  the  company,  to  assist  in  'the  investigation  of  the  accounts;  they 
are  also  empowered  to  examine  the  directors  and  other  officers  of 
the  company,  with  reterence  to  its  accounts,  {k)     The  auditors  are 
required  to  report  upon  the  accounts  and  balance   sheets,  and  their 
reports  are  to  be  read  to  the  shai-eholders  at  the  general  meetings.  {1} 
No  director,  and  no  person  interested  otherwise  than  as  a  member 
of  the  company  in- any  of  its   transactions,  can  be  an   auditor,  (w) 
In  addition  to  these  regulations,  the  Companies  act,  1862,  enacts  {/i) 
^     that,  upon    the   application   of  a  certain    number  of 

Inspection    by  '       -i  '  J^  i  i         • 

B .ard ofTrade ;  the  shareholders  of  any  company  registered  under  it, 
the  Board  of  Trade  may  appoint  inspectors  to  examine  and  report 
on  the  affairs  of  the  company;  and  such  inspectors  are  empowered 
to  call  for  and  examine  all  the  company's  documents  and  books,  and 
to  examine  the  officers  and  agents  of  the  company  upon  oath.  The 
expenses  of  the  inspectors  are  to  be  defrayed  by  the  shareholders 
upon  whose  application  they  were  appointed. 

Instead  of  applying  to  the  Board  of  Ti-ade,  the  shareholders 
r  b  ins  ect-  ^liemselves  may,  by  special  resolution,  aj)point  inspect- 
ors  specially  ^^.^  f^jj.  ^he  purposo  of  examining  into  the  aff"airs  of  the 
tiie  company,  company,  with  tlic  Same  powcrs  as  are  conferred  upon 
inspectors  appointed  by  the  Board  of  Trade,  (o)  A  copy  of  the  re- 
port of  the  inspectors,  authenticated  by  the  seal  of  the  company,  is 
admissible  in  evidence  in  any  legal  proceeding.  (^^) 

Every  limited  hanking  company,  and  every  insurance  company, 
statements  to    and  every  deposit,  provident,  and  benefit  society  gov- 

be  made  bv  ./  i  '    i  -.        ->      •       i  ^      t     jy  • 

banking. insnr-  erned  bv  the  Companies  act,  1862,  is  bound,  betore  it 

ance  and  other  -^  "  ,  .,        .  . 

companies.  bcgius  busiuess,  and  twice  a  year  whilst  it  carries  on 
business,  to  make  a  statement  in  a  prescribed  form,  showing  the 
state  of  its  assets  and  liabilities;  and  a  copy  of  such  statement  is  to 
be  kept  in  some  conspicuous  place  in  the  registered  office  of  the 
company,  and  in  every  branch  office  where  its  business  is  carried 

(0  25  &  26  Vict.  c.  89,  Table  A.  No.  (m)  25  &  26  Vict.  c.  89,  No.  86. 

91.  (n)  lb.  §§56  and  59. 

(//)  lb.  No.  93.  (o)  lb.  §  60. 

(/)  lb.  No.  94.  {p)  lb.  §  61. 

1080 


CIIAl'.   VII!.]  FRAUDULENT    ACCOUNTS.  *''815 

(in,  and  '•every  member  and  creditor  of  the  company'  is  en-     "^'JSH 
titled  to  a  copy  of  such  statement  on  payment  of  sixpence,  {q) 


As  regards  compauies  governed  by  the  Life  Assuratice  Companies  Ac),  JS70. 

By  33  &  34  Vict.  c.  Gl  {r\  all  life  assurance  companies,  other 
than  those  registered  under  the  acts  relating  to  friendly  societies, 
are  required  to  make  out  annually  statements  of  their  revenue  ac- 
counts and  balance  slieets,  and  to  lay  the  same  before  the  Board  of 
Trade  and  to  funli^h  printed  copies  to  tlieir  shareholders  and  poli- 
cv-holders. 


SECTION  Til— OF  FALSE  AND  FRAUDULENT  ACCOUNTS. 

Before  quitting  the  subject  of  accounts  it  is  necessary  to  draw  at- 
tention to  certain  imjiortant  statutory  enactments  re-   pramiuiem 
lating  to  false  and  fraudulent  accounts.     The  act  24:  &  «^'--*^"'^ts- 
25  Vict.  c.  96,  consolidating  the  statutes  relating  to  larceny  and 
other  similar  oli'enses,  declares  amongst  other  things  tliat — 

§  82.  Whoi^oever,  being  a  director,  public  officer  or  manager  of  any  body  corpo- 
rate or  public  company,  shall  as  such  receive  or  possess  himself  of  04  &  25  Vict.  c. 
any  of  the  prop^-rty  of  such  body  corporate  or  public  company  other-  •*'^';  ^^^  ^^ 
wise  than  in  paymcntof  a  just  debt  or  demand,  and  shall,  with  in-  ing  fraudulent 
tent  to  defraud,  omit  to  make,  or  to  cause  or  to  direct  to  be  made,  a  ^ccounta. 
full  and  true  entry  thereof  in  the  books  and  accounts  of  such  body  corporate  or 
pnlilic  company,  shall  be  guilty  of  a  misdemeanor,  and  being  convicted  thereof 
shall  be  liable,  at  the  discretion  of  the  court,  to  any  of  the  punishments  which  the 
court  may  award  as  hereinbefore  last  mentioned.  («) 

§  8;3.  Whosoever,  being  a  director,  manaj^vr,  i)ublic  officer,    or  member  of  any 
body  corporate  or  public  company,  shall,  with  intent  to  defraud, de-    J^l^f^^'"-^ **^' 
stroy,  alter,  mutilate,  or  falsify  any  book,  paper,  wi-iting,  or  valua-   books,  &.c. 
ble  security  belonging  to  the  body  corporate  or  public  company,  or  make  or  concur 
in  the  making  of  any  false  entry,  or  omit,  or  concur  in  omitting  any  material  par- 
ticular, in  any  book  of  account  or  other  document,  shall  be  guilty  of  a 
'misdemeanor,  and  being  con\ncted  thereof  shall  be  liable, 'at  the  discre-     *S15 
tion  of  the  court,  to  any  of  the  punishments  which  the  court  may  awai'd  as 
hereinbefore  last  mentioned. 

{q)  25   &  26  Vict.   c.   89,  §44,    and  not  more  than  seven  nor  less  than  three 

Schedule  1,  Form  D.  (now  five)  years;   or  imprisonment  for 

(/•)  Amf^nded  by  34  &  35  Vict.  c.  58;  not  more  than  two  years,  wth  or  with- 

35  &  36  Vict.  c.  41.  out  hard  labor,  and  with  or  without  sol- 

(s)  i.  c,  by  S  75,  penal  sen-itude  for  itarv  confinement. 

1081 


*S16  FKAUDULENT    ACCOUNTS.  [liOOK  III. 

§  84.  "Wliosoever,  being  a  director,  manager,  or  public  officer  of  any  body  cor- 
Publishiii-  porate  or  public  company  shall  make,  circulate,  or  publish,  or  con- 

fraudulciu  cur  in  making,  circulating,  or  publishing  any  written  statement  or 

statements.  account  which  he  shall  know  to  be  false  in  any  material  particular, 

with  intent  to  deceive  or  defraud  any  member,  shareholder,  or  creditor  of  such  body 
corporate  or  public  company,  or  with  intent  to  induce  any  person  to  become  a  share- 
holder or  partner  therein,  or  to  intrust  or  advance  any  property  to  such  body  cor- 
porate or  public  company,  or  to  enter  mto  any  security  for  the  benefit  thereof,  shall 
be  guilty  of  a  misdemeanor,  and  being  convicted  thereof  shall  be  liable,  at  the  dis- 
cretion of  the  court,  to  any  of  the  punishments  which  the  court  may  award,  as  here- 
inl)efore  last  mentioned. 

§  85.  Nothing  in  any  of  the  last  ten  preceding  sections  of  this  act  contained  shall 
Discovery  in  enable  or  entitle  any  person  to  refuse  to  make  a  full  and  complete 
such  cases.  discovery  by  answer  to  any  bill  in  equity,  or  to  answer  any  question 

or  interrogatory-  in  any  civil  proceeding  in  any  court,  or  upon  the  hearing  of  any 
matter  in  bankruptcy  or  insolvency;  and  no  parson  shall  be  liable  to  be  convicted 
of  any  of  the  misdemeanors  in  any  of  the  said  sections  mentioned  by  any  evidence 
whatever  in  respect  of  any  act  done  by  him,  if  he  shall,  at  any  time  previously  to 
his  being  charged  with  such  offense,  have  first  disclosed  such  act  on  oath,  in  con- 
sequence of  any  compulsoiy  process  of  any  court  of  law  or  equity,  in  any  action, 
suit,  or  proceeding  which  shall  have  been  bond  fide  instituted  by  any  party  ag- 
grieved, or  if  he  shall  have  first  disclosed  the  same  in  any  compulsory  examiniition 
or  deposition  before  any  court  upon  the  hearing  of  any  matter  in  banki-uptcy  or 
insolvency. 

The  Companies  act,  1862,  also  declares,  that  if  any  director,  of- 
ficer, or  contributory  of  any  company  wound  up  under 

C  )inpanies  act,  '  .,  i  c  ^    •  n 

I'O^-  that   act,  destroys,   mutilates,  alters,  or   ialsities   any 

books,  papers,  writings  or  securities,  or  makes  or  is  privy  to  the 
making  of  any  false  or  fraudulent  entry  in  any  register,  book  of 
account  or  other  document  belonging  to  the  company,  with  intent 
to  defi-aud  or  deceive  any  person,  every  person  so  offending  shall 
be  deemed  to  be  guilty  of  a  misdemeanor,  and  upon  being  con- 
victed shall  be  liable  to  imprisonment  for  any  term  not  exceeding 
two  years,  with  or  without  hard  labor,  [t)  The  same  act  also  con- 
tains provisions  by  which  directors  and  others  may  be  ordered  to 
be  criminally  prosecuted  for  offenses  relating  to  a  company  being 
wound  up.  {u) 

Independently  of    all  statutory  enactments,  moreover,  persons 
who  conspire  to  defraud  others  by  false  repre- 
rnninwv'  ^°'  "^816     scutatious  as  *to  the  solvency  of  companies  are 
indictable.     In  the  notorious  case  ol  the  itoyal 
British  Bank,  the  directors  were  indicted  and  convicted  of  the  com- 
mon law  offense  of  a  conspiracy  to  induce  persons  to  become  share- 

(t)  25  &  26  Vict.  c.  89,  §  166.  (")  lb-  §  167,  8. 

1082 


OIIAI'.  VIII.]  FKAUDULENT    ACCOUNTS.  '-.S  1(J 

liulders  in  and  customers  of  tlie  bank  by  issuing  folse  and  fraudu- 
lent reports  respecting  its  condition  and  solvency  {x)\  and  in  the 
equally  notorious  case  of  the  Eupion  Fuel  and  Gas  Company,  the 
directors  were  indicted  and  convicted  of  a  conspiracy  to  defraud  by 
fraudulently  obtaining  a  settling  day  from  the  Stock  E.xchange 
Committee,  with  intent  to  induce  persons  to  deal  in  shares  of  the 
company  in  the  belief  that  it  was  duly  formed  and  constituted,  (y) 
It  has  already  been  seen  that  an  action  for  damages  will  lie 
Action  for  mis-  ^g^i^st  directors  and  others  who  issue  false  reports, 
represuntauon.  g^j^^j  thereby  inducc  persons  to  take  shares  in  a  com- 
])any  (2);  and  it  will  be  seen  hereafter  that  an  action  may  be  main- 
tained to  rescind  contracts  entered  into  with  a  company  on  the  faith 
of  such  reports,  {a) 

{x)  R.  V.  Esdaile,  1  Fos.  &  Fin.  213.  Gurney  Finlaison's  Report,  and  for  ol> 

See,  also,  per  Lord  ('ainpl)ell  in  Burnes  taining  money  under  false  pretenses.  R. 

V.  PenneU,  2  H.  L.  C.  4'J7.  v.  Watson,  4  Jur.  N.  S.  14;  24  &  2o 

(y)  R.  V.  AspinaU,  1  Q.  B.  D.  730,  Vict.  c.  96. 

and  2  Q.  B.  D.  48.    See,  also,  R.   v.  {z)  See  ante,  p.  324. 

Timothy,  1  Fos.  &  Fin.  39,  and  R.  v.  (a)  Infra,  book  iii.  c.  10,  §  3. 

1083 


^817 


PARTNERSHIP    ARTICLES,    ETC. 


[book  III. 


*817  ^CHAPTER    IX. 

OF   PARTNERSHIP  ARTICLES  AND   COMPANIES'    REGULATIONS. 


SECTION    I.— GENERAL    OBSERVATIONS. 

The  rio-hts  and  obligations  of  partners  inter  se,  are  generally,  to 
a  certain  extent,  regulated  by  special  agreement,  the  true  mean- 
ing of  which  is  to  be  ascertained  by  the  ordinary  rules  of  con- 
struction, (a) ' 

In  considering  the  eifect,  however,  of  partnership  articles,  the 
following  principles  are  to  be  borne  in  mind: — 

1.  In  the  first  place,  partnership  articles  are  not  intended  to  de- 
fine, and  are  not  construed  as  defining  all  the  rights 
and  obligations  of  the  partners  inter  se.  A  great  deal 
is  left  to  be  understood.  *  The  maxim  exjyressum  faclt 
cessare  taciturn  naturally  applies  to  partnership  articles 


Partnership  ar 
tk'lcsare  not 
intended  to 
define  all  the 
riglits  and 
duties  of 
partners. 


[a)  See  Chapter  X.  of  Story  on  Part.; 
Collyer  on  Part.  187,  &c.  See,  also,  the 
head  Partnership  in  Jannan  and  Bythe- 
wood's  Conveyancing  and  Davidson's 
Conveyancing. 

'  See  Jackson  v.  Crapp,  32  Ind.  422; 
Bird  V.  Hamilton,  Walk.  Ch.  361. 

When  the  terms  of  a  partnership  have 
been  reduced  to  -writing,  the  wi-itten 
articles  are  presumed  to  contain  all  the 
conditions  of  the  partnership.  Board- 
man  V.  Close,  44  Iowa,  428. 

Where  a  written  co-partnership  agree- 
ment is  doubtful,  the  subsequent  con- 
duct of  the  partners  under  it  is  admis- 
sible in  aid  of  the  construction  of  the 
agreement  on  the  question  of  intent. 
Beacham  v.  Eckford,  2  Sandf.  Ch.  116. 

An    agreement   to    sell,   only  as  an 

1084 


auxiliary  to  the  higher  object  of  form- 
ing a  partnership,  subjects  the  property 
to  the  terms  of  the  paiinership  and  the 
intention  of  the  partners,  as  evidenced 
by  the  double  contract  of  sale  and  part- 
nership. Thompson  v.  Mylne,  6  La. 
Ann.  80. 

^Mming  partnerships,  where  there  are 
no  partnership  articles,  are  governed  by 
the  law  of  ordinary  partnerships  except 
so  far  as  the  general  usage  of  persons 
engaged  in  similar  pursuits,  or  the  es- 
tabhshed  practice  the  particular  com- 
pany has  established  a  different  rule — 
the  only  difference  generally  existing 
being  such  as  flow  from  the  fact  that  in 
such  partnerships  there  is  no  delectus 
personce.     Jones  v.  Clark,  42  Cal.  180. 


CHAP.  IX,]  PAKTNERSIIIP    ARTICLES,    KTC.  -  ^  1  < 

HS  to  other  agreemcnrs;  but  the  riglits  and  obligations  of  partners, 
so  far.  as  they  are  not  expre!5sly  declared,  are  determined  by  genend 
])rinciples,  which  are  always  applicable  where  not  clearly  exclude<l. 
In  the  lanijuage  of  Lord  Langdale  in  Smith  v.  Jeves. (''>),   ^    ., 

-^       "  "  •  Smith  V.  Jcj-fS. 

•'The  transactions  of  partners  with  each   other  cannot 
be  considered  merely  with  reference  to  the  express  contract  between 
them.     The  duties  and  obligations  arising  from  the  relation  between 
the  parties  are  regulated  by  the  ex]:)re6s  contract  between   them, 
so   far   as   the   express   contract  extends  and  continues   in  force; 
but  if  the  express  contract,  or  so  much  of  it  as  continues  in 
^^foroe,  does  not  reach  to  all  those  duties  antl  obligatious,*S18 
they  are  implied  and  enforced  by  the  law;  and   it  is  often 
matter  to  be  collected  and  inferred  from  the  conduct  and  practice 
of  the  parties,  whether  they  have  held  themselves,  or  ought  or  ought 
not  to   be  held,   bound  by    the    particuhir   provisions  contained  in 
their  express  agreement.     When  it  is  insisted  that  the  conduct  of 
one  partner  entitles  the  other  to  a  dissolution,  we  must  consider  not 
merely    the    speciiic  terms  of   the   express   contract,  but  also  the 
duties    and    obligations    which    are  implied    in   every  partnership 
contract."  (c) 

2.  The  attainment  of  the  objects  which  the  partners  have  de- 
clared they  had  in  view  is  always  regarded  as  of  the  Articles  to  be 

•'  .     ,  ,    ,  construed  with 

first  importance.     All  the  provisions  of  the  articles  are   refereiu-e  to 

i  '  _  tho  (jhjects  (if 

to  be  construed  so  as  to  advance  and  not  to  defeat  those  thepiiriin.Ts. 
objects;  and  however  general  the  language  of  partnership  articles 
may  be,  they  will  be  construed  with  reference  to  the  end  designed, 
and,  if  necessary,  receive  a  restrictive  interpretation  atcordingl}'.  {d) 
This  rule  is   of  especial  importance   in  considering  the  limits  of 
general  powers  conferred  on  committees,  directors,  and  others.     For 
example,  in  Chappie  v.  Cadell  {e)  the  proprietors  of  a  p^^ppie ,.. 
newspaper  entrusted  the  management  of  the  paper  to  a  cudcii. 
committee  of  five,  and  gave  them    power  to  call  general  meetings, 
and  agreed  that   the   resolutions  of  the   majority  present  at  such 
meetings  should  be  binding  on  all  the  proprietors.     A  meeting  was 
convened,  and  the  majority  present  resolved  that  the  paper  and  the 

(ft)  4Beav.  505.    See,  too,  Nelson  v.  {c)  See,  too,  Blisset  v.  Daniel,  10  Ha. 

Bo'alby,  30  Beav.  472.  and  Browning  v.  522. 

drowning,  31   Bcav.  316,  as  to  the  non-  (rf)  See  Coll.  on  Bart.  137. 

application    of   the    niiixim    ex2)ressio  (<")  Jac.  537. 

uniits  est  exclusio  alferius. 

1085 


*819  GENERAL    RULES    OF    COXSTliUCTION.  [bOOK  IH. 

shares  of  all  the  proprietors  in  it  should  be  sold  by  auction.  But 
it  was  held  that  the  majority  had  no  power  to  sell  the  shares  of  a 
dissentient  and  protesting  minority. 

So,  in  The  Official  Manager  of  the  Atheiirenm  Life  Assurance 
.,,  T-f     Society  ■?;.  Pooley  ( /"),  a  clause  in    the  deed  of  settle- 

Atnpemim  Lite  ■'  -^      ^•'    '' 

sodotyi^^  ment  of  a  life  insurance  society,  declaring  that  the 
Pooiey.  business  of  the  society  should  be,  amongst  other  things, 

to  purchase,  sell,  and  re-sell  life,  reversionary,  and  other  personal 
estates  and  interests,  was  held  not  to  authorize  the  purchase  of 
Westminster  Improvement  Bonds.  And  accordingly,  some  deben- 
tures of  the  society  which  had  been  improperly  given  as  the 
*819  *consideration  for  a  sale  of  such  bonds  to  the  society,  were 
held  not  to  be  binding  on  the  society,  even  in  the  hands  of 
a  purchaser  for  value,  without  notice  of  the  circumstances  under 
which  the  debentures  were  issued. 

Upon  the  same  principle,  general  powers  of  management  do  not 
authorize  directors  to  amalgamate  one  company  with  another,  either 
l)y  selling  the  assets  and  liabilities  of  their  own  company,  or  by 
purchasing  those  of  another  company,  {g) 

Other  illustrations  of  the  same  principle  will  be  fouhd  in  that 
part  of  the  work  which  treats  of  the  powers  of  majorities. 

Conformably  with  the  same  rule. 

3.  Any  provision,  however  worded,  will,  if  possible,  be  construed 
Articles  to  be  ^^  ^*  ^^  defeat  any  attempt  by  one  partner  to  avail  him- 
asto^TefeaT  ^^^^  ^^  ^^  ^'^^  ^^^  purposc  of  defrauding  his  copartner.' 
fraud;  Thus  it  is  vcry  common  for  partners  to  agree  that  half- 

yearly  accounts  shall  be  made  out  and  signed,  and  not  be  afterwards 
disputed;  but,  notwithstanding  such  a  clause,  if  one  partner  know- 
ingly makes  out  a  false  account,  and  his  co-partners  sign  it  upon 
the  faith  that  it  is  correct,  they  will  not  be  bound  by  it.  (A)  Again, 

{/)  1  GifF.  102,  and  3  DeG.  &  J.  294.  mate. 

{g)  Ernest  v.  NichoUs,  6  H.  L.  C.  419;  '  An  agreement  between  partners,  to 

i?e  The  Era  Assurance  Co.  2  J.  k  H.  keep  their  partnership  a    secret,    and 

400;  Be  The  Saxon  Life  Assurance  So-  maintain  a  fictitious  competition,   for 

ciety,  ib.  408,  and  1  DeG.  J.  k  Sm.  29;  the  purpose  of  deceiving    the    public, 

Gilberts.  Cooper,   10  Jur.  580;  Beman  would  be  illegal  and  void;  but  such  a 

V.  Rufford,  1  Sim.  N.  S.   550;  Clay  v.  purpose  will  not  be  imputed,  by  con- 

Rufford,  5  DeG.  &  S.  768.     Compare  straction,  to  partnership  articles,  unless 

Anglo- Australian  Assurance  Co.  v.  Brit-  clearly  evinced.     Fairbank  v.  Leary,  40 

inh  Prov.  Soci3ty,  3  Giff.  521,  and  on  Wis.  637. 

ai  peal,  4  DcG.  F.  &  J.  341,  where  there  (/j)  See  Oldaker  r.  Lavender,  6  Sim. 

appears  to  have  been  powci-  to  amalga-  239. 
108G 


CHAP.  IX.]  PARTNERSHIP   ARTICLES,    ETC.  *S2(> 

it  is  by  no  means  unusual  for  partners  to  a;,n-ee  that  yearly  accounts 
shall  be  taken,  and  that,  in  the  case  of  the  death  of  a  partner,  his 
representatives-  shall  be  paid  his  share  as  appearing  in  the  last 
account,  with  interest  instead  of  subsequent  profits  ;  but  if 
the  partners  do  not  for  several  years  make  out  any  accounts,  an<l 
then  one  of  them  dies,  the  survivors  are  not  entitled  to  act  on  the 
letter  of  the  agreement,  and  pay  only  the  amount  wliich  in  the  last 
account  was  carried  to  the  credit  of  the  deceased,  with  interest  on 
such  amount.  (?*) 

4.  Every  power  conferred  by  the  articles  on  any  individual  part- 
ner, or  on  anv  number  of  partners,  is  deemed  to  be  con-  and  the  taking 

'  "  '  ofuntair 

ferred  with  a  view  to  the  benefit  of  the  whole  concern;   advantages, 
and  an  abuse  of  such  power,  by  an  exercise  of  it,  warranted 
perhaps  b}'  *tlie  words  conforring  it,  but  not  by  the  truth     *820 
and  honor  of  the  articles,  will  not  be  countenanced.     Thus, 
in  a  case  which  has  been  alrcaiiy  frequently  referred  to  (^),  a  power 
to  expel  any  partner  was  vested  in  the  holders  of  two-thirds  of  the 
shares  in  tlie  firm;  but  it  was  held  that,  although  this  power  was 
so  framed  that  it  might  be  exercised  without  any  reason  being  as- 
signed, it  could  not  be  put  in  turce  for  the  unfair  purpose  of  obtain- 
ing the  share  of  the  expelled  partner  at  less  than  its  value. 

5.  Any  article,  however  express,  is  capable  of  being  abandoned 
by  the  consent  of  all  the  partners  ;  and  this  consent  provisions  may 
may  be  evidenced,  not  only  by  express  words,  but  by  ^acit'agree-^^ 
conduct,  {ly  ^  °'""'- 

The  maxim  modus  et  conventio  vincunt  legem  is  especially  appli- 
cable to  cases  of  this  description.  In  the  language  of  Lord  Eldon, 
"  In  ordinaiy  partnerships  nothing  is  more  clear  than  this,  that, 
although  partners  enter  into  a  w^ritten  agreement,  stating  the  terms 
upon  w'hich  the  joint  concern  is  to  be  carried  on,  yet  if  there  be  a 
long  course  of  dealing,  or  a  course  of  dealing  not  long,  but  still  so 
long  as  to  demonstrate  that  thcv  have  all  agreed  to  change  the 
terms  of  the  original  written  agreement,  they  may  be  held  to  have 
changed  those  terms  hy  conduct.  For  instance,  if  in  a  common 
partnership  the  parties  agree  that  no  one  of  them  shall  draw  ur  ac- 

(0  Pettji;  V.  Janeson,  6  Madd.  146.  Bam.  419. 

(^^)  Blisset  r.  Daniel,  10  Ha.  493.  Sco,  'See  Boisgerand  v.  Wall.   1  Sm.  k 

also,  Wood  V.  Woad,  L.  R.  9  Ex.  190.  M.  Ch.  404;  Robhins  r.  Laswell,  27  III. 

(?)  Thisnilo  app\u-s  to  be  of  compar-  .36-');  McGraw  r.  Pullinfr,  1  Fivem.  Ch. 

ativcly  modern  date;  it  was  not  acted  3j7;  Boyd  r.  Mynatt,  4  Ala.  79. 
on  in  Smith  r.  The  Duke  of  Chandos, 

1087 


*821  GENERAL    RULES    OF    COXSTRUCTION.  [lIOOK  III. 

cept  bills  of  exchange  in  his  own  name,  without  the  concurrence  of 
all  the  otliers,  yet,  if  they  afterwards  slide  into  a  habit  of  per- 
mitting one  of  them  to  draw  or  accept  bills  without  the  concurrence 
of  the  others,  this  Court  will  hold  that  they  have  varied  the  terms 
of  the  original  agreement  in  that  respect."  {m) 

This  principle  was  acted  on  by  Loi-d  Eldon  in  a  case  where  the 
partners  had  agreed  that  annual  accounts  should  be 
taken,  and  that  in  case  of  the  death  of  a  partner,  his 

representatives  sh(juld  be  paid  an  allowance  instead  of 
*821     profits;  for  it  appeared  "^'tliat  for  some  years  no  accounts  had 

been  taken,  and  that  the  partners  had  engaged  in  transac- 
tions of  such  a  nature,  that  it  would  have  been  untair  to  have  ap- 
plied the  original  agreement.  (?i)  So  a  practice  treating  losses  as 
bad  when  discovered  so  to  be,  was  held  to  apply  as  between  the  ex- 
ecutors of  a  deceased  partner  and  the  surviving  partncM-s,  altliough 
the  effect  was  to  give  the  executors  much  more  than  they  would 
otherwise  have  been  entitled  to.  {o)  So,  where  articles  contained  a 
stipulation  that  the  partners  should  contribute  to  losses  and  slini'u 
profits  in  a  certain  ])ro]')ortion,  and  it  appeared  that  a  person  who 
managed  the  affairs  of  the  firm  had  always  received  a  share  of  the 
profits,  but  had  never  been  called  upon  to  contribute  to  losses,  it 
was  held,  that  assuming  him  to  be  a  partner  in  the  proper  sense  of 
the  term,  and  to  have  been  originally  bound  by  the  articles  to  con- 
tribute to  losses,  the  articles,  so  far  as  they  obliged  him  so  to  con- 
tribute, had  been  varied  by  the  conduct  of  the  parties,  and  were  no 
longer  binding  on  him.  (j?) 

If  it  is  proposed  to  make  an  alteration  in  tlie  articles  by  an  agree- 
,,     .        ,.      ment  which  shall  be  l)indin<2:  ou  all  parties,  notice  of  the 

Varying  arti-  ^^  _  t  ' 

cies.  proposed  change  and  of  the  time  and  place  at  which  it 

is  to  be  taken  into  consideration,  ought  to  be  given  to  all  the  part- 
ners, [q)  For,  even  if  the  change  is  one  which  it  is  competent  for 
a  majority  to  make  against  the  assent  of  the  minority,  all  are  enti- 
tled to  be  heard  upon  the  subject;  and  unless  all  have  an  opj)ortu- 

(m)  Const.  V.  Harris,  T.   &  R.  523.  («)  See    Jackson     v.     Sedgwick,     1 

See,  also,  Coventry  v.  Barclay,  33  Beav.  Swanst.  460;  Pettyt  v.  Janeson,  6Madd. 

1,  and  on  app.  3  DeG.  J.  &  Sm.  320;  146;  Simmons  v.  Leonard,  3  Ha.  581. 

PilUng  V.  Pilling,  3  DeG.  J.  &  Sm.  162;  (o)  Ex  parte  Barber,  5  Ch.  687. 

England  v.  Curling,   8  Beav.  133  and  [p]  Geddes  r.  Wallace,  2  Bli.  270. 

137;  Somes  v.  Cun-ie,  1  K.  &  J.  605,  and  (g)  See  Const  v.  Harris,  T.  &  R.  524. 
the  cases  in  the  next  tliree  notes. 

1088 


CHAP.  IX.] 


PAKTNEESniP   ARTICLES,    ETC. 


'822 


nity  of  ojiposing  the  change,  those  who  ohjcct  to  it  will  not  he 
bound  hy  the  others,  (r)' 

In  large  partnershijis,  and  in  coin])anics,  the  original  articles  can 
seldom,  if  ever,  be  varied,  unless  there  is  some  power  varyinticnm- 

^      5  »  '  I  pany  s  <ici-u  of 

to  vary  them  expressly  conferred  by  the  charter  or  stat-   sutifcment. 
ute  by  which  the  comi)any  is  governed  or  by  the  articles  themselves. 
Except  where  there  is  such  a  power  no  variation  can  be  made  by 
directors  or  by  a  majority  of  shareholders;  and  it  is  scarfdy  possi- 
ble to  obtain  the  consent  of  all  the  sharehoklors,  or  to  hind 
*theni  all  by  acquiescence  in  a  particular  line  of  conduct  dif-     *S22 
fereiit  from  that  prescribed  by  the  articles,  (.v)     At  the  same 
time,  if  any  individuals,  be  they  shareholders  or  directors,  choose  to 
ignore  the  articles,  and  not  to  observe  the  provisions  contained   in 
them,  those  individuals  cannot  afterwards  object  to  the  validity  of' 
a  course  of  conduct  adopted  or  acquiesced  in  by  them  on  the  ground 
that  it  is  not  warranted  by  the  articles;'    but  their  adoption  or  ac- 
quiescence in  no  way  aflects  the  rights  and  obligations  of  the  other 
sliareholders,  either  inter  se  or  as  between  them  and  the  actpiiescing 
parties.     On  this  ground,  the  non-observance  of  prcscril)ed  formal- 
ities has  over  and  over  again  been  held  to  be  of  no  consequence  as 
between  acquiescing  shareholders,  and  yet  to  be  fatal  as  between 
them  and  other  non-assenting  shareholders,  {t) 

But  although  it  is  difficult  in  the  case  of  a  company   to  obtain 


(r)  lb.  525, see,  also,  ib.  518.      "'     ' 

*  If  several  persons  enter  into  a  -wait- 
ten  agrreemont  of  partnership,  and  the 
majority  alter  the  agreement  in  a  mate- 
rial point,  those  who  do  not  assent  may 
retire  from  the  firm,  provided  they  do  it 
within  a  reasonable  time,  and  under 
reasonable  circumstances.  Abbot  r. 
Johnson,  32  N.  H.  9.  See,  also,  Liv- 
ingston V.  Lynch,  4  John.  Ch.  573. 

(s)  See  Ex  parte  Sargent,  17  Eq,  273; 
Keane's  Executors'  case,  3  DcG.  M .  & 
G.  272. 

*  In  a  secret  paiinership  for  carrying 
on  the  business  of  planting,  it  is  com- 
petent to  prove  the  usages  and  customs 
of  that  business  for  the  purpose  of  show- 
ing that  the  contract  on  which  the  secret 
partner  is  sought  to  be  charged  wivs 
sanctioned  by  those  usages  and  customs. 


Lea  V.  Guice,  21  Miss.  656. 

Usage  may  make  an  incidental  busi- 
ness so  far  the  regular  business  of  a 
partnoi-ship  as  to  make  all  the  partners 
in  a  firm  bound  by  the  contract  of  one 
in  such  incidental  business.  As,  for 
example,  the  usage  among  the  boatmnn 
on  a  certain  river  to  undertake  to  soil, 
as  well  as  to  carry,  cotton,  may  make  a 
firm  engaged  in  the  carrying  trade  re- 
sponsible for  the  s.^lling  and  bringing 
back  the  proceeds,  as  well  a-s  carrying 
cotton,  upon  a  contract  made  between 
the  owner  of  the  cotton  and  one  of  the 
firm  of  bo;itnien.  Galloway  c.  Hughes, 
1  I5ailey,  ho.). 

{t)  Compare,   for  example,     Keene's 
Executor's  case,  3  DeG.  M.   &  G.   272, 
and  Straffon's  Executors"  case,  2  DeG. 
M.  &  G.  576. 
'  1089 


■^823  ARTICLES    APPLYING    TO    FRESH    PARTNERSHIP.         [bOOK  III. 

Effect  of  prnc-     sucli  coiisent  froiTi  its  sliareliolders  as  will  warrant  tlic 

tice  of  coiiipa-  ,       .  ,  .  ...  ,      .  , 

ny.  conclusion  that  its  original  regulations  are  no  longer  to 

be  considered  binding,  attention  must,  nevertheless  be  paid  to  the 
practice  of  the  company  with  respect  to  all  such  matters  as  to 
which  it  is  competent  for  the  majority  to  bind  the  minority.  In 
deciding  upon  the  effect  of  a  compan)''s  act,  charter,  or  deed  of  set- 
tlement, the  practice  of  the  company  will  be  taken  into  account, 
unless  it  has  been  clearly  illegal  («);  or,  in  a  company  governed  by 
the  Companies  act,  1862,  contrary  to  its  articles  of  association,  (v) 
It  seems  that  a  person  who  comes  into  a  firm  through  another 
Reverting  to  wlio  lias  acquicsced  in  a  variation  of  the  terms  of  part- 
origma  lu  es.  j)Qj.g]jip  articles,  IS  bouud  by  that  acquiescence,  and 
cannot  revert  to  the  original  articles  {w)',  and  this  principle  has 
been  applied  to  companies,  [x) 
Original  arti-  6.       The  last  general  rule  which  it  ia  neces- 

cles  ajiply  to  ,  ,   .  .^  ,  .  .     . 

partnorsiiip       *823     sarv  to uotice  is  *this:    if  a  partnership,  origi- 

continufd  un-  "^  .... 

der  them.  nally  entered  into  for  a  definite  time,  is  con- 

tinued after  the  expiration  of  that  time,  w^ithout  any  new  agree- 
ment, the  articles  under  which  the  partnership  was  first  carried  on 
continue,  so  far  as  they  are  applicable  to  a  partnership  at  will,  to 
regulate  the  rights  and  obligations  of  the  partners  {?iter  se.  (y)' 
j,.^  ^  Thus  in  King  v.  Chuck  (2),  three  partners.  A.,  B.,  C, 

Chuck.  agreed  that  if  either  of  them  should  die,  his  capital  as 

appearing  by  the  last  account,  should  be  paid  to  his  representatives 
by  the  surviving  partners,  on  whom  the  trade  was  then  to  devolve. 
A.  died,  and  this  agreement  was  acted  on,  and  B.  and  C.  continued 
in  partnership  without  coming  to  any  fresh  agreement.     Then  B. 

(h)  See  Somes  ?j.  Currie,    1  K.   &  J.  Robertson  r.  Miller,  1  Brock.  466. 

605;  Marino's  case,  2  Ch.  496;   Bush's  A  parinership  having-  expired  by  the 

case,  6Ch.  246.  limitation  in  the  articles.  A,  one  part- 

(r)  See  £"2:  ^rtr/e  Sargent,  17  Eq.  273.  ner,  transmitted  the  articles  to  B,  the 

{w)  See  Const  v.  Han-is.  T.  &  R.  524.  oth'.T,  with  a  renewal  indorsed  thereon, 

(x)  Ffooks  V.   South- Western    Rail.  which  B  agreed  to,  provided  he  should 

Co.  1  Sm.  &  G.  142;  Peek  v.  Gumey,  be  relieved  from  his  difficulties  by  the 

13  Eq.  79.  arrival  of  a  certain  ship.     The  ship  ar- 

(//)  See  Crawshay  v.  Collins,  15  Ves.  rived,  and  B  resumed  his  duties  as  part- 

228;  Featherstonhaugh  r.  Fen  wick,  17  ner:     Held,  that  the   partnership  was 

Ves.  307;  Booth   v.   Parkes,    1    MoUoy  renewed  for  the  original  term,  though 

465.  there  was  no  formal  renewal.     Dickin- 

»  See  Mifflin  v.  Smith,  17  Serg.  &  R.  son  v.  Bold,  3  Dessau,  501. 

165;  Bradley  r.  Chamberiin,  16  Vt.  613;  {z)  17  Beav.  325. 
U.  S.  Bank  v.  Binney,  5     Mason,  185; 
1090 


CHAP.  IX.]  PARTNERSHIP    AKTICI.ES,    ETC.  *824 

died,  and  it  was  held  that  B.  and  C.  liad  in  fact  continued  in  part- 
nership on  the  old  ternis,  and  that  B.'s  executors  were  therefore  to 
be  paid  the  amount  appearing  to  be  his  capital  in  the  last  account 
come  to  between  him  and  C. 

Even  where  a  i)artnersliip  is  entered  into  for  a  term  of  years,  and 

the  articles  provide  for  events  hai)i)eninfc  durina  the  „     . , 

y         ,  ■,  i  1  J-)  J  Provisions  ap- 

term,  the  above  rule  is  still  a])i)licd.     Tims,  where  two  i'iii"''ii' during 

'  '  '  the  tcTin  iif 

persons  agreed  to  become  partners  for  foui-teen  j-ears,  parf'^;'*'''!'- 
and  stipulated  that  if  either  died  during  this  co-partnership  term, 
his  share  should  be  taken  b}'  the  other  at  a  certain  sum,  and  the 
fourteen  years  expired,  and  the  two  persons  continued  in  partner- 
ship together,  without  coming  to  any  fresh  agreement,  and  then  one 
of  them  died  :  it  was  held  that  the  above  stipulation  was  bindin<r, 
and  that  the  share  of  the  deceased  belonged  to  the  survivor  upon 
payment  of  the  sum  mentioned,  {a)  The  expression,  "  the  partner- 
ship term,"  seems  to  be  equivalent  to  the  time  during  which  the 
partners  continue  in  partnership  without  coming  to  anv  fresh  agree- 
ment. 

Clauses  giving  a  right  of  pre-emption,  {h)  and  a  right  of  ex- 
pulsion,   {c)  have  been  held  not  to  apply  to  a  partnership 
*continued  after  the  expiration  of  the  time  for  wliich  it  was     *S24 
originally  entered  into.     But  an  arbitration  clause  has  been 
held  to  apply,  {d) 


SECTION  II.— OF  DIRECTORY  AND  IMPERATIVE  CLAUSES 

Some  clauses  in  partnership  articles  and  companies'  deeds  of  set- 
tlement are  optional,  some  are  director}/  only,  and  some  DUtincUnn  i.(- 
are  {ynperative.  It  is  important  not  to  confound  these  d^eVtory'.'uI!!! ' 
three  different  classes  of  clauses;  and  as  the  characteris-  ci&y^V^^ 
ticsof  each  are  not  apparent  from  the  words  used  to  denote  them,  it 
is  necessary  to  examine  and  define  those  characteristics  as  accurately 
as  possible.     The  chief  obscurity  arises  from  the  unfortunate  use  of 

(o)  Essex  V.  Essex,  20  Beav.  442.  whether  this  is  siifliriont  to  exclude  the 

(h)  Cookson  r.  Cookson,    8  Sim.  520.  rule  in  question.     See  I^ssex  r.  Essex, 

This  case  turned  on  the  language  of  iihi  trnpro. 

the  articles  by  which  the  right  of  pre-  (<•)  Clark  r.  Leach,  32  Bcav.  14,  and  1 

emption  wa-s  to  be  exorcised  before  the  DeO.  .1.  A:  Sm.  409. 

end  of  the  number  of  years  for  which  the  {d)  Gillctt  r.  Thornton,  19  Eq.  599. 

partnei-ship  was  to  last.      But  quure 

1091 


*825  DIKECTOKY    AND    IMPERATIVE    CLAUSES.  [bOOK  III. 

the  woivls  directory  and  imperative.  These  words  are  employed 
not  only  when  speaking  of  agreements,  but  also  when  speaking  of 
acts  of  Parliament;  and  an  examination  into  their  meaning  when 
so  used,  will  greatly  facilitate  an  inquiry  into  their  meaning  when 
applied  to  less  authoritative  rules. 

All  laws  are  in  one  sense  necessaril}''  imperative;  for  if  no  con- 
obscrvations      sequeiiccs  whatever  result  from  the  disobedience  of  a 

on  the  word  i  i  i  .      .      ^  -,  t,         -itti  i  /» 

imperaiive.  law  that  law  IS  HI  lact  no  law  at  au.  W  hen,  thereiore, 
laws  are  divided  into  those  which  are  imperative  and  those  which 
arc  directory,  the  division  must  have  reference  to  some  particular 
kind  of  consequence  resulting  from  their  non-observance,  {e) 
Nullity  appears  to  ba  this  consequence;  and  a  law  which  directs  a 
certain  act  to  be  done  in  a  certain  way,  and  declares  that  no  other 
way  shall  for  any  purpose  be  equivalent  to  the  way  prescribed,  is 
said  to  be  imperative;  whilst  another  law  which  also  directs  a  cer- 
tain act  to  be  done  in  a  certain  way,  but  does  not  render  every  other 
way  of  no  avail,  is  said  to  be  directory  only;  although  the  conse- 
quence of  not  complying  with  its  directions  may  be  in  the  highest 
degree  penal.  The  following  may  be  referred  to  as  instances  illus- 
trating this  distinction: — 
*82o  '^^j  the  4  Geo.  4,  c.  76,  §  16,  it  was  enacted  that  the  father, 
if  living,  of  any  party  under  twenty-one  years  of  age,  should 
Examples  of  li^^^'s  authority  to  give  consent  to  the  marriage  of  such 
utes'^R  T  ^^^^'  P^rty,  and  if  the  father  was  dead,  then  that  other  per- 
Birmingham.  g^^j^g  i^^^entioued  ill  the  act  should  have  such  authority; 
and  the  act  then  went  on  thus  :  "And  such  consent  is  hereby  re- 
quired for  the  marriage  of  such  party  so  under  age,  unless  there 
shall  be  no  person  authorized  to  give  such  consent."  A  person 
wlio  was  under  twenty-one,  and  whose  father  was  living,  married 
without  his  consent.  It  was  held  that  the  marriage  was  neverthe- 
less valid;  for  the  legislature  evidently  did  not  intend  to  bastardize 
the  issue  of  marriage  solemnized  without  the  consent  required.  (/") 
Again,  it  has  been  held  that  a  covenant  by  a  municipal  corporation 
Piivnev  ^^  repay  money  borrowed,  is  valid,  although  the  money 

Brtcou.  jg  j^Q^  borrowed  for  any  purpose  to  which  the  borough 

(e)  It  must  be  remembered  that  per-  may  be  no  specific  penalty  annexed  to 

sons  who  willfully  violate  the  provisions  the  violation.      See  'per  Lord  Campbell, 

of  an  act  of  Parliament  are,   in  strict-  in  Longworth's  case,   1  DeG.  F.  &  J. 

ness,  guilty  of  a  misdemeanor,  and  in-  31. 

dictable  accordingly,    although    there  (/)  R.  v.  Birmingham,  8  B  &  C.  29. 

1092 


CHAP.  IX.]  rARTNKRSHIP   ARTICI.KS,    ETC.  *62G 

fund  is  made  a])plicable  by  the  Municij»al  corporation  act,  and  al- 
thougli  the  deed  containin<^  the  covenant  has  not  been  approved  by 
the  Lords  of  the  Treasury  as  required  by  the  same  act.  {g)  So  it 
was  held,  tliat  a  rate  made  under  the  Public  Health  act  of  1S4S  was 
valid,  althouf^h  that  statute  requires  all  rates  made  or  j^p.  „yr 
collected  under  it,  to  be  published  in  the  same  manner  *''"<-"■■• 
as  poor-rates,  and  the  rate  in  question  had  not  been  published  in 
the  manner  required.  (Ji) 

In  each  of  these  cases,  the  statute  in  question  was  said  to  be  di- 
rectory only;  and  to  each  of  them  the  maxim  Fieri  nondeljidt  Hcd 
factum  valet,  was  held  applicable.  In  each  case  something  was 
to  be  done  in  a  particular  manner;  but  whatever  may  have  been  the 
consequences  of  doing  it  in  some  other  manner,  the  invalidity  of 
what  was  done  was  not  one  of  those  consequences;  and  this  api)ears 
to  be  the  test  whereby  to  decide  whether  a  law  is  directory  or  im- 
perative as  those  terms  are  customarily^  employed.  (^) 

A  law  which  is  directory,  is  a  law  in  the  true  observations 

sense  of  the  *word,  and  imposes  an  obligation     *S2G  dircctory?'^'^ 
or  duty;   and  in  this  respect  it  differs  from  the 
expression  of  a  desire,  which  those  to  whom  it   is  addressed  may 
lawfully  com])ly  with  or  not  at  their  ])leasure.     In  other  W(jrds, 
compliance  with  a  law  which  is  directory  is  not  optional. 

Passing  now  to  partnership  articles  and  companies'  regulations 
and  deeds  of  settlement,  it  will  be  found  that  the  words   Piroetory  nn.i 

,.  T      .  .  ,  ,      inipiTtitivi;  US 

directory  and  imperative  are  not  always  employed,  uppiie.i  u. 
when  speaking  or  them,  in  the  strict  sense  above  ex-  uniuks.itc. 
plained.  There  is  a  tendency  to  overlook  the  ditfcrence  between 
an  optional  and  a  directory  clause,  and  to  use  the  word  imperative 
in  the  sense  of  binding  on  the  majority;  and  this  tendency  has  led 
to  no  little  confusion.  If  a  clause  is  directory,  in  the  sense  of  not 
rendering  invalid  that  which  is  done  otherwise  than  in  the  mode 
it  prescribes;  and  if,  as  frequently  happens,  tliose  who  do  not  ob- 
serve its  directions  are  in  no  worse  position  than  those  who  do,  it 
is  clear  that  the  clause  is  one,  the  observance  of  which  is  practi- 
cally optional.     To  call  such  a  clause  directory  leads  to  iu»tliing  Imt 

(^r)  Payne  v.  Brecon,  3  H.  &  N.  r)72.      N.  li^;  Bnimfit  r.  Bremner,  9  C.  B.  N. 

Ih)  Le  Feuvrer.  Miller,  8  E.&B.  321.      S.  1;  R.  r.  Rochester,  7  E.  &  B.  910; 

(«■)  For  other  instances  of  directory  Lanca-ster.  <tc.  Rail.  Co.  r.  Heaton,  8 
statutory  enaotmont.s,  see  R.  v.  Tiiffiill,  E.  k  B.  9.'")2;  Caklow  v.  Pixell,  2  C.  P. 
2  Q.  B.  D.  199;  Hunt  v.  Hibbs,  o  H.  k      D.  oG2. 

1093 


*327  FUNDAMENTAL   AND    SUBSIDIAKY    CLAUSES.  [bOOK  HI. 

Cvonfusion.  A  clause  is  optional,  not  directory,  if  no  consequence 
results  from  its  non-observance. 

A  clause  may  be  optional,  although  the  presumption  against  its 
being  so  is  strong;  for  when  shareholders  sign  deeds  containing 
clauses  directing  those  entrusted  with  the  management  of  their  af- 
fairs to  do  certain  things  in  a  certain  way,  the  inference  is  that  those 
clauses  were  not  inserted  for  nothing,  and  that  the  directions  con- 
tained in  them  were  intended  to  be  obeyed.  If,  however,  a  clause 
is  optional,  it  is  not  directory  in  the  sense  above  explained.  On 
the  other  hand,  a  clause  which  is  not  optional  may  be  directory,  or 
it  may  be  imperative:  but  no  clause  can  be  either,  if  its  observance 
or  non-observance  is  a  matter  of  jserfect  indifference;  or,  in  other 
words,  if  the  legal  consequences  of  observance  and  non-observance 
are  precisely  the  same. 

Again,  the  word  directory  is  occasionally  employed  to  denote 
clauses  the  non-observance  of  which  is  said  to  be  of  no 

Clauses  non- 

observance  of     conscQuence  uudcr  certain  circumstances,     it,  under 

wjnch  IS  of  no  1 

consequence.  ^],e  circumstanccs  supposed,  observance  or  non-observ- 
ance is  a  matter  of  no  consequence  whatever,  the  term  directory  is 
evidently  used  in  the  sense  of  optional;  but,  if  by  no  con- 
*S27  sequence  is  meant  *no  such  consequence  as  that  contended 
for  (there  being  some  other  consequence),  then  the  term  di- 
rectory is  not  misapplied. 

The  distinction  between  directory  and  imperative  clauses  turns. 
Misuse  of  the     neither  on  the  right  to  repeal   them,  nor  on  the  right 

temi  impera-  .   .     „  .        .  ,  ,  .1  <»  •     x-  • 

tivc.  ot  infrmo-ing  them,  but  on  the  consequence  ot  intrmg- 

ing  them  whilst  they  are  in  force;  and  whilst  the  consequence  of 
infringing  an  imperative  clause  or  regulation  is  the  nullity  of  what 
is  done,  the  consequence  of  infringing  a  directory  clause  or  regula- 
tion is  not  nullity,  but  something  different. 

It  follows  from  the  foregoing  observations  that  the  power  of  a 
Clauses  option-  majority  to  alter,  suspend,  or  repeal  any  clause  in  a 
majority.^^  Company's  deed  of  settlement,  or  any  regulation  estab- 
lished for  the  conduct  of  the  company's  affairs,  does  not,  properly 
speaking,  depend  upon  whether  the  clause  or  regulation  whilst  in 
force  is  directory  or  imperative;  but  upon  whether  it  is,  as  regards 
the  majority,  optional  or  not.  This  turns,  as  has  been  already 
seen  {k\  on  the  question  whether  the  clause  is  fundamental  or 
sulsidlary,  i.e.,  upon   whether  it  can  or  cannot  be  repealed   or  de- 

{k)  Ante,  p.  598,  et  seq. 

1094 


CHAP.  IX.]  DIRECTOKT   AND    IMPEKATIVE    CLAUSES.  *828 

parted  from  consistently  with  the  ohjccts  for,  and  terms  on,  which 
the  company  was  formed.  The  division  of  clanses  into  funda- 
mental and  suhsidlary^  and  into  imperative  and  directory,  are  cross 
divisions,  and  are  based  on  different  principles. 

The  division  into  fundamental  and  subsidiary  has  reference  to  the 
])ower  to  repeal  or  alter;  whilst  the  division  into  imperative  and 
directory  has  reference  to  the  consequence  of  non-observance  whilst 
in  force.  The  last  division,  moreover,  ap])lies  as  well  to  fundamental 
as  to  subsidiary  clauses.  A  fundamental  clause,  however,  cannot 
be  ojjtional.     The  cross  divisions  may  be  represented  thus: — ■ 

(  imperative. 

fundamental      ,      ,       \    ,. 

'  directory, 

optional, 
subsidiari/      ...      J  imperative. 


directory. 

{optional 
\  fundamental. 
(  imperative     .     ,     .  -,       ,    .,. 
non-optwnal    .     .   J  ,  ,  , 

1  (  fundamental. 

[  directory     .     .     .    -^       ,    .  ,. 

(  subsidiary. 

*What  the  precise  consequence  of  not  observing  a  direc-     *828 
tory  clause  may  be,  depends  in  each  case  upon  the  act,  char- 
ter, deed  of  settlement  or  regulations  of  the  company,  conseqiienc 


ices 


If  no  ])articular  consequence  can  be  pointed  out,  that  f,[g"\trcctory 
very  circumstance  might  be  supposed  to  confer  upon  clauses, 
the  minority  a  right  to  judicial  assistance  for  the  purpose  of  having 
the  ail'airs  of  the  company  properly  carried  on.  For  although  a 
majority  cannot  be  controlled  in  the  exercise  of  powers  which 
legitimately  belong  to  them,  they  may  properly  be  prevented  from 
exercising  powers  which  do  not  beK)ng  to  them;  and  interference 
for  the  purpose  of  preventing  tliem  from  infringing  a  non-optional 
but  directory  clause  or  regulation,  is  clearly  warranted  by  this  prin- 
ciple. Indeed,  such  interference  would  appear  to  be  the  more 
called  for,  as  without  it  a  confessedly  non  optional  clause  becomes, 
in  the  case  supposed,  a  mere  dead  letter.  This,  however,  is  not 
exactly  the  view  taken  by  courts  of  justice.  In  determining 
whether  they  will  or  will  not  interfere  with  the  maiingoment  of  the 
affairs  of  the  company.  Courts  regard  not  so  much  the  question 
whether  what  is  being  done  is  contrary  to  an  imperative  or  direc- 
tory clause,  but  whether  it  is  contrary  to  a  fundamental  or  subsid- 

1095 


*S29 


DIRECTOKY    AND    IMrEKATIVE    CLAUSKS.  [bOOK  III. 


iaiy  clause.  If  a  suLsidiaiy  clause  only  is  being  infring-cd,  the 
Court  will  not  interfere  except  to  protect  a  majority  against  a  mi- 
nority; whilst  if  a  fundamental  clause  is  being  infringed,  the  Court 
will  interfere  to  protect  a  minority  against  a  majority.  (1) 

Having  pointed  out  what  the  writer  conceives  to  be  the  true 
meaning  of  the  word  directory,  as  distinguished  from  imperative 
on  the  one  hand  and  optional  on  the  other,  it  is  proposed  to  notice 
a  few  cases  in  which  clauses  certainly  not  intended  to  be  optional 
with  the  directors  have  been  held  to  be  subsidiary,  and  not  funda- 
mental, and  to  be  directory,  and  not  imperative,  although  the  con- 
sequences of  disregarding  those  clauses  are  by  no  means  apparent. 

In  Foss  V.  Harbottle  (m),  an  act  of  Parliament  incorporating  the 
s^o^clued  direc-  ^^^^*^^'^^  ^^^'^  Company,  declared  that  it  should  be  in 
tory  clauses.       the  power  of  a  certain  number  of  shareholders,  actiii"- 
in    a  certain    manner,   and    observing    certain 
meetinfs?  *829     forms,  to  require  the  directors  *to  convene  ex- 

traordinary meetings,  and  in  case  of  tlieir  de- 
fault, to  convene  such  meetings  themselves.  A  question  having 
arisen  how  far  it  was  necessary  to  adliere  strictly  to  the  letter  of 
the  enactment,  in  order  to  give  validity  to  the  acts  of  a  meeting 
convened  under  it,  the  Yice-Chancellor,  Sir  James  Wio-ram,  ex- 
pressed  a  strong  opinion  that  the  acts  of  a  meeting  convened  in 
substantial  compliance  with  the  statute  would  be  valid,  although 
all  the  prescribed  forms  had  not  been  observed.  He  considered 
the  statute  to  be  in  this  respect  directory  only. 

In  The  Thames  Haven  and  Dock  Railway. Company  v.  Eose  {n\ 
Quorum  of  ^  private  act  of  Parliament  directed  that  the  business 
directors.  ^f  ^  company  sliould  be  carried  on  by  twelve  directors, 

of  whom  five  should  be  a  quorum;  and  the  Court  of  Common 
Pleas  was  of  opinion  that  the  act  was  in  this  respect  directory  onlv, 
and  that  calls  made  by  five  out  of  seven  directors,  there  beino-  no 
more,  were  valid,  [o) 

Again,  it  has  more  than  once  been  held  that  when  a  com2:>any  is 
Cases  where  a  incorporated  by  charter,  or  act  of  Parliament,  which 
beenhfformal  ^irects  the  observance  of  certain  forms  before  the  cor- 
ly sealed.  porate  seal  is  annexed  to  contracts  purporting  to  bind 

the  body  corporate,  a  contract  under  the  corporate   seal,  and  of  a 

(0  This  subject    will  be    examined  {n)  4  Man.  &  Gr.  552. 

hereafter.     See  book  iii.  cL.  10,  §3.  (o)  Compare  Kii-k  r.  Bell,   16  Q.  B. 

(m)  2  Ha.  461.  290,  and  other  cases  cited  ante,  p.  244. 
1096 


cuAr.  IX.]  rAiiTXE.''-:iP  articles,  etc.  *830 

kind  authorized  by  the  charter  or  statute,  is  bindini^  on  the  corpor- 
ation, although  the  seal  may  liave  been  annexed  withuut  the  observ- 
ance of  the  prescribed  formalities,  {p) 

So,  in  the  case  of  any  ordinary  joint-stock  company,  the  deed  of 
settlement  of  which  declared  that  all  cheques  on  its  signature  of 
bankers  were  to  be  signed  by  three  directors,  and  the  cheques, 
directors  drew  che(|ues  signed  by  less  than  three  of  them,  it  was 
held  that  this  irregularity  did  not  aftect  the  right  of  the  directors 
to  be  allowed  as  between  themselves  and  the  shareholders  the  sums 
drawn  out,  such  sums  having  been  Ijund  fiile  applied  for  the  j)ur- 
poses  of  the  company,  i^q') 

*So,  clauses  relating  to  the  mode  of  signing  minutes  of     *830 
meetings,  keeping  registers,  and  making  returns,  so    as   to 
render  them  admissible   in  evidence   without  prelimi-  gj^natureof 
nary  proof,  are  considered  as  directory  only.  (;•)  mmutcs. 

These  cases  are  not  to  be  confounded  with  those  in  which  share- 
holders and  companies  have  been   held  estopped    from  cases  oj  estop- 

,    f  r^  jH'l  to  be 

takintr  advantaire  of  the  non-observance  ot  tormalities.  aiiUnguished. 
Such  cases  do  not  turn  upon  whether  the  clauses  prescribing  the 
formalities  are  directory  or  imperative;  but  upon  the  verj'  different 
question  whether,  supposing  them  to  be  imperative,  the  invalidity  of 
what  has  been  done  informally  can  be  insisted  on  by  those  who  have 
always  treated  it  as  valid,  and  induced  others  to  do  the  same,  {s) 


SECTION   III.— ON   THE   USUAL   CLAUSES   IN   ARTICLES   OF 
PARTNERSHIP. 

Having  now  alluded  to  certain  general  rules  which  require  to  be 
borne   in    mind   in   considering   the   effect   of  special  usuai  clauses 

.       .  '        .  in  partnership 

agreements  between  partners,  it  is  proposed  to  notice  anieies. 
shortly  the  provisions  usually  met  with  in  partnership  articles,  and 
the  interpretation  which  has  been  put  upon  them  by  the  courts. 

(p)    See  Fountaine    r.    Cannarthon  Compare  Kx  parte   Agra   and   ]\IiU';tor- 

Rail.  Co.  5  Eq,  316;  The  Royal  British  man's  Rank,  6  Ch.  200;  Kx  parte  Birm- 

Bank  v.  Turqnand,  6  E.  &   B.  327,  and  in^'ham  Bank,  3  Ch.  G-M. 

5  E.  &  B.  248;  Agar  v.  The  AtheniEura  (/•)  See,  as  to  niinutos  of  meetings, 

Life  Assurance  Society,  8  C.   B.   N.  S.  ante,  p.   650,    and  as  to  registrars  and 

725.     Compare  D'Arcy  v.  Tamar,  <S:c.  returns,  ante,  pp.  139,  140. 

RaU.  Co.  L.  R.  2  Ex.  158.  (s)  See  ante,  p.  128. 

(o)  Ex  parte  Bignold,  22  Beav.  143. 

1097 


*831  USUAL    CLAUSES.  [bOOK  III. 

In  framing  articles  of  partnersliip,  it  slionld  alwaj-s  be  remem- 
bered that  tliey  are  intended  for  the  guidance  of  persons  M'ho  are 
not  lawyers;  and  tiiat  it  is  tlierefore  nnwise  to  insert  only  such 
provisions  as  are  necessary  to  exclude  the  application  ot"  rules 
which  apply  where  nothing  to  the  contrary  is  said.  The  articles 
should  be  so  drawn  as  to  be  a  code  of  directions,  to  which  the 
partners  may  refer  as  a  guide  in  all  their  transactions,  and  upon 
which  they  may  settle  among  themselves  differences  which  may 
arise,  without  having  recourse  to  courts  of  justice. 

1.  The  nature  of  the  business. — This  should  always  be  stated. 
Upon   it  depends  the  extent  to  which   each  partner  is  to  be  re- 
garded as  the  implied  agent  of  the  firm  in  Lis 

buSnussf*^^       *831     dealings  *witli  strangers;  and  npon  it  also  in  a 

great  measure  depends  the  power  of  a  majority 

of  partners  to  act  in  opposition  to  the  wishes  of  the  minorit3\  {f) 

2.  The  time  of  the  commencement  of  a  jpartnershijp — Prima 
2.  Commence-  fade,  articles  of  partnership,  like  other  instruments, 
ijartneiship.  take  eliect  trom  their  date;  and  it  they  are  executed  on 
the  day  of  their  date,  and  contain  no  expression  indicating  when  the 
inirtnersliip  is  to  begin,  it  must  be  taken  to  commence  on  the  d  ly 
of  the  date  of  the  articles,  and  parol  evidence  to  show  that  this  was 
not  intended  is  not  admissible.  {iC) 

It  occasionally  happens  that  it  is  expressly  declared  by  the  part- 
Retrnspective      nci'ship  articles  that  the  partnership  is  to  date  from  a 

and  prospective  .,,     ,     .  .   ,  .  ,  ,        , 

partnership.  speciiied  time,  citlicr  prior  or  subsequent  to  the  day  on 
which  the  articles  are  executed.  The  effects  of  such  a  declaration, 
as  between  the  parties  to  the  articles,  and  as  between  them  on  the 
one  hand,  and  third  persons  on  the  other,  are  by  no  means  the 
same.  As  between  the  parties  themselves  the  time  specified  is  that 
from  which  the  accounts  of  profits  and  losses  are  to  date:  but  as  be- 
tween those  parties  and  third  persons  the  time  in  question  is  of  lit- 
tle if  any  importance;  for  an  agreement  that  a  partnership  shall 
date  from  a  time  past  does  not  enure  to  the  benefit  of  creditors  {x)\ 
and  an  agreement  that  it  shall  date  from  a  time  future  does  not 
prejudice  them,  if,  in  fact,  the  parties  act  as  partners  before  such 
time  aii'ives.  (y) 

{i)  See  ante,  J).  598.  their  execution.     See  Davis  v.  Jones,  17 

(m)  Williams  v.  Jones,  5  B.  &  C.  108.  C.  B.  625. 

If  the  articles  are  not  dated,  parol  evi-  (x)  Vere  r.  Ashby.  10  B.  &  C.  28>^. 

dence  is  admissible  to  show  that  they  (;/)  Battley  v.  Lewis,  1   Man.   &  Cr. 

were  not  to  take  effect  from  the  time  of  155. 

1098 


CHAP.  IX.] 


PARTNERSHIP   ARIICLES,    ETC. 


^832 


It  occasionally  hapiieiis  that  an  agreement  for  a  partnership  is 
drawn  ud  and  siirned,  but  a  more  formal  instrument  is  Formal  con- 

I  o  '  tract  to  be 

intended  to  be  executed.  If  in  a  case  of  this  sort  the  tirawuup. 
execution  of  tlie  formal  instrument  is  delayed,  the  commencement 
of  the  ])artnership  is  not  neces.sarily  delayed  also.  AVhether  it  is  or 
is  not  must  depend  on  the  terms  of  the  preliminary  ai^reement;  for 
by  that  agreement  the  parties  are  bound,  and  its  terms  will  regu- 
late their  rights  and  obligations  uitei'  se,  so  long  as  the  more  for- 
mal instrument  is  unexecuted,  (z) 

*3.  T/ie  name  or  style  of  the  firm,  should  be  expressed;  *832 
and  it  should  be  declared  that  no  partner  shall  enter  into  an 
engagement  on  behalf  of  the  firm  except  in  its  name.  3.  The  style  of 
Such  an  agreement  is  capable  of  being  enforced  (a);  'hefirm. 
and  it  may  be  of  nse  in  determining,  as  between  the  partners, 
whether  a  given  transaction  is  to  be  regarded  as  a  partnership  trans- 
action or  not. 

4.  The  duration  of  the  partnershijy- — If  the  time  for  which  the 
partnership  is  to  endure  is  not  limited  to  a  definite  pe-  4  tiu' duration 

I  r  '  oftht'   imruicr- 

riod,  either  expressly  or  by  necessary  implication,  the  ship, 
partnership  may  be  dissolved  at  the  will  of  any  partner.  {Ijf     But  it 


(z)  See  England  r.  Curling,  8  Bear. 
133. 

(a)  See  Marshall  v.  Coluuin,  2  J.  &  W. 
268. 

(ft)  Ante,  pp.  218-220. 

1  In  a  suit  brought  to  recover  damages 
for  the  breach  of  a  contract  to  continue 
a  partnership,  the  court  was  requested 
to  charge  the  jury  that  "  if  they  found 
that  the  defendant  wrongfully  dissolved 
and  broke  up  the  partnership,  they  were 
not  confined,  in  estimating  damages,  to 
the  rate  of  profits  at  the  time  of  the 
dissolution  but  might  consider  and  give 
damages  for  profits  that  would  probably 
have  been  made  by  the  higher  prices, 
and  might  consider  the  present  and 
probable  future  rate  during  the  bahmce 
of  the  partnership,  to  which  the  court 
said:  "Yes,  I  think  that  is  a  sound 
proposition;  it  requires  some  care.  You 
are  not  to  guess  about  this  matter.  If 
you  can  rationally  see  through  this, 
that  the  profits  would  have  been  greater 


in  the  future,  and  are  greater  at  the 
present  time  than  at  the  time  of  the 
dissolution,  and  you  believe  that  the 
present  increased  profits,  if  such  there 
would  be,  are  likely  to  continue  and  in- 
crease, and  you  can  sati^^fy  yourselves  of 
this  in  your  own  minds,  then  j'ou  hilve 
a  right  to  look  through  the  remainder 
of  the  tiiue  of  the  partnership,  making 
a  very  careful  estimate  in  regard  to 
what  the  profits  might  probably  be." 
Subsequently  the  defendant's  counsel 
requested  the  court  to  charge  "  that  the 
profits  which  might  have  been  made  are 
too  sj)'Hulativ«,  vague  and  contingent, 
depending  upon  tlie  many  ciromustancos 
of  fluctuation  in  prices,  baddcbtji,  etc., 
to  form  a  basis  of  damag"s."  The 
court  responded:  "I  cannot  charge 
that;  you  must  judge  for  yourselves, 
appljnng  those  rules  which  I  have  en- 
joined, and  that  deliberation  whiih  the 
case  requires  :  "  Ilchl,  that  the  rule  of 
damages  establi-shed  by  the  rulings  was 

1099 


*S32 


PARTNERSHIP    ARTICLES,    ETC. 


[book  III. 


must  not  be  forgotten  that  a  partuorsliip  entered  into  for  a  definite 
time  is  dissolved  by  tlie  death  or  bankruptey  of  an}^  one  of  its  mem- 
bers before  that  time  has  expired  (c),  and  that  it  is  therefore  neces- 
saiy  to  provide  for  these  events  in  order  to  give  effect  to  the  agree- 
ment as  to  time.^ 

A  partnership  entered  into  for  a  certain  time  and  continued  after 
that  time  has  expired,  is  a  partnership  at  wilh  {d) 

5.  T/ie  premium. — The  points  to  be  attended  to  witli  reference 
p  _,  .to  this,  are,  1,  when,  to  wliom,  and  how  it  is  to  be  paid: 

5.  The  premi-  3555  5  j  3 

^^-  and,  2,  wliether  the  whole  or  any  part  of  it  is  to  be  re- 

turned in  any  and  what  events.  The  law  relating  to  this  subject 
has  been  already  noticed,  (e) 


en-oneous,  being  of  too  speculative  and 
conjectural  character,  and  leaving  the 
jury  to  make  an  estimate  of  the  profits 
which  would  accrue  during  the  stipula- 
ted term  of  partnership  remaining,  sub- 
sequent to  the  trial,  from  what  in  their 
view  was  probable  on  the  subject,  and 
without  any  data  from  which  to  esti- 
mate.    VanNess  v.  Fisher,  5  Lans.  236. 

(c)  Ante,  p.  230. 

^  A  provision  in  the  articles  of  co-part- 
nership, for  a  continuance,  notwith- 
standing the  death  of  a  member,  is  valid 
and  may  be  enforced;  but  as  it  is  con- 
trary to  general  rule  of  law,  it  must  be 
clearly  proved  and  strictly  followed. 
Alexander  v.  Lewis,  47  Tex.  481.  See 
ante,  p.  231,  note. 

Where  under  the  partnership  articles 
the  children  of  one  partner  were  to  suc- 
ceed to  the  share  and  interest  of  their 
father,  in  case  of  his  death  before  the 
expiration  of  the  partnership  contract, 
and  at  his  death  being  sui  juris  drew 
the  amount  monthly  which  their  father 
was  allowed  to  draw  :  Held,  that  this 
was  an  acceptance  of  the  successorship 
to  all  the  interests  and  responsibilities 
of  the  deceased  partner,  and  that  the 
children  were  liable  at  the  suit  of  a 
creditor  of  the  firm.  Nave  v.  Sturges, 
5  Mo.  App.  557. 

Articles  of  co-partnership  contained 

1100 


the  provision  ' '  that,  in  case  of  the  death 
or  bankruptcy  of  any  of  the  said  parties, 
in  order  to  prevent  any  altercation  with 
the  heirs,  executors,  administrators,  or 
assigns  of  the  deceased  or  bankrupt,  the 
shares  of  the  profits,  as  well  as  capital, 
of  the  deceased  or  bankrupt,  shall  be 
paid  by  the  survivors  or  solvents,  agree- 
ably to  the  yearly  statements  of  the 
company's  affairs  prior  to  his  death  or 
bankruptcy  :"  Held,  that  this  clause 
applied  to  real  estate  belonging  to  the 
firm,  as  well  as  to  personal,  and  that,  on 
the  death  of  a  partner  in  whom  alone 
was  the  legal  title  to  land,  for  the  ben- 
efit of  the  firm,  the  whole  beneficial  es- 
tate therein  survived  to  the  surviving 
partners.  Robertson  v.  Miller,  1  Brock. 
466. 

Where  a  partnership  was  formed  be- 
tween an  individual,  on  the  one  part, 
and  a  pre-existing  firm  on  the  other 
part:  Held,  that  a  provision  in  the 
articles  of  partnership,  that  the  firm 
should  continue  "  until  dissolved  by  and 
with  the  mutual  consent  of  both  par- 
ties," did  not  authorize  the  survivors  to 
continue  the  partnership  business  after 
the  death  of  one  of  the  partners.  Egberts 
V.  Wood,  3  Paige,  517. 

(d)  Featherstonhaugh  r.  Fenwick,  17 
Ves.  307,  and  ante,  p.  219. 

[e]  Ante,  p.  71,  et  seq. 


CHAP,  IX.]  USUAL    CLAUSES.  *833 

6.  Tlie  capital  and  prop>irtij  of  the  fivm. — The  articles  should 
always  caretully  specify  what  is  and  what  is  not  to  be  6.  The  capital 

"  ,."  •!!  1  *"^  properly  of 

considered  partnership  property;    ])articiilarly    where   the  finu. 
one  partner  is,  or  is  to  be,  solely  entitled  to  what  is  to  be  used  for 
the  common  purposes  of  all.     If  one  partner  is  entitled   to   land 
which  is  to  become  partnership  property,  it  is  usual  (in  order  to 
prevent  a  sale  to  a  person  for  value  without  notice),   to  have  that 
laud  conveyed  or  assii^ned  to  trustees  for  the  firm;  but,  as  between 
the  partners  themselves,  all  that  is  requisite  is  to  declare  in  the  ar- 
ticles that  the  land  shall  form  part  of  the  assets  of  the  firm.     It  is 
also  prudent  to  declare  that,  as  between  the  real  and  person- 
al representatives  of  any  deceased  partner,  his  share  *shall     *S33 
be  deemed  personal  estate.     It  should  be  declared  that  ap- 
prentice fees  and  other  casual  payments  belong  to  the  firm  and 
form  part  of  its  profits. 

A  kind  of  pro])erty  which  is  difficult  to  deal  with,  and  which 
should  always  be  made  the  subject  of  an  express  agree-  ofriPiai>Mv 
ment,  is  tlie  benefit  accruing  from  an  ofiice  or  appoint-  r-oinimcnts. 
ment  obtained  by  one  of  the  partners.  For  example,  in  the  case  of 
a  firm  of  solicitors,  one  of  them  may  be  a  clerk  to  some  turnpike 
trust,  or  to  a  poor  law  board,  or  he  may  hold  some  other  apjioint- 
ment  yielding  a  salary.  Care  should  always  be  taken  to  sjiecify 
whether  the  salary  is  to  belong  solely  to  the  partner  holding  the  ap- 
pointment, or  whether  it  is  to  form  part  of  the  partnership  assets  (/); 
and  if  the  latter,  provision  should  be  made  for  the  payment  of  a 
sum  by  the  ]iartner  holding  the  appointment  in  the  event  of  the  dis- 
solution of  the  firm  whilst  the  appointment  continues.  If  the  profits 
of  the  office  are  ])artnership  assets,  and  the  firm  is  dissolved  whilst 
the  office  is  held  by  one  of  its  members,  the  court,  in  winding  up 
the  partnershi])  will  leave  him  in  the  enjoyment  of  the  office,  but 
charge  him  with  its  value  in  his  account  with  the  firm,  [cf) 

AVhen  a  partnershi]>  is  formed  for  working   some   secret  and  un- 
patented invention,  the  articles  should  specify  to  whom   jrn.ie s> cRts 
exclusively  the  right  of  working  such  invention  shall  P'^'i^'iH'*.  ^tc. 
belong  in  the  event  of  dissolution.     For  if  there  be  no  agreement 
on  the  subject,  all  the  parties  will  have  a  right  to  work  it,  in  oppo- 

(/)  See  Collins  r.  Jackson,  31  Beav.      although  ;)n'w<f/afiV  they  do  not. 
645,  noticed  anie,  p.  651,  where  profits  {g)  See  Smith  r.  Mules,  9  Ha.  556; 

arising  from  appointments  of  this  sort      Ambler  r.  Bolton,  14  Eq.  4'27. 
were  held  to  belong  to  the  partnership, 

1101 


*S34  PARTNEKSIIIP    AKTICLES,    ETC.  [bOOK  III. 

sition  to  each  other,  there  being  no  ground  upon  which  any  of  them 
can  be  prevented  from  so  doing.  If,  however,  it  can  be  proved  by 
the  inventor  that  his  secret  was  to  be  kept  from  liis  co-partners,  or 
that  they,  if  they  discovered  it,  were  not  to  make  use  of  their  dis- 
covery, they  will  not  be  allowed  to  violate  the  agreement  into  which 
they  have  entei'ed,  or  the  trust  reposed  in  them ;  and  the  circumstance 
that  the  invention  has  not  been  patented  will  not  be  material.  (A) 

Good-ioill  is  a  kind  of  property  which  ought 
Good-will.         *834     also  to  be  *expressly  provided  for;  but  this  is 
most  conveniently  done  in  connection  with  the 
dissolution  clauses.  (^) 

The  proportions  in  which  the  capital  is  to  be  contributed  by  the 
Contributions  P'^^rtucrs,  and  the  'proportions  in  which  they  are  to  be 
of  capital.  entitled  to  it  when  contributed,  ought  also  to  be  care- 
fully expressed.  It  by  no  means  follows  that  the  partners  are  to  be 
entitled  to  the  assets  in  the  proportions  in  Mdiich  they  contribute  to 
the  capital.  Indeed,  if  no  express  declaration  upon  the  subject  is 
\r\&()ie^  the  primd  facie  inference  is,  that  all  the  partners  are  entitled 
to  share  the  assets  (minus  the  capital)  equally,  although  they  may 
have  contributed  to  the  capital  unequally.  {I:) 

The  capital  should  be  expressed  to  be  so  much  money;  and  if  one 
Ca  itaish  uid  ^^  ^^^  partners  is  to  contribute  lands  or  goods  instead 
be  money.  ^f  money,  such  lands  or  goods  should  have  a  value  set 
upon  them,  and  their  value  in  money  should  be  considered  as  his 
contribution.  If  this  be  not  done,  the  articles  and  accounts  and  the 
proportions  in  which  profits  and  losses  are  to  be  shared  will  be  less 
perspicuous  and  free  from  doubt  than  would  otherwise  be  the  case; 
and  the  partner  who  contributes  land  will  generally  be  inclined  to 
look  upon  such  land  as  his,  and  not  as  part  of  the  common  stock. 

When  the  articles  provide  that  each  partner  shall  bring  in  so 
Rules  as  to  mucli  Capital,  or  do  some  other  specified  thing,  the 
precedent  qucstion  somctimcs  arises  how  far  the  fulfilment  by 
each  of  his  obligations  is  a  condition  precedent  to  his 
right  to  call  for  fulfilment  by  the  others  of  their  obligations.  The 
rules  laid  down  in  the  well  known  note  to  Pordage  v.  Cole  (Z), 
must  be  applied  to  all  such  cases.     These  rules  are  as  follows: 

"1.  If  a  day  be  appointed  for  paynieut  of  money,  or  part  of  it,  or  for  doin<r  any 
other  act,  and  the  day  is  to  happen,  or  may  happen,   before  the  thing  which  is  the 

(70  See  Morison  r.  Moore,  4  H.  &  241.  (t)  Ante,  pp.  676,  677. 

(0  See  as  to  this,  infra,  p.  859  et  seq.  (J)  1  Wms.  Saund.  320,  a. 

1102 


CHAP.  IX.]  USUAL    CLAUSKS.  *S35 

consideration  of  the  money  or  other  act  is  to  be  performefl,  an  action  may  b'.* 
brought  for  the  money  or  for  not  doing  such  other  act  h  fore  performance;  for  it 
appears  that  the  party  relied  upon  his  remedij,  and  did  not  intend  to  make  the 
performance  a  condition  precedent;  and  so  it  is  where  no  time  is  fixed  for  iK*rform- 
ance  of  that  which  is  the  consideration  of  the  money  or  other  act. 

"  2.  When  a  day  is  appointed  for  the  payment  of  money,  Arc,  and  the 
*day  is  to  happen  oflcr  tlie  thing  which  is  the  consideration  of  the  money,      *S35 
&c.,  is  to  be  performed,  no  action  can  be  muintamed  for  the  money,  <tc., 
before  perfonuance. 

"  3.  Where  a  covenant  goes  only  to  part  of  the  consideration  on  both  sides,  and 
a  breach  of  such  covenant  may  be  jjaid  for  in  damages,  it  is  an  independent  cove- 
nant, and  an  action  may  be  maintained  for  a  bn  ach  of  the  covenant  on  the  part  of 
the  defendant,  without  averring  performance  in  the  declaration. 

"4.  But  where  the  mutual  coven iints  go  to  the  whole  coiiftideraiion  on  hoth 
sides,  they  are  mutual  conditions,  and  the  performance  must  be  averred. 

"5.  Where  two  acts  are  to  be  done  at  the  same  time,  as  where  A.  covenants  to 
convey  an  estate  to  B.  on  such  a  day,  and  in  consideration  thereof  B.  covenants  to 
pay  a  sum  of  money  on  the  same  day,  neither  can  maintain  an  action  without 
showing  performance  of,  or  an  offer  to  perform,  his  part,  though  it  is  not  certain 
which  of  them  is  obliged  to  do  the  first  act ;  and  this  particularly  applies  to  all 
cases  of  sale." 

In  conforiTiitj  with  these  rules,  it  was  held,  in  Stavers  v.  Curl- 
inw  (m).  that  the  plaintiff  who  had  covenanted  to  pro     c. 

o  \      -"  r  I       -    Stavers  v. 

ceed  on  a  whaling  voyage,  and  to  obey  the  instructions   curiiug. 
of  the  defendants,  but  who  had  not  obeyed   them,  could  neverthe- 
less maintain  an  action  against  them  for   the  share  of  the  profit.^ 
which  they   had  covenanted    to  pay  him,  although  they  had  onlv 
covenanted  to  pay  liim  on  the  performance  by  him  of  his  covenants. 

So  in  Kcmble  r.  Mills  {n\  where  two  persons  had  agreed  to  be- 
come partners,  and  one  of  them  was  to  bring  in  2000/,,  Kpn,,,iep 
and  do  certain  things,  and   the  other  was   to  bring  in    *''"^- 
5000/.,  it  was  held  that  an  action  lay  for  non-payment  of  the  5000/., 
although  the  plaintiff  did  not  state  that  he  liad  brought  in  liis 
'2000/.,  or  had  done  any  other  of  the  acts  which  he  had  agreed  to  do. 

Capital  is  sometimes  agreed  to  be  brought  in  in  tiie  shape  of 
good  debts.  Where,  on  the  formation  of  a  partner-  BrinsjinB  in  so 
ship,  it  was  agreed  that  one  of  the  partners  should  debts, 
bring  in  40,000/.  of  good  debts,  and  that  sum  was  owing  to  him  by 
persons  who  continued  customers  of  the  lirm  after  its  formation, 
and  became  indebted  to  it,  and  Avho  in  time  paid  it  -tO.oCK*/.  and 
more,  it  was  held  that  this  sum  had  been  brought  in  as  a^rroed. 

(m)    3  Bing.  N.  C.  355.  Compare  Marsden  v.  Moore,  4  H.  \-  N. 

(n)    Kemble  v.  Mills,  9  Dowl.  446.       500. 

1103 


*837  USUAL  CLAUSES.  [book  iil 

*836  For  ^nothing  having  been  said  as  to  tlie  accounts  on  wliicli 
the  payments  were  made,  and  each  customer's  account  hav- 
ing been  kept  in  such  a  way  as  to  form  one  single  continuous  ac- 
count, tlie  40,OOOZ.  was  treated  as  having  been  paid  in  discharge  of 
the  earliest  items  in  their  respective  accounts;  or,  in  other  words, 
in  discharge  of  the  debts  owing  to  the  partner  who  undertook  to 
bring  in  that  amount  of  good  debts,  and  not  in  discharge  of  the 
subsequent  debts  contracted  with  the  firm,  (o) 

In  Cook  V.  Benbow,  a  father,  who  was  in  business,  took  his  sons 
P,j^,.  ^,  into  partnership,  and  agreed  to  bring  into  the  business 

Benbow.  ^||  |-]jg  capital,  plant,  and  stock  in  trade  then  and  usu- 

ally employed  by  him  in  the  business.  In  estimating  the  capital, 
the  book  debts  due  to  the  father  were  valued  at  twenty  per  cent,  be- 
low their  nominal  amount,  but  they,  in  fact,  realized  more  ;  and  it 
was  held  that  the  surplus  constituted  part  of  the  father's  capital, 
and  not  part  of  the  profits  of  the  partnership,  [p) 

AVhen  a  person  is  about  to  enter  a  firm,  he  sometimes  requires 
Guarantee  ^  guarantee  that  its  debts  do  not  exceed  a  certain  sum. 
against  debts,  jf  such  a  guarantee  is  given,  and  it  turns  out  that  the 
debts  of  the  firm  exceeded  the  sum  mentioned  at  the  time  in  ques- 
tion, the  guarantor  is  liable  to  an  action;  and  the  amount  of 
damages  wliich  the  plaintiff"  is  entitled  to  recover  is  the  loss  he  has 
sustained  in  consequence  of  the  excess  of  debts  above  the  sum 
mentioned;  but  not  the  loss  he  may  have  suffered  by  having  joined 
tlie  firm,  {q) 

7.  Interest,  allowances,  <&c. — The  allowance  of  interest  on  capital 
7  Interest  ^'^^  ^'^  advances  should  be  made  the  subject  of  special 
allowances, &c.  agreement.  The  interest  should  be  made  payable  be- 
fore the  profits  to  be  divided  are  ascertained,  and  the  interest  on 
advances  should  be  made  pa^yable  before  interest  on  capital,  (r) 

Most  articles  of  partnership  contain  a  clause  authorizing  each  part- 
ner to  draw  out  of  the  partnership  funds  a  cerf ain 
dravmom.^^  *837  *sum  per  month  for  his  own  private  purposes. 
Such  a  clause  should  provide  for  the  repayment 
with  interest  of  whatever  may  be  drawn  out  in  excess  of  the  sum 
mentioned. 

The  articles  should  also  specify  what  expenses  are  to  be  borne  bj^ 

(o)  Toulmin  v.  Copland.  2  CI.  «fe  Fin.  iq)  Walker  v.  Broadhurst,  8  Ex.  889. 

681 ;  S.  C.  3  Y.  C.  Ex.  636.  (r)  See,  as  to  interest,  when  there  is 

Q;)  Cook?'.  Benbow,  3  DeG.  J  &  Sm.  1.  no  agreement  to  allow  ii,  ante, -p.  780. 
1104 


CHAP.  IX.] 


USUAL    CLAUSES. 


*83; 


tlicfirin;  and  particular  notice  sliould  1)C  taken  of  allow-   Kxpcnscs  to  be 

1     1   •      1     1  I'll  clmrKeJ  lo  the 

anccs  of  an  unusual  kind,  out  which  the  ]iartner5  may   tinn. 
intend  shall  be  made,  e.g.,  an  allowance  for  treatini^  customers,  for 
mana<i;ement,  for  rent,  maintenance  of  servants,  itc,  ttc.  (.s).' 

8.  Conduct  and  ixjwers  of  the  'partners.— It  is  the  practice  to 
insert  in  partnership  articles  an  express  covenant  bv  s.  con<iuot and 

1  !•  •  iii'ii-  •!      powers  of 

each  ]iartncr  to  be  true  and  just  in  all  his  dealings  witli   partners, 
the  others.     This,  however,  is  always   im])lied;  and   the  clause  in 


(s)  Ante,  p.  779. 

'  A  provision  in  a  partnership  contract, 
that  (  ach  partnor  shall  pay  his  own  in- 
dividual expenses,  must  be  understood 
as  intended  to  apiily  when  the  parties 
were  at  home,  and  not  when  traveling 
on  the  business  of  the  concern.  With- 
ers V.  Withers,  8  Pet.  255. 

Where  articles  of  co-partnership 
stipulated  that  the  capital  and  profits 
should  remain  in  the  concern,  each 
party  being  at  liberty  to  draw  from  the 
joint  funds  so  much  only  as  was  neces- 
sary for  his  private  expenses:  Held,  that 
plate,  furniture,  carriages,  tSrc,  did  not 
come  within  the  provision,  but  that  the 
expenses  of  the  family  and  education  of 
children  did.  Stoughton  v.  Lynch,  1 
Johns.  Ch.  467. 

Where  one  entered  into  a  co-partner- 
ship wth  his  son-in-law,  and  it  was 
agreed  that  the  father-in-law  should 
furnish  a  house  for  a  shop,  tools,  etc., 
and  a  house  for  the  defendant  to  live  in, 
and  that  he  "  should  be  at  no  expense  :  " 
Held,  that  these  words  must  be  inten- 
ded to  mean  expense  for  things  con- 
nected with  the  business,  and  not 
family  expenses.  Brown  v.  Ilaynes,  6 
Jones   Eq.  49.  * 

By  an  agreement  to  share  profits,  the 
active  partner  was  to  be  allowed,  on 
adjustment  of  accounts,  "  the  actual  ex- 
penses that  may  appertain  to  the  goods 
themselves  :  the  court  allowed  tlie  ex- 
penses for  taxes,  advertising,  "  and 
clerk-hire,  caused  in  the  trade  in  ques- 
tion, and  in  connection  with  that  part 
of  such   partner's    pr:)perty    employed 


therein.     Foster  r.  Ooddard,    1    Black, 
506. 

A  co-partnership  was  formf'd  to  work 
a  mining  interest  in  several  lots  of 
land  owned  by  the  partners ;  by  the 
articles,  each  partner  was  to  pay  his 
proportion  of  the  expenses,  in  the  ratio 
of  his  interest  in  the  respective  lots  ; 
some  parts  of  the  partnership  accounts 
wei-e  so  kept  that  their  apportionment 
was  readily  made  ;  but  a  portion  of 
them  were  so  kept  that  the  expense  in- 
curred on  the  respective  lots  could  not 
be  separated  :  Held,  that  in  adjusting 
this  portion  of  tha  accounts  the  entire 
expense  of  working  all  the  lots  must  be 
apportioned  among  them  respectively 
in  the  proportion  of  the  value  of  the 
mineral  raised  from  each,  and  then  the 
partners  must  be  charged  in  the  ratio 
of  their  interests  in  each  lot.  Levi  v. 
K^rick,  l:>  Iowa.  344. 

Where  the  articles  of  co-partnersliip 
distinguished  between  the  obligatlMH 
of  the  parties  to  contiibuto  for  the  ex- 
penses of  repairs  to  machinery,  or  new 
machinery  to  supply  the  place  of  any 
worn  out,  and  the  oljligation  to  contril>- 
ute  for  the  purcha.se  of  additions  to  the 
machinery:  Held,  that  a  new  founda- 
tion for  a  new  engine  put  in  a  mill  in 
place  of  an  old  one  discardi'd,  built  for 
it  because  the  foundation  of  the  old  en- 
gine, if  repaired,  was  not  sufficient  for 
the  new  en<;ine,  must  be  considered  a-s 
an  addition  and  not  as  repairs,  under  ar- 
ticles distingui.shing  additions  from  re- 
pairs. Bunnell  v.  Henderson,  SJ  N.  J. 
Eq.  174. 

1105 


*838  PARTNERSHIP   ARTICLES,    ETC.  [bOOK  III. 

question  is  of  little  use  in  a  legal  point  of  view,  although  it  may 
serve  to  remind  the  partners  of  tlieir  mutual  obligations  to  good 
faith.  In  a  recent  case,  two  partners  covenanted  that  tliey  respect- 
ively would  be  true  and  just  to  eacli  other  in  all  tlieir  contracts, 
reckonings,  receipts,  payments,  and  dealings;  and  each  bound  him- 
self to  the  other  in  the  penal  sum  of  50001.  for  the  due  perform 
ance  of  the  covenants  in  the  articles.  One  of  the  partners  became 
o-reatly  indebted  to  the  firm  in  respect  of  receipts  by  him  on  its 
account.  It  was  contended  that  the  debt  was  a  specialty  debt  by 
reason  of  the  covenant  above  referred  to;  but  it  Avas  held  that  the 
debt  was  only  a  specialty  debt  to  the  extent  of  5000Z.,  the  amount 
of  the  penalty  in  which  each  partner  was  bound  to  the  other,  and 
that  the  residue  of  the  debt  was  a  simple  contract  debt  only,  {t) 
Hiring  ser-  It   IS   useful   to   State   wlio  is  to  havo  the  power  of 

vants,  &c.  biring  and  dismissing  servants,  {u) 

The  time  and  attention  which  the  partners  are  to  give  to  the 
Amount  of  at-  affairs  of  the  firm  should  be  expressly  mentioned;'  es- 
givln'to  afl'lirs  pecially  if  one  of  them  is  to  be  at  liberty  to  give  less 
ot  theflrra.  ^^-  j^-^  ^[^^^q  j^,^(|  attention  than  the  others.  Inattention 
to  business  by  reason  of  illness  is,  however,  no  breach  of  an  agree- 
ment to  attend  to  it.  (x) 

It  is  usual  to  insert  in  partnership  articles  a 
stipulations       *838     clausc    ^prohibiting  any  partner  from  doing  cer- 

that  one  part-  i.    •        xi  •  -^i         i.  •         i  w    •     •     "      .1 

nershaiinot  taiii   tliuigs    witliout    previously  Obtaining    the 

do  certain  /•      i  ^i  i  •  ^  i         • 

things  without    couscut  ot  the  otliers;  e.g.,  becoming  surety,  releasing 

the  consent  of  ,  .1,^11'. 

the  others.         debts.    Speculating  m  the  funds,  drawing,  accepting,  or 

indorsing  bills,  otherwise  than  in  the  usual  course  of  business,  &c.. 

If  the  number  of  partners  exceeds   two,   the  majority  should  be 

expressly  entrusted   with   the  power  of  deciding  what 

Majority.  ,       -   ,        ,  ,  •        1  •  1 

shall  be  done  as  regards  any  matter  m  dispute  l)etween 
the  partners,  and  relating  to  the  business  of  the  partnership,  as 
defined  b}'  the  articles,  (y)     It  is  difficult  to  lay  down  a  general  rule 

(t)  Powclrell  V.  Jones,   2  Sm.   &   G.  the  causes  wli'ch  have   ronder'^d  it  less 

305.  productive.      Stidger   r.    Reynolds,    lu 

(m)  See  ante,  p.  598.  Ohio,  351. 

2  See  Leighton  1).  Hosner,  39  Iowa,  (x)  Boast  «.  Firth,  L.  R.  4  C.  P.  1 : 
.594.  A  partner,  who  agrees  to  "take  Robinson  ij.  Davison,  6  Ex.  269. 
charge  of  the  entire  business,  and  (//)  See  as  to  the  powers  of  a  ma- 
exert  his  utmost  attention  and  time"  jority,  rt»fe,  p.  598  et  seq.,  and  Falk- 
forit,  must  account  for  the  ordinary  land  r.  Cheney,  5  Bro.  P.  C.  476,  whicli 
profits  of  such  business,  or  explain  turned  on  the  wording  of  the  articles. 
1106 


CHAP.  IX.]  USUAL    CLAUSES.  *830 

for  tlie  determination  of  what  is  to  be  done  if  tlie  partners  aiv 
equally  divided.  Articles  of  partnership,  as  usually  drawn,  are 
silent  upon  this  question;  but  if  it  were  declared  that  in  such  a 
case  matters  should  be  left  in  statu  quo,  probably  some  little  as- 
sistance would  be  given  to  the  preservation  of  peace  and  i^ood  will. 

9.  Partnership  hooks. — In  order  to  prevent  any  disputes  as  to 
the  custody  of  the  partnershi))  Itooks,  it  is  advisable  to  o-  'ustody  or 

,",  1T1-11  n^  till' i'»rt"*-''^'''P 

declare  that  they  shall  be  KC})t  at  tlie  onice  of  the  part-  books. 
ncrship,  and  that  each  partner  shall  have  free  access  to  them.  A 
Court  will  restrain  the  removal  or  detention  of  the  partnershiji 
books  contrary  to  an  express  agreement  entei-ed  into  by  the  ])art- 
ners  (2);  and  even  in  the  absence  of  any  s])eclal  agreement,  tlu' 
Court  would  probably  interfere,  for  it  is  an  im])lied  obligation  on 
the  part  of  every  partner  not  to  exclude  his  co-})artners  from  access 
to  the  books  of  the  firm,  {a) 

10.  Accounts. — The  object  of  taking  partnership  accounts  is 
two-fold,  viz.,  1.  To  show  how  the  firm  stands  as  re-  10.  Accounf- 

to  be  kept  ami 

gards  strangers;  and    2.   io    show   how   each    partner  taken, 
stands  towards  the  firm.     The  accounts,   therefore,  which  the  arti- 
cles should  require  to  be  taken,  should  be  such  as  will  accomplish 
this  two-fold  object.     The  articles  should  consequently  j)rovide,  not 
only  for  the  keeping   of  proper  books   of  account,  and  for 
*the  due  entry    therein  of  all   receipts   and    payments,  but     *S3!.» 
also  for  the  making  up  yearly  of  a  general  account,  showing 
the  then  assets  and  liabilities  of  the  firm,  and  what  is  due  to  each 
partner  in  respect  of  his   capital   and    sliare  of  profits,  or  what  is 
due  from  him  to  the  firm,  as  the  case  may  be. 

In  order,  moreover,  to  prevent  accounts  which  have  been  once 
fairly  taken  and  settled  from  being  afterwards  disputed.  Accounts 

,'.-  1111  1  ■  1     flKrcetl  to  not 

the  articles  usually  declare  that  an  account  when  signed  to ix;  re-opened. 
shall  be  treated  as  conclusive;  or  not  be  opened  except  for  some 
manifest  error  discovered  within  a  given  time.  A  provision  to  this 
effect  is  extremely  useful,  and  should  never  be  omitted;  but  how- 
ever stringently  it  may  be  drawn,  no  account  will  be  binding  on  any 
partner  who  may  have  been  induced  to  sign  it  by  false  and  fraudu- 
lent representations,  or  in  ignorance  of  material  circumstances  dis- 

{z)  See  Taylor  v.  Davis,  3  Beav.  '■:>&^,  &  ?m.  C92,  it  docs  not  appear  whether 
note;  Greatrex  r.  Greatrex,  1  DeG.  &  any  express  a|?reement  as  to  the  custody 
Sm.  692.  of  the  books  had   been  entered  into  or 

(fl)  In  Groatrex  v.  Greatrex,   1   DeG.      not. 

]10T 


*8J:0  PARTNERSHIP   ARTICLES,    ETC.  [bOOK  III. 

honorably  concealed  from  liim  by  his  co-partners.  (J)  Where,  how- 
ever, all  parties  act  lond  fide  such  clauses  are  operative  ;  but  the 
usual  provision  as  to  manifest  errors  applies  only  to  errors  in  fig- 
ures and  obvious  blunders,  not  to  errors  in  judp^ment,  e.g ,  in  treat- 
inn-  as  o'ood,  debts  which  ultimately  turn  out  to  be  bad,  or  in  omit- 
tino-  losses  not  known  to  have  occurred.  (<?)  All  errors  are  manifest 
when  discovered;  but  such  clauses  as  those  here  alluded  to  are  in- 
tended to  be  confined  to  oversif^hts  and  blunders,  so  obvious  as  to 
admit  of  no  difference  of  opinion. 

Moreover,  an  account  may  be  conclusive  for  one  purpose,  although 

not  for  another,  e.  g.,  for  the  purpose  of  calculating  the 

elusive  forone    profits  to  be  divided  so  louff  as  the  firm  is  unchano-ed, 

purpose  but  not    r  "  o       ' 

tor  another.  jj^^^.  j^^^  f^j.  calculating  the  total  amount  to  be  paid  to  a 
partner  on  his  expulsion  from  the  firm,  {d) 

So,  from  the  fact  that  nothing  is  reckoned  for  good-will  in  taking 
annual  accounts  with  a  view  to  a  division  of  profits,  it  does  not  fol- 
low that  the  good- will  is  not  to  be  reckoned  on  a  dissolution  of  the 
partnership  by  the  death  or  retirement  of  a  partner.  (^)  Nor 
*840  does  it  follow  that  because  profits  and  losses  *are  annually 
divided  equally,  the  losses  on  a  final  winding  up  are  to 
be  divided  equally,  without  reference  to  the  capitals  of  the 
partners,  {f) 

The  most  important  and  instructive  case  on  this  subject  is  Cov- 
covent  V  entry  v.  Barclay,  {g)  There  it  was  provided  that  ac- 
Barciay.  couuts  should  be  taken  and  signed  yearly,  and  not  be 

afterwards  disputed,  and  that  on  the  death  of  a  partner  the  survi- 
vors should  be  at  liberty  to  take  his  share  at  its  value,  according  to 
the  last  annual  account  preceding  his  death.  The  partners  were  ac- 
customed in  their  annual  accounts  to  put  a  nominal  value  on  their 
plant  and  stock  in  trade,  and  to  carry  over  a  portion  of  their  profits 
to  a  separate  account,  in  order  to  form  a  reserve  fund  to  answer 
unforeseen  losses.  Shortly  before  the  death  of  one  of  the  partners, 
the  others  hondfide  made  up  an  annual  account  in  the  usual  way, 
and  sent  him  a  copy  of  it,  which  he  never  signed,  but  never  in  any 

(h)  See  Oldaker  v.  Lavender,    6  Sim.  note,  [g) 

239;  Blisset  v.  Daniel,  10  Ha.  493.  (e)  Wade  v.  Jenkins,  2  GiiF.  509. 

(c)  See  Ex  parte  Barber,  5  Ch.  687;  (/)  Wood  v.  Scoles,  1  Ch.  369. 

Laing  v.  Campbell,  36  Beav.   3,  where,  {g)  33  Beav.  1,  and  on  appeal,  3  De- 

however,  there  were  no  articles.  G.  J.  &  Sm.  320.     See,  also,  Ex  parte 

{(l)  Blisset   V.   Daniel,    10  Ha.   493.  Barber,  5  Ch.  687. 
Compare  Coventry  v.    Barclay,   infra, 
1108 


CHAP.  IX.]  USUAL   CLAUSES.  ^'Sil 

way  disapproved.  It  was  held  (both  by  Lord  Komilly  and  Lord 
Westbury)  that  the  executors  of  the  deceased  jjartner  were  bound 
by  the  nominal  valuation  of  the  stock,  &c.,  but(by  Lord  Westbury, 
reversing  the  decision  below)  that  they  were  entitled  to  a  ehare  of 
the  surplus  of  the  reserve  fund  after  paying  the  losses,  &c.,  to  meet 
whicli  it  was  created. 

The  accounts  having,  in  this  case,  been  taken  bond  Jide  find  in  the 
usual  way,  and  no  eiTurs  being  suggested,  the  absence   Ap(;o„nt.s 
of  the  deceased  partner's  signature  was  treated  as  of  no   "<j' s'fe'»*;^i- 
im])ortance,  for  he  could  not  })roperl3'  have  refused  to  sign  them.  (//) 

IL     Retiring. — In  the  absence  of  a  special  provision  enabling  a 
partner  to  retire,  there  is  no  method  by  which  he  can  ^^    Retiring 
do  so  without  a  general  dissolution   and  winding  up  of  fro™  the  firm. 
the  firm;  unless,  of  course,  some  agreement  can  be  made  between 
all  the  partners  at  the  time  of  retirement.     Moreover,  as  has  been 
seen  already,  a  partnership  which  has  been  entered  into  for  a  defi- 
nite time,  cannot  be  dissolved  at  the  will  of  any  member.       It  is 
obviously,  therefore,  in  many  cases  necessary  to  insert  in  the  arti- 
cles, a   special  clause   enabling   a   partner    to   retire,    and 
^defining  the  terms  on  which,  as  between  himself  and  co-     ■"•841 
i;artners,  he  is  to  be  at  liberty  so  to  do.    (^) 

If  it  is  provided  that  a  partner  may  sell  his  share,  and  no  restric- 
tions '  are  mentioned,  he  may  sell  to  any  one  he  likes,    power  to  sell 
even  to  a  pauper;  and  on  giving  his  co-pai-tners  notice  s*"""*^- 
of  liis  withdrawal  from  the  firm,  he  will  cease  to  be  a  member  thereof 
as  between  himself  and  them;  even  although  the  purchaser  fn»in  him 
does  not  come  forward  and  take  his  place  as  a  partner  in  the  firm.  (1i) 

It  is  sometimes  declared  that  a  partner  who  is  desirous  of  retir- 
ing shall  offer  his  share  to  his  co-partners  before  selling  ovpnrtneisto 

.    ^  '  °     have  refusal  of 

it  to  any  one  else.  si'ir^--- 

(A)  The  same  thing'  occurred  in   Ex  solution  and  the   appointment  by  the 

parte  Barber,  5  Ch.  687.  court  of  a  receiver  of  the  partnership 

(i)  As  to  the  interest  in  the  good-will  property.     Noonan  r.  McNab,  30   Wis. 

where  nothing'is  said  about  it,  see  infra,  277  ;  Noonan  v.  Orton,  31  Wis.  265. 

p.  860.  (A-)  .Jetlerjs  v.   Smith,   3  Kuss.    158, 

'A  stipulation  in  articles  of  co-part-  ante,  p.  70<J. 

nership  that  neither  party  shall,  without  '•'A  provision   in  partnership  articles 

the  other's   consent,    sell  -or  assign    his  that  neither  of  the  partners  should   sell 

interest  in  the  co-partnership,  or  in  any  or  iu«sign   his  inteivst   withovit   consult- 

propei-ty  thereof,  restricts  the  jus   di.s-  ing  the  other  partners,  and  giving  tliera 

ponendi  only  during  the  continuance  of  the  preference,  does  not   by  implication 

the  co-partnership,  and  not  after  its  dis-  authorize  the  introduction  of  a  stranger 

1109 


=  84:1 


USUAL    CLAUSES. 


[book  IIL 


Til  Homfray  v.  Fothergill  (Z)  the  articles  provided  that  the  offer 
should  be  made  first  to  the  other  partners  collectively;  and  if  they 
should  decline,  then  to  those  desirous  of  collectively  purchasinoj; 
and  if  none  such,  tlien  to  the  partners  individually.  It  was  lield 
that  an  offer  by  one  partner  to  all  the  others  was  equivalent  to  an 
offer  to  all  of  them,  and  also  to  such  of  them  as  might  be  desirous 
of  buving,  and  that  one  of  them  having  declined  to  buy,  the  others 


into  the  firm  by  one  of  the  partners,  on 
a  refusal  by  the  rest  to  purchase  his 
share.  McGlensey  v.  Cox,  5  Pa.  Law  J. 
Rep.  203. 

The  plaintiffs  and  defendants  became 
partners  in  the  manufacture  of  a  patent 
medicine,  ^vith  a  written  agreement 
that  the  firm  should  continue  10  years 
unless  the  plaintiffs  desired  to  dissolve 
it  sooner,  by  a  notice  for  that  purpose, 
and  that  upon  dissolution  the  recipe 
should  be  sold  to  the  highest  bidder  of 
the  parties.  The  plaintiff's  gave  notice 
of  a  dissolution,  and  that  the  recipe, 
trade-mark,  etc.,  would  be  sold  at  auc- 
tion by  B.  at  the  Merchant's  Exchange. 
The  property  was  then  sold  to  the 
plaintiffs,  the  defendants  refusing  to 
concur  in  the  sale,  or  to  bid  :  Held, 
that  the  agreement  contemplated  a 
friendly  dissolution,  and  a  sale  at  auc- 
tion by  mutual  consent,  and  that  the 
parties  should  bid  therefor  among  them- 
selves ;  but  that  no  authority  was  given 
to  either  to  fix  the  time  or  place  of  sale,  or 
to  select  an  agent  to  make  it ;  and  that 
the  plaintiffs  oljtained  no  title  by  their 
purchase.  Comstock  v.  White,  31  Barb. 
301. 

A  provision  in  the  articles  that  upon 
the  death  of  either  partner  the  property 
shall  vest  in  the  survivor,  and  that  he 
><hall  become  debtor  to  the  deceased 
partner's  representatives  for  its  value, 
is  valid.     Gaut  v.  Reed,  24  Tex.  46. 

N.  being  engaged  in  an  insurance 
and  real  estate  business,  sold  one-half 
his  interest  therein  to  R.,  and  they  en- 
tered into  a  written  contract  to  carry  on 
the  business  as  partners,  with  a  stipula- 

w  1110 


tion  that  in  case  of  a  dissolution,  "the 
party  continuing  the  business  "  should 
pay  "  the  retiring  party  "  a  certain  sum. 
After  the  firm  had  carried  on  the  busi- 
ness some  years,  the  partnership  was 
dissolved  in  consequence  of  a  disagree- 
ment. At  that  time  the  real  estate 
business  of  the  firm  had  become  small, 
but  they  were  agents  for  seven  insurance 
companies;  several  days  before  the  dis- 
solution, N.,  without  the  knowledge  of 
R.,  wrote  to  each  of  said  companies 
that  he  could  no  longer  contmue  the 
partnership,  and  soliciting  for  himself 
the  agency  of  such  company;  and  he 
was  made  agent  for  five  of  them,  one 
of  the  others  ceasing  to  take  new  risks, 
and  the  other  transferring  its  business 
to  a  third  person.  N.  took  from  the 
late  office  of  the  firm  all  the  books  of 
the  companies  which  had  made  him 
their  agent,  and  of  the  one  which  had 
ceased  to  do  new  business,  and  thereaf- 
ter transacted  their  business  as  the  firm 
had  formerly  done,  doing  also  some 
land  business  for  a  customer  of  the  late 
firm;  while  R.  transacted  no  insurance 
or  real  estate  business  after  the  dissolu- 
tion. It  does  not  appear  that  R.  wa.s 
ever  solicited  to  aid  N.  in  procuring  the 
agencies  of  the  companies  previously 
represented  by  the  firm;  nor  that  he 
ever  objected  to  such  transfer:  Held, 
to  establish  a  retirement  of  R.  from  the 
firm  and  a  continuance  of  the  firm  busi- 
ness by  N.,  of  whom  R.  was  entitled  to 
recover  the  sum  named  in  the  contract. 
Read  v.  Nevitt,  41  Wis.  348. 
(?)  1  Eq.  567. 


CHAP.  IX.]  PARTNERSniP   ARTICLES,    ETC.  *8-ir2 

were  at  liberty  to  do  so,  altliougli  no  fresh  offer  to  eell  to  tliem  had 
been  made,  and  the  retirin<^  partner  refused  to  make  such  offer. 

In  Glassington  v.  Thwaites  (m),  tlie  articles  provided  that  no 
share  should  be  disposed  of  by  any  partner  until  one  now  notice 
month  after  notice  in  writing  under  his  hand  had  been  niay  be  given, 
given  to  the  other  proprietors  at  a  monthly  meeting.  A  ])artner 
desirous  of  selling!:  his  share  wrote  a  notice  to  that  effect  in  a  book 
whicii  was  produced  at  monthly  meetings,  and  which  all  the  part- 
ners had  at  all  times  power  to  inspect.  It  was  held  that  the  notice 
so  giveji  was  sufficient,  even  although  the  book  was  not  seen  by  all 
the  partners.  As  a  general  rule,  however,  notice  should  be  given 
to  each  ])artner  individually,  {n) 

"Where  two  persons  became  partners,  and  agreed  that  in  the 
case  of  the  death  of  either,  the  other  should  buy  his  share,  or 
if  he  declined  so  to  do,  then  that  the  share  of  the  5^^,^  if  offer  is 

deceased  ^should  be  sold   to  any  person    who     *S42  declined, 
might  choose  to  buy  it,  one  of  the  partners  died,  hln^xxT^^' 

and  the  survivor  declined  to  buy  his  share,  or  to  enter  '^"'■"'^'■■ 
into  partnership  with  any  purchaser  of  it.  Under  these  circum- 
stances, the  Court,  at  the  suit  of  the  executor  of  the  deceased  part- 
ner, decreed  a  sale  of  his  share,  and  directed  that  if  no  hond  fide  sale 
could  be  effected,  an  accc  unt  should  be  taken  in  order  to  ascertain 
the  value  of  such  share.  ]So  sale  being  effected,  and  the  accounts 
having  been  taken,  the  surviving  partner  was  decreed  to  pay  the 
amount  of  the  share  of  the  deceased  and  the  costs  of  the  suit,  {d) 

Articles  of  partnership  frequently  contain  a  clause  to  the  effect 
that  in  case  a  partner  is  desirous  of  retiring,  he  shall  Pecinring 

J  1         option  to 

give  so  many  months'  notice  to  his  co-partner,  who  purehuse. 
shall  have  the  option  of  purchasing  the  share  of  the  retiring  part- 
ner. If  such  a  clause  is  acted  on,  ;md  a  partner  notifies  his  desire 
to  retire  to  his  co-partner,  and  the  latter  deolares  his  option  to  pur- 
chase the  share  of  the  retiring  ]>artner,  a  contract  is  thereby  con- 
cluded between  them,  from  which  neither  can  depart  without  the 
consent  of  the  other,  {p)  Consequentl3^  the  retiring  partner  can- 
not withdraw  his  notice  and  dissolve  the  partnership  under  some 
other  chiuse  in  the  deed.  (;?)     Even  if  the  co-partner  who  is  to 

(w)  Coop.  iemp.  Brougham,  115.  (;>)  See  Warder  r.  Stilwoll.  3  .lur.  N. 

(«)  lb.  S.  9,  V.-C.  Stuart;  Homfray  r.  Fother- 

(0)  Featherstonhaugh  v.   Turner,  25      gill,  ante,  p.  841. 
Beav.  382. 

nil 


* 


*843  USUAL    CLAUSES.  [boOK  HI. 

purcliase  the  otlier's  share  infringes  the  partnership  articles,  the 
Court  will  not  willingly  interfere  and  dissolve  the  partnership; 
although,  if  the  partner  who  is  to  retire  conducts  himself  so  as  to 
prejudice  the  business  and  exclude  the  other,  the  Court  will  inter- 
pose for  the  protection  of  the  latter;  for  otherwise  the  business  to 
which  he  is  shortly  to  be  solely  entitled  may  be  entirely  ruined.  ( q) 

With  respect  to  the  exercise  of  a  right  of  pre-emption,  it  must 
Enlarging  time  be  borne  in  mind  that  if  the  right  is  to  be  exercised 
for  purchasing,  withiii  R  givcu  time  it  cannot  be  exercised  afterwards, 
unless  the  time  has  been  enlarged  by  the  parties  themselves.  Courts 
will  not  extend  the  time  on  the  ground  that  it  was  accidentally  al- 
lowed to  slip  by.  (?') 
843  *Where  an  offer  to  sell  was  made  to  a  person  who  became 
lunatic  after  it  was  made,  but  before  the  time  for  accepting 
it  had  expired;  it  was  held  that  his  committee  was  not  entitled  to 
an  extension  of  such  time,  nor  to  a  renewal  of  the  offer,  (.s-) 

12.  Dissolving  the  firm. — Where  the  articles  expressly  stipulate 
12.  Dissolving  ^^^^*'  ^^  ^^^^^^  ^0  lawful  for  either  partner  to  dissolve  the 
the  firm.  partnership  upon  the  commission  by  the  other  of  cer- 

tain specifically  forbidden  acts,  the  partnership  may  of  course  be 
determined  if  either  partner  does  these  acts.  But  this  clause,  like 
any  other,  may  be  waived  by  mutual  consent;  and  even  if  not 
waived,  advantage  cannot  be  taken  of  it  to  dissolve  the  partnership 
on  the  ground  of  the  commission  of  any  forbidden  act,  after  the 
lapse  of  any  considerable  time  since  such  act  came  to  the  knowl- 
edge of  the  partner  seeking  to  avail  himself  of  it.  {t) 

It  is  not  unusual  to  provide  for  a  dissolution  or  retirement  in 
In  case  of  ^^^^  ^  partner  shall  become  insolvent.  The  word  ^n- 
insoivency.  solvent^  unless  controlled  by  context,  means  unable  to 
pay  debts,  in  the  ordinary  acceptation  of  that  phrase.  A  person 
may  therefore  be  insolvent,  althougli  his  assets,  if  all  turned  into 
money,  might  enable  him  to  pay  his  debts  in  full  {u);  and  although 

( q)  See  Warder  v.   Stilwell,   3  Jur.  ered   as  an  authority  for  the  docti-ine 

^-  S.  9.  that  the  Court  will  not  hold  partners  to 

(r)  See,   on  this  subject,    Brooke  v.  their  articles.     The  notice  to  dissolve  in 

Garrod,  2   DeG.   &   J.   62;  Lord  Rane-  that  case  was  given  six  months  after  the 

lagh  V.  Melton,  2  Dr.  &  Sm.  278.  commission  of  the  act  complained  of, 

(s)  Rowlands  v.  Evans,  and  Williams  and  not  on  account  of  such  act,  but  in 

i\  Rowlands,  80  Beav.  302.  consequence  of  other  disputes. 

{t)    See    Anderson    v.   Anderson,   25  {u)  See  per  Le  Blanc,  J.,  in  Bayly  v. 

Beav.  190,  which  must  not  be  consid-  Schofield,  1  M.  &  S.  338. 

1112 


CIIAr.  IX.]  PARTNL'.j.'IIP   ARTICLES,    ETC.  *Sii: 

he  has  not  been  adjudicated  bankrupt  or  conipouudcd  witli  his 
creditors,  (f)  But  a  person  is  not  deemed  insolvent  merely  be- 
cause he  keeps  renewing  a  bill  which  he  cimuot  conveniently 
meet,  {x) 

A  clause  enabling  any  partner  to  determine  the  partnership  by 
giving  notice  to  the  others,  may  be  acted  on,  although  one  of  the 
firm  has  become  insane;  for  the  ])artner  serving  civiu- notice 

the  *notice  is  not  bound  to  liud   under&tan<ling     '"SO:  y^^ruM"is 
for  liim  who  is  served,  (y) 

A  notice  once  given  cannot  be  withdrawn  except  by  J[)^'^'^'^\[^*** 
consent,  (s) 

A  notice  to  dissolve  on  a  given  day  of  the  week,  and  a  given  day 
of  the  month,  is  bad  if  there  is  any  mistake  in  either   i„f„r,„tti 
date;  e.g.,  a  notice  to  dissolve  on   Monday  the  'Jth  is  """^"• 
bad.  if  the  0th  falls  on  a  Friday,  (a) 

In  a  case  where  it  was  provided  that  the  dissolution  should  be  by 
deed,  it  was  held  that  a  submission  by  deed  of  all  mat-   Dissolution  to 
ters  in  dispute  between  the  partners,  and  an  award  ^e  by  deed, 
under  seal  made  upon  that  submission  dissolving  the  partnership, 
had  the  effect  of  dissolving  it,  although  nothing  was  said  about  dis- 
solution in  the  submission.  {!/) 

When  power  is  given  to  retire  or  dissolve  the  firm,  or  to  expel  a 
j)artiier  from  it,  power  should  also  be  given  to  any  part-  gigni up  notices 
ner  to  sicni,  in  the  name  of  himself  and  co-partners,  a  ^''■^li'^^^i^'io"- 
notice  of  dissolution  for  insertion  in  the  "  Gazette."  (c) 

13.  Expelling. — In  order  that  an  objectionable  partner  may  be 
summarily  got  rid  of,  clauses  are  sometimes  inserted  13.  powers  of 
providing  for  expulsion  in  certain  events.  All  such  e^puis'""- 
clauses  are  construed  strictly,  on  account  of  the  abuse  M'hich  may  be 
made  of  them,  and  of  the  hardship  of  ex])ulsion;  and  the  Court  will 
never  allow  a  partner  to  be  expelled  if  he  can  show  that  his  co-])art- 
ners,  though  justified  by  the  wording  of  the  ex])ulsion  clause,  have,  in 
fact,  taken  advantage  of  it  for  base  and  unworthy  purposes  of  their 

(f)  See  Parker  v.  Gossage,  2  C.  M.  &  (//)  Robertson  r.  Lock-ie,  15  Sim.  285. 

R.  617,  and  BidiUecombe  r.  Bond,  4  A.  (z)  Jones  r.  Lloyd,  18  Eq.  2fi5. 

&  E.  3:^2,  in  which  it  was  held  that  "  in-  (a)  Watson  r.  *Eales,  23  Beav.  294. 

solvent"  had  not  the  technical  meaning:  (l>)  Hutchinson  v.   Whitfield,    Hayes 

of  having  taken  the  benefit  of  the  acts  (h.  Ex.),  78. 
for  the  relief  of  insolvent  debtors.  (r)  See  Troughton  i\  Hunter,  18  Beav. 

{x)  Cutten  V.  Sanger,  2  Y.  &  J.  459;  470. 
and  see  Anon.  1  Camp.  492. 

1113 


*84:5  USUAL    CLAUSES.  [bOOK  IIL 

own,  and  contrary  to  that  truth  and  honor  which  every  partner  has  a 

Biissct  V.  right  to  detnand  on  the  part  of  liis  co-partners.    In  Blis- 

"'"*^  ■  set  V.  Daniel  (d),  the  expulsion  clause  was  as  follows: — ■ 

"That  it  shall  be  lawful  for  the  holders  of  two-thirds  or  more  of  the  shares  for 
the  time  beincr,  from  time  to  time  to  expel  any  partner,  by  giving  to,  or  leaving 
for  him,  at  his  then  last  place  of  abode  in  England  or  Wales,  a  notice  in  writing 
under  their  hands  of  such  expulsion,  which,  in  such  event,  shall  operate 
*845  from  and  at  the  time  of  giving  or  leavuig  such  notice,  *and  shall  be  in  the 
following  form,  namely,  '  We  do  hereby  give  you  notice  that  you  are 
hereby  expelled  from  the  partnership  carried  on  under  the  firm  of  John  Freeman 
and  Copper  Company.    Witness  our  hands  this day  of .'  " 

The  power,  therefore  was  in  the  most  general  terms;  no  reasons 
for  its  exercise  were  required  to  be  given,  no  meetings  or  delibera- 
tions were  declared  to  be  necessary  before  serving  the  notice.  The 
holders  of  two-thirds  of  the  shares  signed  a  notice  in  the  ibrra  pre- 
scribed, and  served  it  on  the  partner  whom  they  desired  to  expel. 
Thev  gave  no  reasons  and  relied  upon  the  clause  setout above.  But 
it  appeared  that  they  desired  to  get  rid  of  their  co-partner,  not  be- 
cause so  to  do  was  in  any  sense  for  the  benefit  of  the  linn  in  a  mercan- 
tile point  of  view,  but  because  he  objected  to  the  appointment  of  one 
of  his  co-partner's  sons  as  co-manager  with  his  father.  It  further 
appeared  that  the  offended  father  had  com];)lained  to  the  otlier  part- 
ners behind  the  back  of  the  expelled  partner,  and  had  prevailed  upon 
them  to  sign  the  notice,  intimating  that  either  the  expelled  y)ai  tner 
or  himself  must  leave  the  firm.  The  expelling  partners  having  re- 
solved to  exercise  the  power,  induced  the  expelled  partner  to  sign 
certain  accounts,  in  order  that  he  might  be  bound  by  them  when  ex- 
pelled. Their  intention  to  expel  him  was,  however,  concealed  until 
after  the  accounts  were  signed;  and  the  notice  of  expulsion,  which 
gave  him  the  first  intimation  of  any  design  to  get  rid  of  him  was 
not  served  until  he  had  signed  the  accounts.  Under  these  circum- 
stances the  Court  declared  that  the  notice  of  expulsion  was  void,  and 
restored  the  expelled  partner  to  his  rights  as  a  member  of  the  firm. 

Having  regard  to  the  principles  acted  upon  in  cases  of  this  de- 
Opportunity       scriptiou,  it  is  conccivcd  that  a  power  to  expel  for  n;is- 

for  explana-  .  \  ,    ^  ,     ^  ^•^    ^i  i    t 

tion.  conduct  cannot  be  safely   acted   upon   until  the  delin- 

quent partner  has  had  an  opportunity  of  explaining  his  conduct,  {e) 

(d)  Blisset  v.   Daniel,    10    Ha.    493.  (e)  See  the  judgment  in  Blissett  r. 

See,  also.  Wood  v.  Woad,  L.  R.  9  Ex.  Daniel,   and   Cooper    r.   Wandsworth, 

190.  Board  of  Works,  14  C.  B.  N.  S.  180. 
1114 


CHAP.  IX.]  PARTNERSHIP    ARTICLES,    ETC.  *S-irC 

A  power  of  expulsion  cannot  be  exercised  without  the  concur- 
rence of  a^Hhose  whose  concurrence  may  be  reciuired  AHmustcou- 
by  the  articles.  (/*) 

*A  notice  of  expulsion  under  one  clause,  can-     *846  J'«[^f^V^'-'^- 
not,  if  invalid,  o])erate  as  a  notice  of  dissolution 
under  some  other  clause,  (g) 

In  Smith  v.  Mules  it  was  provided,  in  eifect,  that  if  a  partner 
should  do  or  omit  to  do  certain  things,  the  others  ^,^^5^,^^  ^^,^3 
should  be  at  liberty  to  dissolve  the  partnership,  by  giv- 
ing notice  to  the  partner  who  should  oifend;  and  that  upon  giving 
such  notice  the  partnership  should  cease  and  be  dissolved  in  the 
same  manner,  and  with  the  same  consequences,  as  if  it  had  been  de- 
termined by  the  voluntary  retirement  of  the  offending  ]iartner. 
The  firm  consisted  of  three  partners.  A.,  B.,  and  C,  who  was  13.'s 
son.  13.  was  guilty  of  conduct  for  which  he  might  have  been  com- 
pelled to  retire.  A.  gave  B.  and  C.  notice  that  he  dissolved  the 
partnersiiip  under  the  clause  above  referred  to.  C,  however,  had 
done  nothing  rendering  it  comj)etent  for  A.  to  expel  him.  It  was 
therefore  decided:  1,  that  A.  had  no  right  to  expel  B.  without  C's 
concurrence;  2,  that  A,  had  no  right  to  dissolve  the  firm,  so  far  as 
C.  was  concerned:  3,  that  C.  having  adopted  the  notice  after  it 
was  given,  A.  could  not  treat  the  partnership  as  continuing;  and  4, 
that  the  dissolution  actually  brought  about  was  not  a  dissolution 
provided  for  by  the  articles,  and  did  not,  therefore,  entail  the  conse- 
quences of  a  dissolution  under  them,  {h) 

AVhen  a  power  of  expulsion  is  given  in  the  event  of  a  partner 
omittin'^  to  do  certain  things,  e.  a.,  entering  in  the  part-   Power  tocxpd 

,   .    "         ,       „  1  •  i.       i-    in  case  »t  uiinl- 

nership  book  all  moneys  he  may  receive  on  account  01  tin^t.-do 

,  .,,  ,1  Uiuisjs. 

the  partnership,  the  power  will  not,  as  a  rule,  be  exer- 
cisable, unless  the  omission  was  a  studied  omission.  (/) 

As  to  power  to  expel  in  case  a  partner  becomes  insolvent,  see 
ante,  p.  843. 

A  ]X)wer  to  expel  contained  in  articles  for  a  partnership  for  a 
term  of  years  is  not  exercisable  after  the  term  has  expired,  although 
the  partnership  may  have  been  continued  on  the  old  footing.  {^■) 

if)  See  Smith  r.  Mules,  9  Ha.  556.  (/()  Smith  r.  Mules.  9  Ha.  2")fi. 

{(j)  See  Smith  v.  Mules,  9  Ha.   556;  (/)  See  Smith  r.  Mules.  9  Ha.  5:.6. 

Hart  r.  Clarke,  6  DeCi.  M.  &  G.  532,  and  (A-)  Clark  v.  Leach,  3'2  Beav.  14  and 

Clarke  v.  Hart,  6  H.  L.  C.  633.  1  ItoG.  J.  &  Sm.  409. 


Ill 


0 


*847  USUAL    CLAUSES.  [bOOK  III. 

14.    Yaluatloii  of  shares. — Having  provided 

14.  vnUmtion     847*     for  the  events  *upoii  which  a  general  partnership 

is  to  cease,   the   next   point  is    to    specify  the 

method  in  which  its  affairs  are  to  be  wholly  or  partially  wound  np. 

Where  the  articles  have  prescribed  no  method  of  winding  np,  or 

,     ,        where  the  method  prescribed  cannot  be  carried   into 

Ocncral  rule  ^ 

wht^rc  tiie         effect,  then,   unless    the   partners   can  come  to   some 

articles  cannot     ^"^^"■>  ■>  r 

be  acted  on.  aofreement  as  to  what  is  to  be  done,  there  must,  as  a 
general  rule,  be  a  conversion  of  all  the  partnersliip  property  into 
money;  and  this  money,  after  payment  of  the  partnership  debts, 
mnst  be  divided  amongst  the  partners  in  the  shares  in  which  they 
may  be  entitled  to  it.  (l) 

An   agreement  that  on  a  dissolution  the  partnership  property 
,  „     shall  be  fairly  and  equally  divided,  after  payment  of  its 

Agreements  for  J  i  ./  '  i     ./ 

fair  division.  Jebts,  has  been  held  to  mean  that  the  property  shall 
be  sold,  and  that  the  money  produced  by  the  sale  shall  be  divided 
after  the  debts  have  been  paid,  (jn) 

In  order  to  prevent  the  ruin  consequent  on  a  sale  when  a  part- 
Methodsof  Tiersliip  happens  to  be  dissolved,  several  devices  are  had 
avoiding  sale,  rccourse  to.  The  simplest  is  to  specify  in  the  articles 
a  sum  at  which  the  share  of  an  outgoing  or  deceased  partner  may 
be  taken  by  his  co-partners,  (w)  But  it  is  seldom  possible  to  fix  a 
sum  beforehand,  and  consequently  such  a  provision  is  not  common. 
It  is  more  usual  to  stipulate  that  the  share  shall  be  taken  to  be  of 
the  value  appearing  in  the  last-signed  account,  and  be  paid  with 
the  addition  of  subsequent  profits,  or  with  interest  at  a  certain  rate, 
in  lieu  of  such  profits.  If  a  stipulation  to  this  effect  is  made,  and 
the  accounts  have  been  regularly  taken  and  signed,  or  regularly 
taken  but  not  signed  (o),  so  that  the  shares  of  the  partners  appear 
from  the  accounts  as  intended,  all  parties  must  abide  by  the  stipu- 
lation [py  although  difiiculties  may  arise  as  to  the  true  construc- 

{})  See  Cook  v.  Collingridge,  Jac.  607;  sion  in  Essex  v.  Essex,  20  Beav.  442. 

Kershaw  v.     Matthews,    2  Russ.    62 ;  (o)  As    in    Ex  parte   Barber,    5  Ch. 

Wilson  V.  Greenwood,    1   Swanst.  482.  687  ;  Coventry  v.  Barclay,  3  DeG.  J.  & 

That  this  rule  is  not  to  be  rigorously  ap-  Sm.  320. 

plied,  see  Pettyt  v.  Janeson,  6  Madd.  (p)  King  v.   Chuck,    17   Beav.   325  ; 

146,   and  Simmons  r.  Leonard,  3  Ha.  Gainsborough  v.  Stork,  Barn.  812  ;  and 

581,  noticed  infra.  the  cases  in  the  last  note. 

(w)  Rigden  v.  Pierce,  6  Madd.  353 ;  ^  By  articles  of  partnersliip,  M.   and 

Cook  V.  Collingridge,  Jac.  607.  A.  stipulated  that  at  the  end  of  three 

(n  Effect  was  given  to  such  a  provi-  months   after  the  death  of    either    of 

1116 


CHAT.  IX.]  PARTNKKSUll'    AUTICLES,    ETC.  ^848 

tion  of  *the  articles,  (q)     But  if,  as  frequentl}*  happens,  the     *84:S 
accounts  intended  to  he  taken  and  si<^ned  have  not  heen  taken, 
or  have  been  taken  irregularly,  so  that  the  last-sif^ned   Effect  of  not 
account  is  not  so  late  a  one  as  is  contemplated  by  the  eouut."as*^ 
articles,  in  such  a  case  the  account  must  be  made  up  to  '^^^^^  ' 
the  latest  date  at  which  it  ought  to  have  been  made  up,  regard  being 
had  to  the  articles  and  the  practice  of  the  partners;  and  the  share 
of  the  outgoing  or  deceased  partner  must  be  taken  at  its  value,  as 
the  same  appears  by  the  account  so  taken. 

Thus  in  Petty  t  v.  Janeson  (?■),  the  artirles  provided  that  the  part- 
nership accounts  should  be  taken  ever}'  25th  of  March,    Peitytv. 

1-1  .^i,  I'll'  1  •  Janeson. 

and  that  it  either  partner  died  durmg  the  continuance 
of  the  partnership,  his  interest  should  be  regulated  by  the  last 
yearly  settlement,  and  vi'hat  siiould  then  appear  to  be  due  to  him 
should  be  paid  to  his  executors,  with  five  per  cent,  interest,  instead 
of  subsequent  profits.  For  some  time  the  partnershi])  accounts 
were  regularly  settled  every  25th  of  March;  but  afterwards  tiiey 
were  made  up  very  irregularly,  and  often  not  for  sixteen  or 
eighteen  months.  A  partner  died  in  February,  1813.  The  last 
account  prior  to  his  death  was  settled  on  the  5th  of  Noveml)cr, 
1811.  The  executors  insisted  that  as  there  had  been  no  animal 
settlement,  as  contemplated  by  the  articles,  they  were  entitled  to 
a  share  of  the  ])rotits  calculated  to  the  time  of  their  testator's 
death.  The  surviving  partner,  on  the  other  hand,  contended  that 
all  they  were  entitled  to  was  the  amount  of  their  testator's  sliare, 
as  a]ipearing  by  the  account  settled  in  November,  1811,  with 
interest  tliei'con.  But  the  Yice-Chancellor  observed,  "  that  the 
articles  had   two  ]ilain  intentions — that  there  should  be  an  annual 

them,  a  vnlnation  of  all  their  partnor-  Eq.  1^1. 

sliip  assets  and  property  should  be  luade  (q)  A  provision  that  a  share  shall  be 

according  to  the  amount  of  capital  in-  paid  for  as  the  same  stood  at  the   time 

vested;  and   that  the  survivor  should  of  the  last  account,  means  as  it  stood  in 

have  one  year  thereafter,  to  take  and  the   partnership  books.     See  Blisset  r. 

pay  the  value  of  such  share  to  the  legal  Daniel,  10  Ha.    493,  p.   511;  compaa 

representatives  of  the  decedent.     One  Stewart  f.  Gladstone,  W.   N.    1878,    p. 

partner  (A.)  died  in tt^state  :    /feW,  that  82.     See,  as  to  clauses  of  this  descrip- 

M.  was  entitleil  to  specific  performance  tion,  Coventry  r.  Barclay,  ante,   p.  84n; 

of  the  contract,  which  of  itself  constitu-  E.r parte  Barber,  uhi  supra;  and  Brown-' 

ted  an  equitable  conversion  of  the  real  ing  v.   Browning,  31    Beav.  3ir),   as  to 

estate?,  and  that  the  proceeds  must  be  interest  and  subsequent  drawings  out. 

divided  among  the  iiitestato's  next  of  (r)  6  Madd.  146. 
kin.     Maddock  v.   Astbury,  32  N.   J. 

1117 


*S49  USUAL   CLAUSES.  [bOOK  III. 

settlement,  and  that  the  estate  of  a  deceased  partner  slionld  receive 
no  profits  for  the  fraction  of  the  year  since  the  last  annual  settle- 
ment. That  the  settlement  of  the  5th  November,  1811,  was  to  be 
considered   as  a  settlement  substituted   by  the  agreement  of  the 

parties  in  the  place  of  the  settlement  stipulated  for  in  the 
*849     "^articles.     That  if  the  testator  had  died  on  the  1st  October, 

1812,  it  could  not  have  been  contended  that  his  estate  was 
to  take  profits  subsequent  to  the  5th  November,  1811,  being  the  last 
settlement  within  a  year  of  the  death;  and  if  this  were  to  l)e  treated 
in  that  case  as  a  settlement,  within  the  spirit  of  the  articles,  against 
the  testator's  estate,  it  must  be  equally  considered  as  a  settlement 
for  the  testator's  estate  as  a  settlement  on  the  5th  November,  1811, 
which  bound  each  party  to  come  to  the  next  annual  settlement  on 
the  5th  November,  1812.  That  the  Court  must  act  upon  that 
which  ought  to  have  been  done  as  if  it  had  been  done,  and  must 
declare  the  testator's  estate  entitled  to  a  share  in  the  profits  up  to 
the  5th  November,  1812,  being  the  day  which  ought  to  have  been 
the  last  annual  settlement  before  the  testator's  death.  " 

The  same  principle  was  acted  upon  by  Y.-C.  Wigram,  in  Simmons 
Simmons  v  '^'  Lcouard  (s),  altliougli  account  having  ever  been 
Leonard.  taken  between  the  parties,  and  the  day  mentioned   in 

the  articles  for  taking  the  account  not  being  apparently  considered 
of  much  importance,  the  account  directed  to  be  taken  did  not  stop 
at  the  day  at  which  the  last  account  would  have  been  taken  if  the 
articles  had  been  acted  on.  In  Simmons  v.  Leonard,  the  articles 
provided  that  a  general  account  and  rest  should  be  taken  every  31st 
of  December,  or  on  such  other  day  as  the  partners  should  agree 
upon;  and  that  if  a  partner  died  during  the  term  his  executors 
should  receive  paj'ment  of  his  share  as  ascertained  at  the  last  an- 
nual rest,  with  interest  thereon,  in  lieu  of  subsequent  profits;  and 
that  his  executors  should  have  no  right  to  look  into  the  partner- 
ship books.  The  provision  relative  to  the  annual  settlement  of  an 
account  was  never  acted  upon  at  all.  One  of  the  partners  died, 
and  the  Vice-Chancellor  held  that  the  primary  object  of  all  parties 
was,  that  the  death  of  one  of  them  should  not  cause  a  general  dis- 
solution and  winding  up;  that  this  object  might  be  attained, 
although  no  such  account  as  was  contemplated  had  been  taken; 
that  it  was  absolutely  necessary  to  take  an  account  of  some  port, 
and  to  let  the  executors,  therefore,  look  into  the  partnership  books; 

(s)  3  Ha.  581. 
1118 


I 


CHA-P.  IX.]  USUAL   CLAUSES.  *S51 

and  tliat,  liavini^  regard  to  the  omission  of  *tlie  partners  to     *S5iJ 
settle  any  account  at  all,  the  only  account  which  could  be 
taken  was  a  general  account  of  what  was  due  to  the  testator  at  the 
time  of  his  death  for  his  share  of  cipital  and  profits. 

These  cases  not  only  afford  good  illustrations  of  the  rule  th:it  in 
construing  partnership  articles  regard  must  be  liad  to  the  conduct 
of  the  partners,  even  where  a  circumstance  has  arisen  of  which  the 
partners  had  no  previous  experifueo  (Y),  but  they  also  show  that 
the  rule  that  there  must  be  a  sale  of  the  partIlc^.-^hip  ])roperty  when- 
ever there  is  a  dissolution,  unless  the  articles  provide  for  some  other 
method  of  dealing  with  it,  and  the  provisions  in  the  articles  arc 
capable  of  being  rigorously  carried  out,  must  be  taken  with  con- 
siderable qualification,  (u) 

It  is  not  unusual  to  stipulate  that  the  share  of  an  outgoing  or 
deceased  partner  shall  be  taken  by  the  continuing  or  taking  share 
surviving  partners  at  a  valuation;  and  although  as  a  at  a  valuation. 
rule  specific  performance  of  an  agreement  for  sale  at  a  valuation 
will  not  be  decreed  unless  the  valuation    has  been    made  («);  yet 
where  persons  enter  into  partnership  upon  certain  terms,  one  of 
which  is,  that  on  a  dissolution  one  partner  shall  take  the  share  of 
another  at  a  valuation,  the  Court   will,  on   a  dissolution  under  the 
articles,  enforce  such  a  stipulation,  and  if  necessary  itself  ascertain 
the  value  of  the  share,  (y)      It  has,   however,   been  held,  that  an 
agreement  for  a  sale  at  a  price  to  be  fixed  by  valuers,  one  to  be  a])- 
pointed  by  the  seller  and  the  other  by  the  purchaser,  or  in  case  the 
valuers  differ,  by  an  umpire,  does  not  enable  the  Court  to  appoint  an 
umpire  if  the  valuers  will  not  do  so,  and  are  yet  themselves  unable 
to  fix  a  price.  (2)     Moreover,  Wilson  v.  Greenwood  (a),  throws 
considerable  doubt  *on  the  validity,  in  the  event  of  a   bank-     *S51 
rii])tcv,  of  an   agreement  that  the  share  of  a  bankrupt  part- 
ner shall  be  taken  at  a  valuation  by  his  co-parttiers. 

{f)  See,  too,  Jackson  v.  Sedgwick,    1  Jackson  v.  Jackson,  1  Sin.  &  G.  184. 
Swanst.    460;    Coventr}'  v.  Barclay  and  (1/)  Dinham  r.  Bradford,  6  Ch.   -519. 

Ex  parte  Barber,  ante,  note.  (0)  See,  as  to  contracts  to  sell  at  a  fair  val- 

(m)  See,  as  to  the  rule  referred  to,  nation,  a.s  distinguished  from  a  valuu- 

ante,  p.  847.  tion  to  be  made  by  particular  individ- 

{x)  See  Vickers  v.  Vickers,  4  Eq.  529,  uals.  Fry  on  Spec.  Perf.  95. 
a  case  between  partners  and  the  authori-  (r)  Collins  r.  Collins.    26   Beav.   SCM)-. 
ties  there  cited.     The  rule  does  not  ap-  and  see  Vickers  r.  Vickers,  4  Eq.  529. 
ply  to  a  valuation  of  things  which  are  {«)  1  Swanst.  471.      Se.\  also,  Whit- 
accessories  to  the  main  purchase.      See,  more  r.  Mason,  2  .1.  &  H.  204. 

1110 


*852  PARTNERSniP   ARTICLES,    ETC.  [bOOK  III. 

15.  Transmission  of  shares  and  introduction  of  new  partners. — 
15.  introduc-  It  is  a  coinmoii  provision  in  partnership  articles  tliat 
paftnJiTrUien  OH  the  death  of  a  partner  his  executors,  or  his  son,  or 
"iredpartnJn'''  somc  other  pcrson,  shall  be  entitled  to  take  his  place. 
The  effect  of  any  such  provision  must  of  course  depend  on  its 
words;  but  speaking  generally  it  may  be  said, — 

1.  That  clauses  of  this  kind,  although  they  bind  the  surviv- 
ing partners  to  let  in  the  person  nominated  (J),  do  not  bind 
him  to  come  in,  but  give  him  an  option  whether  he  will  do  so  or 
not.  (c) 

2.  That  before  making  up  his  mind  he  is  entitled  to  make  liim- 
self  acquainted  with  the  state  of  the  partnership  affairs,  although 
he  is  not  entitled  to  have  its  accounts  formally  taken,  id) 

3.  That  if  he  is  desirous  of  coming  in,  he  must  comply  strictly 
with  the  terms  upon  which  alone  he  is  entitled  to  do  so.  {e) 

4.  That  if  he  declines  to  come  in,  and  there  is  no  provision  as  to 
what  is  then  to  be  done,  the  partnership  must  be  dissolved  and 
wound  up  in  the  usual  way.  (/) 

As  a  general  rule,  and  excluding  cases  of  agency,  an  agreement 
,  ,   between  two  persons  cannot  be  enforced  against  either  of 

Person  entitled  ^ 

to  succeed  wiu  them  bv  a  third  person,  even  although  such  third  person 

be  assisted  in  •'  ^  c      n  ^  /    \ 

equity.  .^as  intended  to  derive  a  beneht  from  the  agreement,  {g) 

In  a  recent  case  it  was  attempted  to  apply  this  rule  to  an 
*852  ^agreement  between  two  part-  ers,  that  on  the  death  of  one  his 
widow  should  succeed  him.  One  of  the  partners  was  dead ;  it 
was  contended  that  his  widow  had  no  right  to  succeed.  But  it  was 
held  that  the  rule  in  question  had  no  application  to  such  a  case;  that 
the  articles  had  created  a  valid  trust  in  favor  of  the  widow;  and  that 

[b]  In  Wainwright  v.  Waterman,  1  Cox,  10  Ha.  163.  See,  too,  Pearce  v. 
Ves.  J.  311,  a  person  was  declared  en-       Chamberlain,  2  Ves.  S.  33. 

titled  to  be  admitted,  although   those  (d)  Pigott  v.  Bayley,  McCl.  &  Y.  569. 

with  whom  that  question  rested  were  (e)   Holland  v.   King,  6    C.   B.    727; 

divided  in  opinion.      But  in  Milliken  v.  Brooke  v.  Garrod,  3  K.  &  J.  608,  and  2 

MilHken,8  Ir.  Eq.  16,itwasheldthata  DeG.   &   J.  62  ;    Milliken  v.  Milliken, 

person  who  is  to  be  let  in,  provided  he  supra,  note  (b).     See  Ex  parte  Marks, 

conducts  himself  to  the  satisfaction  of  1  D.  &  Ch.  499. 

the  survivors,  is  without  remedy  if  they  (/)  Kershaw  v.  Matthews,   2  Russ. 

will  not  admit  him.  62;  Downs  v.  Collins,  6  Ha.  418;  Madg- 

(c)  Pigott  V.  Bayley,  McCl.  &  Y.  569;  wick  v.  Wimble,  6  Beav.  495. 
Madgwick    v.   Wimble,   6  Beav.   495;  (g)  See  Colyear  v.  The   Countess  of 
Downs  V.  Collins,  6  Ha.  418  ;  Page  v.  Mulgrave,  2  Keen,  81. 

1120 


CHAP.  IX.]  USUAL   CLAUSES.  *S."53 

she  was  entitled  to  come  to  the  Court  for  a  decree  for  the  execution 
of  such  a  trust.  (A) 

In  a  case  where  articles  provided  that  in  the  event  of  the  death 
of  a  partner  durini^  the  term  for  which  the  partnership  oisesof  st-ttk.i 
was  intended  to  last,  his  share  should  i^'o  to  his  widow  j3ai,„„i,i„. 
for  life,  and  after  her  death  to  liis  chihh-en,  and  in  de-  ^'i""^'- 
fault  of  children  to  his  widow's  executors,  adiniidstrators.  or  as- 
signs; it  was  held  that  the  children  of  a  partner  who  had  died  leav- 
ing a  widow,  did  not  take  any  vested  interest  in  the  partnership 
assets  during  her  life,  (i) 

In  another  case   partnership  articles  provided   that  on  the  death 
of  a  partner  the  survivor  should  carrv  on  the  husiuess  Appointment 

r  •  01  success.ir. 

for  the  benefit  of  himself  and  such  person  as  the  other  p,,,,,^^^, 
should  by  will  appoint,  and,  in  default  of  apj^ointment,  D"»»- 
for  the  benefit  of  his  widow,  or  (if  she  should  be  dead)  for  the  ben- 
efit of  his  children,  and  in  default  of  children  for  the  benefit  of  his 
executors  or  administrators;  and  that  such  person,  or  the  said  widow, 
children,  executors,  or  administrators,  sliould  stand  in  the  place  of 
the  deceased,  and  be  entitled  to  the  same  share  in,  and  have  the 
same  control  over,  the  partnership  trade  and  assets,  as  the  deceased 
would  himself  have  been  entitled  to  if  living.  It  was  held  that  this 
was  not,  technically  speaking,  a  power  of  appointment,  and  that 
consequently  a  partner  could  bequeath  his  share  by  a  will  whioli 
did  not  allude  either  to  the  power  or  to  the  partnership.  {I:) 

When  a  person  has  been  admitted  into  an  existing  firm,  and  no 
express  airreeraent  has  been  made  as  to  his  rights  and   Position  of 

"--^r   "^  M  ^  incoming 

liabilities,  the  inference  is  that  as  between  themselves   partner, 
his  position  is  the  same  as  that  of  the  other  partners.'     If  they  are 
bound  by  existing  articles   he  will  be  bound   by  the  same 
*;irtieles,  if  his  conduct  justifies  the  conclusion  that  he  has     *S53 
assented  to  them;  and  if  any  special  agreeirtent  is  made  with 
him,  it  will   be  regarded  as  incorporated    with  any  ]>i-cvious  agree- 
ment between  the  older  partners,  although  so  far  as  the  two  agree- 

(/i)  Page  V.  Cox,  10  Till..  Ifi:!.  of  some  of  the  membei-s  of  a  firm,  and 

(?)  Balraain  v.  Shore,  9  Ves.  500.  are  recognized  and  treated  as  partners 

(Jt)  Ponton  V.  Dunn,  1  R.  &  M.  402.  by  the  remaining  original  membei-s,  the 

See,    also.    Beamish    v.  Beamish,    Ir.  latter  continuing  the  business,   in  con- 

llep.  4  Eq.  120,  where  a  bequest  of  a  junction  with  them,  under  the  original 

share  of  residue  was  held  not  to  amount  agn-ement,  become  memV)ers  of  the  fimi 

to  a  nomination  of  a  successor.  under  the  original  articles.     Mealier  v. 

'  Persons  who  succeed  to  tlie  interest  Cox,  37  Ala.  201 ;  S.  C.  Ala.  Sel.  Cas.  156. 

1121 


*854:  PARTNERSHIP    ARTICLES,    ETC.  [bOOK  III. 

nients  in;iy  be  inconsistent,  the  latest  will  prevail,  {l)  If,  indeed, 
the  incoming  partner  has  no  knowledge  of  any  prior  agreement 
between  the  others,  he  cannot  be  bound  thereby  (m);  for  nothing 
that  he  can  have  done  can  be  regarded,  nnder  these  circumstances, 
as  evidence  of  any  assent  thereto  on  his  part;  and  it  is  upon  such 
presumed  assent  that  the  rule  in  question  is  founded. 

16.  Annuities   to  vjidoics. — Sonietiuies    it  is   agreed  that   if  a 
,^   .       ...        partner  dies   the   survivor  shall    pay    an  annuitv,  or  a 

16.  Annuities       ^  i     j  „  i 

to  widows, &c.  share  of  the  profits,  to  his  widow.  There  is  now  no 
difficulty  in  framing  a  clause  of  this  sort  without  making  the  widow 
a  ]mftner  or  a  quasi- partner  by  virtue  of  her  participation  in  pro- 
fits (?0;  and  after  her  husband's  death  slie  can  enforce  payment  of 
the  provision  intended  for  her.  (o) 

If  the  annuitv  is  mnde  payal)le  out  of  the  profits,  and  the  busi- 
ness is  carried  on  and  no   profits  are  made,  no  annuity 

Annuity  pny-  ■  '  •' 

fitslnd'noife™'  ^'^^-^  ^^  payable.     So,  if  the  surviving  partn&r  has   an 

^^'^^^^  option  to  pnv  either  r.n  annuity  or  a  share  of  the  profits 

and  there  should  be  no  profits,  he  will  not  be  bound  to 

Ex  parte  ' 

Harper.  y^y  anj'tliing;  for,  ex  hyjx^thesi,  it  is  competent  for  him 

to  elect  to  pay  out  of  the  profits,  and  his  right  to  make  this  election 
in  no  way  depends  on  their  amount.  (j9)  Moreover,  in  construing 
a  j)rovision  giving  a  widow  of  a  deceased  partner  a  share  of  the 
profits,  the  partnership  which,  strictly  speaking,  determined  when 
her  husband  died,  is  regarded  as  continuing,  and  the  profits,  which 
she  is  to  share  must  be  ascertained  on  that  principle.  They  ought 
not  to  be  calculated  as  if  the  returns  yielded  by  the  new  business  had 
not  to  be  applied  in  liquidating  the  demands  on  the  old  firm,  {q) 
Annuity  pay-  In  Holylaud  V.   Dc  Mcudcz  {v)  a  continuing 

able  until  evic-  .j^gK^  partner  gave  a  ^-bond  conditioned  to  be  void  on 
Hoiviandv  payment  of  an  annuity,  or  on  being  without  his 

Mendez.  ^^^.^  default  disposscsscd   of  the  partner:^llip   property 

assigned  to  him.  It  was  held  that  the  annuity  did  not  cease 
on  the  bankruptcy  of  the  continuing  partner;  dispossession  b}'  his 
assignees  not  being  such  a  dispossession  as  was  contemplated  in  the 
bond. 

(0  See  Austen  r.  Boys,  24  Beav.  598,  p.  852. 

and  2  DeG.  &  J.  626.  ( p)  Ex  parte  Harper,  1  DeG.  &  J.  180. 

im)  Ibid.  (  q)  Ibid. 

(»)  See,  as  to  this,   ante,  pp.   43,  44.  (rj  3  Mer.  184. 
(o)  See  Page  v.  Cox,  10  Ha.  Wi,unte, 
1122 


CHAP.  IX.]  USUAL    CLAUSES.  *b55 

An  agrceincnt  to  pay  an  annuity  out  of  profits  involves  an  obli- 
gation not  willfully  to  prevent  the  earninar  of  profits;   Effect  of  dts- 

f  ./I  o  1  '    continuing 

and  if,  therefore,  the  person  who  has  to  pay  tlie  annn-  bus-incss. 
ity  willfully  ceases  to  carry  on  business  he  becomes  liable  to  an 
action  for  damages,  (s)  In  order,  however,  to  provide  as  far  as 
possible  against  any  attempt  to  defeat  the  annuity  by  discontinuing 
the  business,  it  is  desirable  that  the  partner  continuing  the  business 
should  covenant  not  only  that  he  will  carry  on  the  business  and  pay 
the  annuity,  but  that  he  will  not  transfer  the  business,  or  take  in 
any  fresh  partner,  without  procui-i ng  from  the  transferee  or  new 
partner  a  similar  covenant  on  his  part. 

17.  I^foJiihitions  against  carry iiuj onhiisincss? — A  subject  upon 
which  it   is   always   desirable   to    make  some   express  y^  prohiw- 
agreeinent    is  the    extent  to  which    a  retiring  partner  p,?"fi,"fi",Vg1n 
shall  be  restrained  from  commencing  business  on  his  *^"'**"<^^- 
own  account,  and  in  opposition  to  the  continuing  partner.     In  the 
absence  of  anv  a<;rcement  upon  the  subject,  a  retiring  Knicwiicre 
partner  is  as  much  at  liberty  to  set  up  for  himself,  in   pn.iiiijiti.m. 
o]>position  to  the  firm  he  has  quitted,  as  he  would  be  if  he  had 
never  belonged  to  it;  and  on  a  general  dissolution  of  partnershiji, 
all  the  partners  are  at  liberty  to  commence  business  in  opposition 
to  each  other,  as  freely  as  if  they  had  never  been  partners,  unless 
they  have  entered  into  some  agreement  not  to  do  so.     A  dissolution 
per  se  obliges  no  partner  to  retire  from  business,  or  to  refrain  from 
seeking  a  livelihood  in  the  manner  in  which  he  has  been  accustomed 
so  to  do,  and  in  the  neighborhood  where  he  is  known.  {f.Y 

F\irther,  it  is  held,  although  it  is  certainly  an  extraordinary  doc- 
trine, that  if  a  person  sells  the  good-will   of  his  cnrn-ingon 

1  ^il        •  ji     i    1  i    J-         I.' A.^      \  •  icc^""    business  after 

trade  or '"business,  that  does  not  disentitle  Inin     *boo  selling u. 

(s)  MacintjT-e  v.  Belcher,  14  C.  B.  N.  (0  See  Favr  v.   Pearce,  3  i^Iadd.  78; 

S.  654;  Telegrapli  Dispatch  Co.  r.  Mo-  Pavies  r.  Hod^^son,  2">  Beav.  177. 

Lean,  8  Ch.   658.     Compare   Rhodes??.  ^  On  the  dissolution  of  a  partnership 

Forwood,  1  App.  Ca.  256,  and  see  ante,  whose  business  is  the  publication  ot  a 

p.  ,378.  periodical  pap'-T,   the  good-will  of  tlio 

'  A  clause  in  a  co-partnersliip  agree-  iiapcr  is  a.«sets,  but  one  partner  will  not 

ment,  wherein  each  partner  a j.r3's  not  be  enjoined  from  carrying  on  the  same 

to  transact  on  his  individual  account,  busim-ss  (in  the  absence  of  any  covenant 

within  twenty  miles  of  the  village  in  or  restriction),  unless  he  does  it  in  a 

which  such  partnership  is  to  do  business,  way  which  would  be  an  infringement, 

the  kind  of  business  for  the  transaction  according  to  the  analogies  of  the  law 

of  which  it  is  created,   is  unobjection-  of  trade-marks.     Dayton  r.  W  Ikes,  17 

able.     Fairi)ank  r.  LeaiT,'  40  Wis.  6o7.  How.  Pr.  510.     Seei>(y*Y,  GoodnHl. 

ir2a 


'^yo 


USUAL    CLAUSES. 


[cook  III. 


irom  recomniencing  a  similar  trade  or  business  in  the  imiuediate 
vicinity  of  the  place  where  the  old  one  was  carried  on;  {uy  and, 
therefore,  if  it  is  agreed  that  a  partnership  shall  be  dissolved,  and 
that  one  partner  shall  buy  the  other  out,  and  this  agreement  is  car- 
ried into  effect,  the  retiring  partner  will  nevertheless  be  at  liberty 
to  recommence  business  in  the  old  line  in  the  old  neighborhood  («?); 
and  he  may  advertise  the  fact,  (y)  But  lie  must  not  specially  solicit 
business  from  the  old  customers  or  correspondents  of  the  lirm  (s);' 
and  he  must  not  hold  himself  out  as  continuing  the  business  which 
he  has  sold,  and  must  not  therefore  carry  it  on  in  the  name  in  which 
it  was  carried  on  before  he  sold  it.  {a)^  At  tlie  same  time,  if  that 
name  happens  to  be  his  own,  it  is  by  no  means  clear  that  he  could 
be  restrained  from  carrying  on  business  in  that  name.  (J) 

The  above  propositions  are  well  illustrated  by  the  important  case 
churtonv  ^^^  Churton  V.  Douglas,  (c)     There  two  of  the  plaintiffs, 

Douglas.  ^T^^  j-j-jg  defendant,  whose  name  was  John  Douglas,  car- 

ried on  business  in  partnership  under  the  firm  of  John  Douglas  <£. 


{i()  CmttwelU'.  Lye,  17  Ves.  335;  Har- 
rison V.  Gardner,  2  Madd.  198;  Kennedy 
V.  Lee,  8  Mer.  455;  Shackle  v.  Baker,  14 
Ves.  468.  See,  too,  Davies  v.  Hodg-son, 
25  Beav.  177,  and  Churton  v.  Douglas, 
Johns.  174.  In  Johnson  v.  HeUeley,  34 
Beav.  63,  notice  of  this  right  was  di- 
rected by  the  Court  to  be  given  in  the 
particulars  of  the  sale  of  the  goodwill. 

1  White  V.  Jones,  1  Robt.  N.  Y.   321. 

{x)  See  Kennedy  v.  Lee,  3  Mer.  452  ; 
Mellersh  v.  Keen,  27  Beav.  236  ;  Brad- 
bmy  ».  Dickens,  ib.  53;  Smith  r.  Ev- 
erett, ib.  446,  and  the  next  note. 

(y)  Hoockham  v.  Pottage,  8  Ch. 
Labouchere  v.  Dawson,  13  Eq.  322, 
see  Cruttwell  v.  Lye,  17  Ves.  335. 

{z)  Ib. 

^  See,  x>ost,  857,  note. 

(fl)  Churton  v.  Douglas,  Johns. 
Hookham  t'.  Pottage,  8  Ch.  91,  where 
the  defendant  described  himself  as  P. 
from  H.  &  P.,  the  old  firm,  but  in  a  way 
calculated  to  deceive. 

'  On  the  retirement  of  a  partner  from 
a  firm,  his  co-partners  continued,  the 
business  at  the  old  place,  and  the  retir- 

1124 


91; 

and 


174; 


ing  partner  embarked  in  the  same  Une 
of  business,  and  on  the  same  side  of  the 
same  street,  and  within  about  fifty  feet 
from  the  old  store,  and  put  up  a  sign 
bearing  in  the  first  Line  his  own  name, 
in  the  second  line  the  words,  "of  the 
late  firm  of;"  and  in  the  third,  the  name 
of  the  old  firm;  the  second  line  being 
in  letters  of  good  size,  j'et  but  little 
more  than  a  thkd  the  height  of  the  let- 
ters in  the  thu-d  line :  Held,  that  an 
injunction  should  issue  to  restrain  this 
use  of  the  firm  name.  Smith  v.  Cooper, 
5  Abb.  New  Cas.  274. 

Abiaham  Bininger  Clark,  who  had 
been  a  partner  in  the  firm  of  A.  Bin- 
inger &  Co.,  usually  writing  his  name 
as  Abm.  B.  Clark,  continued  a  sim- 
ilar business  on  his  own  account,  af- 
ter the  dissolution  of  that  firm,  and 
put  up  his  name  as  A.  Bininger  Clark, 
successor  to  A.  Bininger  &  Co. :  Held, 
that  he  might  be  restrained  by  injunc- 
tion from  the  use  of  such  a  style.  Bin- 
inger V.  Clark,  10  Abb.  Pr.  N.  S.  264. 

(fc)  See  ib. 

(c)  Johns.  174. 


CHAP.  IX.]  PARTNERSHIP    ARTICLES,    ETC.  *8oO 

Co.^  as  stuff  niercliants  at  Bradford.      Tlie  defendant  retired  from 
the  firm;    a  new  partner  was  taken  in;  and  the  defendant  assigned 
to  his  old  partners  and  their  new  partner  (heing  the  plaintiffs)  all 
his,  the  defendant's,  share  and  interest  in   the  old  firm,  and  in  the 
good-will  thereof.     The   pkintiffs  cdiitinncd    to   carry  on  the  old 
hnsiness  under  anew  name,  witli  the  addition  late  John  Douglas  dd 
Co.     The  defendant  formed  a  new  ]):irtuership  with  three 
persons  who  had  been  in  the  employ  of  the  "old  firm,  and     *S5G 
whom  he  had  enticed  to  leave  the  service  of  its  successors 
and  to  join  him;  and  he  and  his  new  partners  commenced  business 
as  stuff  merchants  at  Bradford,  in  a  house  adjoining  the  place  of 
business  of  the  old  firm;  and  tliev   did  so  in    the   name   of  John 
Douglas  <&  Co.     They  further  affixed  that  name  to  the  house  they 
had  taken,  and  sent  circulars  to  the  old  custumers  of  the  old  firm,  so 
as  to  lead  them  to  suppose  that  the  business  of  that  firm  was  being 
continued  by  defendant  and  his  new  partners.      On  a  bill  filed  by 
the  ]>laintiffs  against  the  defendant  it  was    held,  (1),  that  he  was 
entitled  to  carry  on,  by  himself  or  in  ])artner&hip  with  others,   the 
kind  of  business  previously  carried  on  by  him  with  his  late  part- 
ners; and,  (2),  that  he  was  entitled  so  to  do  in  the  immediate  neigh- 
borhood of  the  place  where  he  and  liis  late  partners  previously  car- 
ried on  their  business.     But  it  was  also  held,  (3),  that  the  plaintiffs 
alone  had  the  right  to  carry  on  the  business  previously  carried  on 
by  Joh7i  Douglas  <&  Co.;   (4),  that  the  plaintiffs  had  the  right  to 
represent  themselves  as  the  successors  of  that  firm;  (5),  that  the  de- 
fendant had  no  right  to  represent  himself  as  its  successor;  (6),  that 
he  could  not  acquire  such  a  right  by  taking  other  persons  into  part- 
nersliip  with  him;  and,  (7),  that  although  his  name  was  John  Dong- 
las,  he  had  not,  either  alone  or  in  partnership  with  others,  tlie  right 
to  carry  on  the  old  kind  of  business,  in  the  old  place,  under  the  old 
name  of  John  Douglas  c5  Co.     An  injunction  was  granted  accord- 
ingly to  restrain  the  defendant  from  carrying  on  the  business  of  a 
stuff  merchant,  at  or  in  the  immediate  neighborhood  of  Bradfoi-d, 
either  alone  or  in  ]>artncrship,  under  the  style  Joh7i  Douglas  d'  Co., 
or  in  any  other  manner  holding  out  that  he  was  carrying  on  the 
business  of  a  stuff  merchant  in  continuatioTi  of,  or  in  succession  to, 
.  the  business  carried  on  l)y  the  late  firm  oi  John  Douglas  c&  Co. 
An  agreement  by  a  partner  that  he  ^ill  not  carry   in,piie,i nproo- 
on  business  in  op]iosition  to  his  late  co-]>artners,  may   ',"7)tiin'ic iu 
be  implied  from  some  other  agreement  into  which  he     ""'"'■■^ 

11-25 


*857  USUAL    CLAUSES.  [UOOK  IIL 

and  thej  have  entered.  Thns  wliere  two  persons  became  partners 
as  brewers  for  eleven  years,  and  it  was  provided  in  the  articles 
that  eitlier  of  the  parties,  on    giving   six   months'  notice  to  the 

other,  should  be  at  liberty  to  qiiii  the  trade  and  mij^tcvy 
*S57     of  a  hrewer,  and   that  *tlie  other  should   be  at  liberty  to 

continue  the  trade  on  his  own  account;  it  was  held  tliat 
one  of  the  partners  who  had  retired  from  the  firm  after  giving 
notice  to  the  pother  was  not  at  liberty  to  continue  in  the  trade 
at  all.  {d) 

Again,  wliere  on   the  retirement  of  a  partner,  it  was  left  to  an 
,  ,.  arbitrator  to  determine  what  the  continuinor  partner 

Award  dispos-  »    r 

iug  of  business.  ^  gjjQQ](j  pr^y  fQ-j.  ^j^g  good-will,  and  the  arbitrator  fixed  a 
sum  upon  the  understanding  that  the  retiring  partner  would  not 
commence  a  new  business  in  the  same  street  in  which  the  old  oie 
was  carried  on;  an  injunction  was  granted  restraining  the  retiring 
partner  from  carrying  on  business  in  that  street,  although  the  award 
itself  was  silent  upon  the  point,  (e) 

So  in  Churton  v.  Douglas  (_/),  the  sale  of  the  good- will  was 
„  ,     ,      ^      alone  sufiicient  to  preclude  the  seller  from  setting  up 

Sale  of  good-  ^  ^  .  ,       ■ 

^^'iii-  business  in  the  name  of  the  old  firm,  as  if  he,  and  not 

the  purchasers,  were  continuing  the  business  sold.* 

An  agreement  b}'  a  retiring  partner  not  to  commence  business 

.     ^  in  opposition  to  his  late  partners,  will,  whether  express 

to  carry  on        Qp  implied,  be  Upheld  and  enforced,  if  the  restriction 

))usiness  i  t  i  ^ 

enforced,  imposed  upon  him  is  not  unreasonable,  having  regard 

[d)  Cooper  v.  Watson,  3  Dougl.  413;  personal  property,  but  the  same  pertain 
'^.Q.suh  nomine,  Cooper  r.  Watlington,  to,  and  could  not  be  sold  separately 
'2  Chitty,  451.  from  the  lease.     Mitchell  v.   Read,    19 

(e)  HaiTison  v.  Gardner,  2  Madd.  198.  Hun,  418. 

(/)  Johns.  174,  ante,  p.  855.  One  partner's  share  in  the  good  will  of 

^  But  such  sale  is  not  sufficient  to  pre-  the  business  of  the  firm  is  not  a  subject 

elude  the  seller  from  setting  up  business  of  separate  sale.     The  good  will  of  the 

in  his  own  name.     Wliite  v.   Jones,  1  business  is  invisible,  when  one  of  sev- 

Robt.  (N.  Y.)  321.  eral  partners  retires  from  the  firm,  the 

A  transfer,  by  a  retiring  partner  to  good  will  remains,  as  an  entirety  with 

the  other,  of  "the  business  connections  the  continuing  partners  (subject  to  any 

and  patronage  belonging  to  the  finn,  "  right  of  the  retiring  partner  to  be  com- 

may  be  deemed  to  include  the  good-will  pansated).      Hence  a  court  of  equity 

of  the  concern.     Kellogg  tJ.  Totten  16  will  nofcenforce,  n3r  enjoin  pro^eeding-i . 

Abb.  Pr.  35.  at  law  upon,  an  agreement  for  a  sale  of 

The  good  will  of  a  hotel  is  not  trans-  one-fourth  part  of  a  good  will.     Cassidy 

ferred  by  the  sale  of  the  furniture  and  v.  Metcalf,  1  Mo.  App.  593. 

112G 


CHAP.  IX.] 


rSLAL    CLAUSES. 


^637 


to  the  nature  of  tlie  partnei^hii)  business.  UjY     Thus  in  Williams 


{g)  See,  generally,  as  to  covenants  not 
to  carry  on  business,  Mitchell  v.  Rey- 
nolds, 1  Smith's  L.  C;  also  the  useful 
table  appended  to  Avery  v.  Langford, 
Kay,  G63;  and  Allsopp  v.  Wheatcroft, 
15  Eq.  .59.  Distances  are  measured  as 
the  crow  flies,  Duignan  r.  Walker, 
Johns.  446;  Mouflet  v.  Cole,  L.  K.  7  Ex. 
70,  and  8  Ex.  32,  and  the  cases  there 
cited.  As  to  infringements  by  supply- 
ing goods  within  the  distance,  see  Clark 
r.  Watkins,  1  N.  R.  342,  L.  J.;  Turner 
r.  Evans,  2  E.  &  B.  512,  and  Brampton 
r.  Beddoes,  13  C.  B.  N.  S.  538.  As  to 
the  construction  of  covenants  by  agents 
not  to  carry  on  business  to  the  detri- 
ment of  their  principals,  compare  King 
r.  Hansen,  5  H.  &  N.  ICfi,  with  Mum- 
ford  V.  Gething,  7  C.  B.  N.  S.  305;  and 
see  Turner  r.  Major,  3  Gift".  442. 

*See  Angier  r.  Webber,  14  Allen, 
211;  Shearaian  r.  Hart,  14  Abb.  Pr. 
;i-58;  Butler  v.  Barleson,  16  Vt.  176 ; 
Ropes  V.  Upton,  1.5  Mass.  258. 

Paitners  dissolved  their  partnership, 
and  the  retu-ing  memljer  agree  not  to 
be  concerned  in  any  way  in  the  kind  of 
business  carried  on  by  the  tirm,  for  iive 
years  within  the  city  where  their  busi- 
ness was  established,  nor  interfere  with 
any  agency  already  established,  nor  es- 
tablish any  similar  agency,  that  might 
interfere  with  the  business  of  the  firm, 
as  before  carried  on,  whether  in  said 
city,  or  elsewhere:  Held,  that  so  far  as 
this  covenant  restra-ned  the  retiring 
member  from  engaging,  within  said 
city,  in  the  business  carried  on  by  the 
finn,  for  a  Imiited  time,  it  was  not  in 
general  restraint  of  trade,  and  therefore 
legal  and  proj  e;-.  and  that  the  remain- 
der was  a  general  restraint  of  trade,  and 
therefore  void.  Thomas  v.  Miles,  3 
Ohio  St.  274. 

Where  partners,  before  dissolution, 
sold  then-  stock  of  goods  and  the  •'  good 
will  "  of  their  bushicss,  and  stipulated 


in  the  contract  of  sale,  that  they,  or 
either  of  them,  would  not  again  fnt«r 
into  the  same  business  in  that  locality  : 
ILhl,  that  either,  or  both  of  them,  were 
liable  for  a  breach  thereof  by  either  une 
of  them  after  dissolution.  Stark  f.  No- 
ble, 24  Iowa,  71. 

Upon  the  sale  of  a  business  and  gooil- 
will,  it  was  agreed  that  the  purchaser 
should  be  at  liberty  to  use  the  name  or 
style  of  the  vendoi-s  for  a  period  of  two 
years.  After  the  expu-ation  of  the  two 
years  the  vendoi-s  recommenced  busi- 
ness under  a  similar  name  or  style  to 
that  under  which  they  had  carried  on 
the  business  under  which  thoy  had  sold, 
and  al-o  solicited  their  former  customers : 
Held,  that  they  must  be  restrained  from 
soliciting  or  in  any  way  endeavoring  to 
obtain  the  custom  of  ther  fonner  cus- 
tomers. Setiible,  that  they  might  also 
be  restrained  from  dealing  with  their 
foi-mer  customers.  Genese  v.  Coop.'r, 
22  Alb.  Law  Jour.  170. 

N.  &  C.  purchased  the  grain  elevator 
of  H.,  with  the  good- will  pertaining 
thereto,  and  H.  at  the  same  time  agreed 
not  to  engage  in  the  grain  business  in 
the  same  place.  Subsequently,  X.  &  H. 
and  another  fomied  a  co-partnerehip  for 
the  prosecution  of  the  same  business  for 
one  j'ear:  Held,  that  the  formation  of 
of  partnership  was  inconsistent  with  the 
prior  undertalring  of  H.,  and  that,  at 
the  expiration  of  the  partnei-ship,  he 
was  absolved  therefrom.  Norris  r.  How- 
ai-d,  41  Iowa.  508. 

The  plaint ilf  and  defendant  being  co- 
partners, th(!  latter  on  January  24,  1876. 
sold  his  interest  to  the  former,  taking 
his  notes  for  $4,000,  payable  at  various 
times  through  a  period  of  more  than 
three  yeai-s,  and  transferred  the  good- 
will of  the  business  to  the  plaintiH",  and 
agreed  not  to  engage  in  it  himself  at  B. 
for  the  term  of  10  years  from  date. 
"This  last  agreement,"  (repeating  it), 
1127 


*858  PABTNEKSHIP   ARTICLES,    ETC.  [llOOK  III. 

v.  Williams  (A),  the  defendant,  \\\\o  had  been  in  partnership  with 
the  plaintifls,  in  rnnnint^  coaches  between  Readino^  and  London, 
sold  his  share  in  the  business  to  tliem,  and  covenanted  not  to  run 
any  coach  between  Readinir'  and  London,  or  so  as   to  injure  the 

business  of  the  plaintiifs;  and  this  covenant  was  enforced  in 
-"858     *equitj.     So,  in  Tallis  v.  Tallis  {i)  the  Court  of  Queen's 

Bench  upheld  a  covenant  entered  into  by  a  retiring  member 
of  a  firm  of  booksellers  not  to  carry  on  the  canvassing  trade  in  Lon- 
don, nor  within  150  miles  of  the  General  Post-ClHce,  nor  in  nor 
within  fifty  miles  of  Dublin  or  Edinburgh,  nor  in  any  town  in 
Great  Britain  or  Ireland  in  which  the  continuing  partner  or  his  suc- 
cessors might  at  the  time  have  an  establishment. 

An  agreement  entered  into  when  a  partnership  is  formed,  to  the 
^     _      .        efifect  that  a  retiring  partner   shall  not  carry  on  the 

Consideration.  .  t  i 

business  carried  on  by  the  firm,  cannot  be  invalid  for 
want  of  consideration.  (Z;) 

An  agreement  with  a  bankrupt  to  take  his  son  into  partnership, 
and  to  employ  the  bankrupt,  is  a  sufficient  considei-ation  for  an 
agreement  by  him  not  to  carry  on  business  in  competition  with  the 
firm.  (Z) 

In  framing  articles  of  partnership  between  solicitors,  provision 
Solicitors'  should  always  be  made  respecting  the  deeds  and  docii- 

papers,  &c.        mcnts  in  their  possession,  but  belonging  to  their  clients. 

It  need  hardly  be  observed  that  no  agreement  which  the  solici- 
tors may  make  between  themselves,  will  piejudice  their  clients. 
Subject  to  any  question  of  lien,  the  clients  are  entitled  to  have 
their  deeds  and  documents,  and  all  drafts  and  copies  thereof,  paid 
for  by  them,  delivered  up  on  request,  (m)  They  have,  moreover, 
a  right  to  the  joint  assistance  of  all  the  members  of  the  firm  em- 
ployed by  them;  and  although,  if  the  firm  is  dissolved,  a  client  can- 

"tobe  binding  on  me  (defendant)  only  condition  precedent  to  its  maintenance, 
in  case  the  $4,000,  which  is  the  consid-  Hunt  r.  Thibbetts,  70  Me.  221. 
eration  hereof,  is  paid  according  to  the  [h]  2  Swanst.  253.     See,  too,  Hani- 
said  H.'s  agreement  to  pay  the  same  son  t'.  Gardner,  2  Madd.  198;  Whittaker 
and  at  the  time  agi-eed  upon."     Nearly  v.  Howe,  3  Beav.  383. 
three  years  thereafter,  the  plaintiff  hav-  (/)  1  E.  &  B.  391.     See,  too,  AtkjTis 
ing  paid  at  maturity  all  of  his  notes  ex-  v.    Kinnear,   4  Ex.   776;    Reynolds  v. 
cept    two,    which    had    not    matured,  Bridge,  6  E.  &  B.  528. 
brought  this  action  for  the  violation  of  (k)  Per  Lord  Cranworth,  in  Austen  r. 
the  defendant's  agreement  not   to  en-  Boys.  2  DeG.  &  J.  626. 
gage  in  the  business:     IIcUl,  that  the  {/)  Clarkson  v.  Edge,  33  Beav.  227. 
payment  of  the  whole  $4,000  was  not  a  {ni)  Ex  parte  Horsfall,  7  B.  &  C.  528 
1128 


CHAP.  IX.]  rSUAL    CLAUSES.  *859 

not  insist  that  the  partners  shall  continue  to  act  as  his  solicito.-s,  it 
is  clear  that  they  cannot,  M'ithout  liis  consent,  turn  him  over  to  one 
of  themselves  (71):  nor  act  against  him  as  if  he  had  never  heeii  a 
client.  (<9)  The  dissolution  o])erates  as  a  discliari^^e  of  the  client  i»y 
the  solicitors;  and  the  client  is  thereupon  entitled,  subject  to  any 
question  of  lien,  to  have  his  deeds  and  pai)ers  delivered  up  t.» 
him.  {p) 

*But,  as  between  the  solicitors  themselves,  it  is  com|)e-  S5!»* 
tent  for  them  to  a;n:ree  that,  if  they  dissolve  partnership,  the 
clients  of  the  old  iirm,  and  all  their  deeds  and  papers,  shall  be  di- 
vided amongst  the  partners,  or  belong  solely  to  the  partner  who 
continues  to  carry  on  the  business  of  the  firm;  and  such  an  agree- 
ment will  be  enforced.  (//)  If  no  such  agreement  is  come  to,  each 
partner  may,  after  dissolution,  do  his  best  to  induce  the  old  clients 
to  continue  him  as  their  sole  solicitor. 

18.  Good-ic'dl. — In  connection  with  the  subject  considered  under 
the  last  head  it  is  necessaiy  to  allude  to  the  good-will  ^^  c^j.^vj], 
of  a  trade  or  business. 

The  term  good-will  can  hardly  be  said  t(5  have  any  precise  signi- 
Hcation.  It  is  generally  used  to  denote  the  benefit  Mature  of  good- 
arising  from  connection  and  reputation;  and  its  value  ^^^'^• 
is  what  can  be  got  for  the  chance  of  being  able  to  keep  that  connec- 
tion and  improve  it.  Upon  the  sale  of  an  established  business  its 
good-will  has  a  marketable  value,  whether  the  business  is  that  of  a 
jirofessional  man  or  of  any  other  person.  (/•)  But  it  is  plain  that 
good-will  has  no  meaning  except  in  connection  with  a  continuing 
business  (s);  and  the  value  of  the  good-will  of  any  business  to  a 
purchaser  dej^ends,  in  some  cases  entirely,  and  in  all  very  much,  on 
the  absence  of  competition  on  the  ]iart  of  those  by  whom  the  busi- 
ness has  been  previously  carried  on. 

When  a  })artnership  is  dissolved,  the  question  arises,  "What  is   to 
be  done  with  its  good-will?     Now  it  has  just  been  seen  that  there 

(»)  Cook    V.    Rhodes,    19  Ves.    272,  See,  however,   Davidson  v.   Napier,    1 

note.  Sim.  297. 

(0)  Cholmondeley  v.  Clinton,  19  Ves.  [r)  Good-will  is  prop?rty  within   the 

261.  meaning  of  the  stamp   acts.   Potter  r. 

{p)  Griffiths  V.  Griffiths,  2  Ha.  587;  The  Commissioner  of  the   Inhind  Keve- 

Colegrave  r.  Manley,  T.  &  R.  400;  and  niie,  11  Ex.  147. 

see  Vau^jrhan  r.  Vanderstegren,  2  Drew.  {s)  See,  as  to  a  lepracy  of  good-will. 

409.  apart  from   any  share  in   a  business, 

(q)  Whittakor  v.  Howe,  3  Beav.  083.  Robertson  f.  gu.ddinglon.  28  I3eav.  o'ii). 

1120 


^S60 


PAKTNEKSHIP    ARTICLES,    ETC. 


[dock  hi. 


is  no  obligation  on  the  part  of  any  of  the  partners  to  retire  from 
business  merely  because  the  partnership  between  them  is  dissolved; 
and  that  even  on  tlic  sale  of  good-will,  the  vendors  are  at  liberty  to 
continue  to  carry  on  business  on  their  own  account.  It  obviously 
follows,  that  the  good-will  of  a  valuable  partnership  busi- 
860*  ness  may  be  practically  worthless,  at  '^'least  to  any  one  ex- 
cept a  former  ])artner  desiring  to  continue  the  business  of 
the  firm,  (t)  It  is  only  so  far  as  good-will  has  a  saleable  value  that 
it  can  be  regarded  as  an  asset  of  any  partnership;  and  the  good- 
will of  a  business  is  frequently  of  no  value  at  all,  except  in  connec- 
tion with  the  place  of  business.  This,  however,  is  b}'  no  meins 
always  the  case.  The  value  of  the  good-will  of  a  newspaper,  for  ex- 
ample, attaches  to  its  name,  and  is  scarcely,  if  at  all,  dependent  on 
the  place  of  publication. 

The  saleable  value  of  the  good-will  of  a  partnership  business 
^    ,    .„  whatever  that  value  may  be,  must  be  considered  as  be- 

Good-wiU  as-  ■'  ' 

sets  of  the  firm,   longing  to  the  firm,  unless  there  is  some  agreement  to 
the  contrary,  and  it  follows  from  this — 

1.  That  if  a  firm  is  dissolved,  and  there  is  no  Mgreement  to  the 
contrary,  the  good-will  must  be  sold  for  the  benefit  of  all  the  part- 
ners, if  any  of  them  insist  on  such  sale  (^^);' 


{t)  Se8  Davies  v.  Hodg'son,  '25  B^av. 
177,  where  the  good- will  was  treated  as 
valueless  on  this  very  ground. 

(u)  Bradbury  v.  Dickens,  27  Beav. 
53,  and  the  cases  cited  infra. 

'  The  good- will  of  a  partnership  is  an 
important  and  valuable  interest,  which 
th?  law  recognizes  and  wUl  protect. 
Williams  v.  Wilson.  4  Sandl".  Ch.  405; 
Holden  v.  McMakin,  1  Pa.  Sel.  Cas. 
270;  Dougherty  v.  Van  Nostrand,  1 
Hoff.  Oh.  68.  And  it  is  regarded  in 
equity  as  part  of  the  assets  of  a  firm. 
Binmger  v.  Clark,  10  Abb.  Pr.  N.  S. 
264. 

When  a  partnership  is  dissolved,  the 
good- will  is  a  part  of  the  assets  of  the 
firm,  and  the  court  may  order  it  sold  or 
disposed  of  in  such  manner  as  may  be 
deemed  most  advantageous  to  the  part- 
ners, and  the  court  may  permit  a  part- 
ner to  retain  it  upon  payment  of  the 
fuU  value  thereof   to    his    co-partner. 

1130 


Shepherd  v.  Boggs,  2  N.  W.  Rep.  N.  S. 
370:  S.  C.  9  Neb.  258. 

The  good- will  may  be  sold.  Williams 
r.  Wilson,  4  Sandf.  Ch.  405;  Holden  v. 
McMakm,  1  Par.  Sel.  Cas.  270;  and 
where,  after  dissolution,  continuing  part- 
ners refuse  to  take  it  at  a  valuation,  a 
court  cannot  compel  them  so  to  do,  and 
it  must  be  disposed  of  like  other  part- 
nership effects.  Dougherty  v.  Van  Nos- 
trand, 1  Hoff.  Ch.  68. 

But  the  sale  and  assignment  of  a 
lease  of  a  bakery,  with  the  tools,  fixtures, 
furniture,  etc.,  etc.,  together  with  the 
gaod-willl  of  the  business  of  bakmg 
then  or  theretofore  carried  on  by  the 
vendor,  with  a  covenant  not  to  carry  on 
the  business  in  the  same  city  himself, 
does  not  confer  on  the  purchaser  the 
right  to  use  the  name  of  the  vendor 
in  the  conduct  of  the  business  at  the 
same  place,  nor  to  designate  or  de- 
scribe the  bakery  (by  signs  placed  there- 


CHAl'.  VX.] 


USUAL    CLAUSES. 


'SGI 


2.  Tliut,  so  far  as  is  possible,  iiaving  regard  to  tlie  riglit  of  every 
partner  to  carry  on  business  himself,  the  Court  will,  on  a  dissolution, 
interfere  to  protect  and  preserve  the  good-will  until  it  can  be  sold  {x)\ 

3.  That  if  a  partner  has  himself  obtained  the  benefit  of  the  good- 
will, he  can  be  conii)elled  to  account  for  its  value,  i.  e.,  for  what  it 
would  have  sold  for,  he  being  himself  at  liberty  to  compete  in  busi- 
ness with  the  purchaser.  (?/) ' 

In  the  event  of  dissolution  by  death,  it  has  been  said  that  the  good- 
will survives,  and  there  is  a  clear  decision  to  this  effect,  (s)  Goo^.^-ni  in 
l>ut  this  is  not  in  accordance  with  modern  authorities;   t^*-^ "»'*^^"'h. 
they  are  wholly  opposed  to  the  notion  that  the  value  of  the 
good-will,  as  such,  belongs  to  the  survivor,  (a)'     It  *undoubt-     ''SGI 
edly  may  ha])pen  that  the  survivor  may  obtain  the  benefit  of 
the  good-will  without  paying  for  it;    for  he  is  at  liberty  (unless  re- 
strained by  agreement)  to  carry  on  business  on  his  own  account  (^), 


on  or  otherwise)  by  the  n;ime  of  such 
vendor.  Howe  v.  Seiirinff,  6  IJosw. 
354. 

To  preserve  it,  a  receiver  may  be  ap- 
pointed to  carry  on  the  finn  business 
until  a  sale  can  be  effected.  Marten  v. 
VanShaack,  4  Paige,  479. 

And  an  injunction  will  lie  to  restrain 
one  person  from  assuming  the  name  of 
another's  newspaper  to  impose  upon  the 
public  and  to  supplant  the  latter  pei-son 
in  the  good-will  of  his  paper.  Bell  v. 
Locke,  '4  I'aige  Ch.  75. 

And  ai'tor  dissolution  a  partner  may 
be  enjoined  from  appropriating  the 
good  will  to  the  exclusion  of  the  other 
l)artners.  Bininger  v.  Clark,  10  Abb. 
Pr.  N.  S.  264;  and  even  after  a  receiver 
has  been  appointed  for  the  tirm,  or  after 
it  has  made  an  assignment  in  bank- 
ruptcy, one  pai'tner  may  restrain  an- 
other one  from  a  wrongful  attempt  to 
api)ropriate  the  good-wiU  and  name  of 
the  former  firm.  Binmger  r.  Clark,  lU 
Abb.  Pr.  N.  S.  264. 

A  person,  forming  a  co-pai-tnsrship 
with  another,  having  agi-eed  to  leave  at 
the  end  of  the  tenu,  cannot,  on  retiring 
claim  im  interest  m  the  good-will  of  th<' 
business,   and  m  accounting  with   his 


partner,  who  continues  at  the  sann' 
place,  have  an  allowance  for  such  good 
will.  Van  Dyke  v.  Jackson,  1  E.  D. 
Smith,  419. 

(x)  See  Turner  r.  Mayor,  3Giff.  442, 
where,  however,  there  was  an  express 
agi-eement  for  the  sale  of  the  good- will. 
In  Lewis  r.  Langdon,  7  Sim.  425,  the 
V.-C.  Shadwcll  seemed  to  thuik  that  a 
surviving  partner  was  under  no  obliga- 
tion to  preserve  the  good- will.  But  his 
opinion  was  probably  mfluenced  by 
Hammond  v.  Douglas,  5  Ves.  539. 
which  was  not  then  overruled. 

{>/)  Smith  f.  Everett,  27  Beav.  446; 
Mellersh  v.  Keen,  ib.  236,  and  23  Beav. 
453. 

^Soo  post,  p.  801,  note. 

{z)  Hammond  v.  Doughxs,  5  Ves.  539. 

(«)  Wedderbum  v.  Wedderbum,  22 
Beav.  104;  Smith  r.  Everett,  27  Beav. 
446,  and  Mellersh  v.  Keen,  ib.  2:i6,  and 
2><  Beav.  453.  See,  also,  Giblett  r. 
Bead,  9  Mod.  459,  a  case  of  a  newspa- 
per. 

*  Dougheiiy  r.  VanNostrand,  1  Hoff. 
Ch.  68.  Holden  r.  McMakin.  1  Par.  Sel. 
Cas.  270.     See  3  Kent  Com.  64. 

ih)  Farr  r.  Pearco.  3  Madd.  7-1;  Da- 
vio.s  c.  Hodgson,  25  Beav.  177. 

1181 


*861 


USUAL    CLAUSES. 


[book  iir. 


nd  possibly  in  the  name  of  the  late  firm,  (c)'  Under  these  circum- 
stances, if,  on  the  death  of  a  partner,  the  good-will  is  put  up  for  sale. 
it  will  produce  nothing  if  it  is  known  that  the  surviving  partner  will 
exercise  his  rights.  He  will  therefore  acquire  all  the  benefit  of  the 
good-will;  but  he  does  not  acquire  it  by  survivorship,  as  something 
belonging  to  him  exclusively,  and  with  which  the  executors  of  the 
deceased  partner  have  no  concern;  for  if  he  did,  he  might  sell  the 
good-will  for  his  own  benefit,  and  this  he  cannot  do.  (d)  When, 
therefore,  it  is  said  that  on  the  death  of  one  partner,  the  good-will 
of  the  firm  survives  to  the  other,  what  is  meant  is,  that  the  survivor 
is  entitled  to  all  the  advantages  incidental  to  his  former  connection 
with  the  firm,  and  that  he  is  under  no  obligation,  in  order  to  render 
those  advantages  saleable,  to  retire  from  business  himself,  (e) 


(c)  See,  as  to  tliis,  infra,  note  (?). 

^  A  surviving  partner  is  not  entitled, 
without  consent  of  the  representatives 
of  the  deceased  partner,  to  use  the  firm 
name  m  continuing  the  business.  Either 
the  partnership  name  perishes  with  the 
firm  itself,  and  neither  the  representa- 
tive nor  the  survivor  is  entitled  to  use 
it;  or  it  is  an  mterest  held  in  common 
after  the  death  of  one  partner,  possessed 
legally  by  the  survivor,  but  held  for 
mutual  benefit.  Fenn  v.  BoUes,  7  Abb. 
Pr.  202.  See,  however,  contra,  Staats 
V.  Hewlett,  4  Den.  559. 

A  continuing  partner  may  be  enjoined 
from  using  the  old  firm  name,  so  as  to 
give  third  persons  good  cause  to  believe 
that  the  retired  partner  was  still  m  the 
firm;  the  latter,  in  selling  out  to  the 
former,  not  having  mentioned  the  good- 
will. McGowan  Bros.  Pump  «fe  Ma- 
chine Co.  V.  McGowan,  22  Ohio  St.  370. 

A  receipt  given  by  executors  for 
money  due  and  paid  to  the  estate  of  a 
deceased  person  from  former  partners, 
in  which  the  latter  are  mentioned  by 
the  name  of  the  former  parinership,  un- 
der which  they  continued  to  carry  on 
business,  will  not  be  construed  as  a 
written  consent  to  the  continued  use  of 
the  foraier  partner's  name  in  the  new 
business  and  firm,  if  it  was  executed 
and  delivered  merely  for  the  purposd  of 

1132 


exhibiting  the  settlement  of  the  claim. 
Bowman  v.  Floyd,  3  Allen,  76. 

Where  one  of  two  partners  in  a  feny, 
who  were  tenants  in  common  of  the 
land  adjacent,  died,  and  his  moiety  was 
sold  by  his  administrator,  and  the  pur- 
chaser offered  to  form  a  partnership  with 
the  other  partner,  and  was  refused,  and 
afterwards  set  up  an  opposition  feny,  a 
cornet  of  equity  refused  to  enjoin  him. 
Spann  v.  Nance,  32  Ala.  527. 

In  proceedings  under  the  act  of  March 
21,  1861,  of  Ohio,  the  good- will  of  the 
partnership,  though  not  a  distinct  item 
of  assets,  should  be  considered  as  an 
element  of  value  in  the  appraisement 
of  the  tangible  property.  And  if  it  has 
not  been  considered  in  the  appraisement, 
and  the  siu'V'ivtng  partner  has  appropri- 
ated it  to  his  own  benefit,  he  may  be 
compelled  to  account.  Rammelsbei-g  v. 
Mitchell,  29  Ohio  St.  22. 

[d)  See  Smith  v.  Everett,  27  Beav. 
446;  Mellersh  v.  Keen,  ib.  2-36,  and  2H 
lb.  453;  Weddei'bui-n  v.  Wedderburn, 
22  Beav.  104.  See,  however,  Fan-  v. 
Pearce,  3  Madd.  74,  and  Hammond  r. 
Douglas,  5  Ves.  539,  contra.  The  last 
case  cannot  be  regarded  as  now  law. 

{e)  See  Farr  i'.  Pearce,  3  Madd.  74; 
Davies  r.  Hodgson,  24  Beav.  177;  Mei- 
ler^h  r.  Keen,  27  Beav.  236,  and  28  ib. 
453. 


ClfAP.  IX.]  PAUTNKKSIIIP    ARTICLKS,    KTC.  *S('i2 

Aorain,  when  a  partner  retires  not  only  from  the  firm,  but  frum 
the  business  carried  on  by  it,  tlie  continuing  partners  Good-wnnn 
will  acquire  the  benefit  arising  out  of  the  good-will  for  Ji"^,u",',f^ouu'' 
nothing,  unless  it  has  been  agreed  that  they  shall  jiay   v"'"'"^''- 
for  it  ;  for  they  retain   ])0ssessiun  of  the  old   place  uf  bu.-iness,  and 
they  continue  to  carry  on  that  business  under  the  old  name.     This, 
in  fact,  secures  the  good-will  to  them,  and  they  cannot   be  com- 
pelled to  pay  separately  for  it,  unless  some  agreement  to  that  effect 
has  been  entered  into.  (/") 

The  right  to  continue  the  use  of  a  partnership  name  is  frequently 
the  most  important  element  in  the  good-will,  and  is  governed  by 
principles  similar  to  those  applicable  to  it.    The  Goo.i-wiii  in 

*purchaser  of  the  good-will  of  a   business  ac-     *S62  ^vui"\{se'of 
quires  the  right  not  only  to  represent  himself  as  nume. 

the  successor  of  those  who  formerly  curried  it  on  {(/),  but  also  to 
prevent  other  persons  from  doing  the  like.  (A)  If  then  the  goi^l- 
will  of  a  partnership  business  has  any  saleable  value  at  all,  it  seems 
impossible  to  hold  that  on  a  dissolution  of  a  partnership,  whether 
by  death  or  otherwise,  any  partner  can  continue  the  old  business 
in  the  old  name  for  his  own  benefit,  unless  there  is  some  agreement 
to  that  eftect,  or  at  least  to  the  eft'ect  that  the  assets  are  not  to  be 
sold.  Such  a  right  on  his  part  is  inconsistent  with  the  right  of  the 
other  partners  to  have  the  good-will  sold  for  the  common  benefit  of 
all.  Tiiereare,  however,  authorities  tending  to  show  that,  in  the  case 
of  death,  the  surviving  partners  are  entitled  to  continue  to  carry 
on  business  in  the  old  name  {i),  and  to  restrain  the  executors  of  the 
deceased  partner  from  doing  the  like.  (A')  But  if  these  cases  are 
carefully  examined,  they  will  be  found  scarcely  to  warrant  so  gen- 
eral a  proposition.  In  Webster  v.  Webster  (/),  the  ex-  ^vehstprv 
ecutors  of  a  deceased  partnei-  sought  to  restrain  the  '^^'^'^s'^'"- 
surviving  partners  from  carrying  on  business  in  the  name  of  the 
old  firm;  but  the  application  was  based  upon  the  untenable  ground 
that  by  so  doing  the  surviving  partners  exposed  the  estate  of  the 
deceased  partner  to  continued  liability.  No  question  je„.jg,, 
of  good-will  appears  to  have  been  in  dispute.     In  Lewis  Langdon. 

(/)  See  i)ifra.  490;  Lewis  v.   Langdon,   7  Sim.   421  -. 

((/)  Churton  r.  Douglas,  Johns.  174,  Robertson  r.Quiddington,  28  Beav. ."):;(;; 
ante,  p.  855.  Banks  v.  Gibson,  ^  Beav.  566. 

(//)  lb.  ik)  Lewis  r.  Langdon,  7  Sim.  42L 

(0  Webster  v.   Webster,   3   Swanst.  (/)  3  Swanst.  490. 

1133 


*863  USUAL    CLAUSES.  [bOOK  IIL 

V.  Lan<^rlon  (w),  the  Y.-C.  Shadwell  certainly  intimated  his  opinion 
to  be,  that  surviving  partners  liad  a  riglit  to  continue  to  carry 
on  business  in  the  old  narae(;/);  but  the  real  question  there  was, 
wliether  the  executors  of  a  deceased  partner  were  entitled  to  con- 
tinue the  use  of  that  name;  and  it  was  lield  tliat  they  were  not, 
which  is  quite  consistent  with  the  absence  of  the  same  right  on  the 
part  of  the  surviving  partner.  There  seems,  moreover,  to  have 
been  some  agreement  not  set  out  in  the  report  (o),  which  influenced 

the  judge's  decision;  and  at  the  time  it  was  pronounced  the 
*863     ^doctrine  that  good-will  is,  if  saleable,  a  partnership  asset, 

was  not  so  well  established  as  it  is  at  present. 
In  considering  this  question,  the  right  of  a  late  partner  not  to  be 
Continued  use  exposed  to  Hsk  by  having  his  name  continued  in  a 
?vVon^on"one  busiucss  must  uot  be  forgottcn  {p)',  and  where  his 
ofiwogrounds.  j^^^^-^g  jg  pg^j.^  ^f  ^jjg  name  of  the  firm,  e.  ^.,  if  his  name 
is  A,  B.,  and  the  name  of  the  firm  is  A.  B.  &  Co.,  so  long  as  he 
lives  he  would,  it  is  apprehended,  in  the  absence  of  an  agreement 
to  the  contrary,  be  entitled  to  restrain  his  late  co-partners  and 
their  representatives  from  carrying  on  business  under  the  old  name, 
and  so  continually  exposing  him  to  risk. '  Keither  his  executors, 
however,  nor  his  trustee  in  bankruptcy,  would  have  the  same  right 
on  the  same  ground;  for  they  would  not  be  exposed  to  risk.  Their 
rio-ht,  and  indeed  the  right  of  any  partner  whose  name  does  not  ap- 
pear in  the  name  of  the  firm,  to  prevent  the  continuance  of  the  use 
of  the  name  of  the  firm,  can  only  be  maintained  u]^on  the  ground 
that  such  right  is  involved  in  the  more  general  right  of  haviug  tlie 
partnership  assets,  including  the  good-will,  sold  for  the  common 
benefit.  And  if  upon  a  dissolution  this  right  is  waived,  or  if  the  terms 
of  dissolution  are  such  as  to  preclude  its  exercise,  then  each  partner 
can  not  only  carry  on  business  in  competition  with  the  others,  but 
each  can  represent  himself  as  late  of,  or  as  successor  to,  the  old  firm: 
and  if  he  does  not  hold  out  the  other  partners  as  still  in  partnershi]i 
with  himself,  each  may  use  the  old  name  without  qualification,  {g) 

(m)  7  Sim.  421.  borne  in  mind  in   Banks  v.  Gibson,   34 

(n)  See,  too,  per  Lord  Romilly,  in  28  Beav.  566. 

Beav.  536.  ^See  ante,  861,  note. 

(o)  See  the  last  line  in  7  Sim.  425.  (q)  See   Banks  v.  Gibson,   84  Beav. 

(p)  See  Routh  v.  Webster,  10  Beav.  566,  and  the  cases  cited  in  the  last  four 

561;    Bullock  v.    Chapman,   2  DeG.  &  notes.     See,  as  to  describing:  oneself  as 

Sm.211;  Troughton  f.  Hunter,  18  Beav.  late   with   or  from   another.  Glenny  r. 

470.      Query  if   this    was    sufficiently  Smith,  2  Dr.  &  Sm.  476. 

113i 


CHAP.  IX.]  rARTXERSlIIP    AUTICLIiS,    ETC.  '■•^•''4 

The  use  of  a  partnership  trade  mark   is  aiit»ther  very  important 
element   in   the   good-will   of  its  business;  and  it   is  Goodwill  in 
clearly  settled  by  recent  decisions  that   a   partnership  wiihVm.i'e 
trade  mark  is  an  asset  of  the  firm,  saleal)le  on  a  disso- 
lution like  any  other  asset,  (r) 

Good-will  is   generally    valued    at  so    many  years'   valuation  of 
purchase  on  the  amount  of  profits.  ^"^' 

*In  framing  articles  of  partnership,  too  great     *80-i   Agreem.-ntx as 
care  cannot  be  taken    to  express   as   clearly  as  good-\v'in  on 

possible  what  is  intended  to  be  done  with  respect  to 
good  will;  and  in  order  to  avoid  all  ambiguity,  the  word  itself 
should  be  made  use  of.  There  are  cases  which  show  that  an  agree- 
ment to  take  a  retiring  partner's  share  in  the  proi)erty  and  efifects 
of  the  partnership  (5),  or  in  the  partnership  premises  {t),  do  not  en- 
title him  to  anything  in  respect  of  good-will.  But  in  another  case 
a  clause  authorizing  a  surviving  partner  to  take  the  stock  of  the 
partnership  at  a  vahiation  was  held  to  entitle  the  executors  of  a 
deceased  partner  to  a  share  of  the  value  of  the  good-will  of  the 
partnership,  and  of  a  trade  mark  belonging  to  it.  {u) 

When  an  agreement  is  entered  into,  to  the  effect  that  a  retiring 
partner  shall  be  entitled  to  be  paid  for  his  interest  in  the  good-will 
of  the  firm,  it  is  material  to  determine  whether  the  firm  is  to  be  re- 
garded as  of  definite  or  of  indefinite  duration.  For  upon  this  will 
depend  the  amount  to  be  paid  to  the  retiring  partner. 

In  Austen  v.  Boys  (cc),  a  partnership  was  entered  into  for  seven 
years,  with  power  for  any  partner  to  retire.  In  case  of  Austen  v 
retirement  the  retiring  partner  Avas  to  be  paid  by  the  *^-*" 
continuing  partners  the  fair  market  value  of  his  interest  find  shan^ 
in  the  partnership  business,  and  in  the  good-will  thereof.  Two 
days  before  tiie  expiration  of  the  seven  years,  one  of  the  partners 
retired,  and  the  question  arose,  whether  in  ascertaining  the  value 
of  his  interest  in  the  good-will  of  the  business,  the  partnershij^ 
business  was  to  be  considered  as  continuing,  or  as  ending  at  the 
expiration  of  the  seven  years.  It  was  held  that  tlie  good-will  to 
be  valued,  was  the  good-will  of  a  business  ending  with  the  seven 

(r)  See  Bury  v.  Bedford,  4  DeG.  J.  &         (t)  Btufield  v.  Roiich,  31  Boav.  241. 
Sm.  352;   Hall  v.  Barrows,  4  DeG.  J.  k         (n)  Hall  r.  Ban-ows,  4  DeG.  J.  it  ?in. 
Sm.  150.  150. 

{.1)  Soe  Hall  r.  ITall.  20  Beav.  139;  f.r)  24  Beav.  7T\  affirmed  2  DeG.  * 

Kennedy  v.  Lee,  :>  Mcr.  452.  J.  O'JG. 

1135 


*SG5  USUAL    CLAUSES.  [nOOK  IIL 

3-ear.-?,  and  that  therefore  the  retiring  partner's  interest  in  it  was 
nominal  merely. 

In  Wade  y.  Jenkins  (y),  ])artnership  articles  stipulated  that  the 
o-ood-will   should   be  deemed    to   be  of  the  value   of  6000Z.   and 
should  belong  to  the  partners  in  the  proportions 
Jenkins.  *865     in  wbich  "they  were  entitled  to  the  capital,  but 

that  the  value  of  the  good- will  should  not  be 
taken  into  account  in  any  of  the  accounts  between  the  partners- 
On  the  death  of  one  of  the  partners  it  was  held  that  he  was  entitled 
to  a  share  of  the  good-will;  and  that  the  last-mentioned  stipulation 
only  applied  to  the  accounts  taken  during  the  continuance  of  the 
partnership. 

In  Turner  v.  Major  (s),  partners  agreed  to  dissolve  and  to  have 
the  assets  and  ffood-will  sold  by  two  persons  selected  bv 

Turner  v.  ^  .  .    ,  ' 

Major.  them;  an  injunction  was  granted  to  restrain  one  of  tne 

partners  from  violating  this  agreement  by  carrying  on  business  on 
his  own  account  before  the  good- will  of  the  partnership  had  been 
disposed  of. 

19.  Getting  in  debts. — When  a  firm   is  dissolved,  it  is  usual  to 
19.  Gettingin      appoint  One  of  the  partners,  or  some  third  person,  to 

debts  on  disso-  '  ,  .        i        i    i  ■■     i       /•         i       -r>    j         ^     -^i 

lution.  collect  and  get  in  the  debts  oi  the  nrm.      i>ut  notwith- 

standing any  such  arrangement  and  notice  thereof,  a  debtor  to  the 
firm  will  be  discharged  if  he  pays  to  any  one  of  the  partners,  {a) 
Effect,  however,  will  be  given  by  the  court  to  an  agreement  of  the 
nature  in  question,  by  appointing  a  receiver,  and,  if  necessary, 
granting  an  injunction,  {Ij)  If  the  agreement  is  under  seal  and  is 
broken,  an  action  for  damages  may  be  brought  upon  it.  (<?)  But  it 
has  been  held  that  an  agreement  not  under  seal  entered  into  be- 
tween two  members  of  a  dissolved  partnership',  to  the  effect  that 

(«/)  2  Giff.  509.  penses,  in  so   doing.     He  emiiloyed  an 

{z)  3  Giff.  442.  agent,  who  was  at  the  tnne  engaged  in 

^  On  a  settlement  of  partnership  affairs,  other  business  for  him,  to  collect  the  bills : 

if  it  is  agreed  that  one  of  the  partners  Held,  that  the  partner  was  entitled  to  be 

shall  collect  a  note  and  accounts,  for  the  allowed  only  for  the  amount  paid  the 

benefit  of  both,  it  will  be  presumed  that  agent,  and  not  for  the  value  of  the  lat- 

the  money,  as  fast  as  received,  should  ter's  services  in  the  employment  from 

be  divided  between  the  parties.     Met-  which  he  took  him,  which  was   much 

calf  V.  Fonts,  27  lU.  110.  gi-eater.     Porter?'.  Wheeler,  37  Vt.  281. 

Upon  the  dissolution  of  a  partnership  («)  Ante,  p.  275. 

it  was  agreed  that  one  of  the  partners  {V)  Davis  v.  Amer,  3  Drew.  64. 

should  collect  the  bills  of  the  firm,  and  [c]  As  in  Belcher  v.  Sikes,  8  B.  &  C. 

that  he  should  be  allowed  for  his  ex-  1S5. 
1136 


CHAP.   IX.]  rARTNERSniP    ARTICLES,    ETC.  *S66 

one  of  them  slmll  gvt  in  the  debts  of  the  firm,  and  ]m-  what  he 
shall  receive  in  ree^jject  thereof  to  his  co-])artner,  is  not  an  a;:;ree- 
ment  on  which  tlie  hitter  can  maintain  any  action  for  (hima^es  in 
case  the  debts  are  got  in,  and  the  money  received  on  account  of 
them  is  not  paid  over;  for  it  is  said  there  is  no  consideration  for 
such  an  a<,M-eeinent.  {d)  But  it  seems  to  liave  been  admitted,  in 
the  case  in  which  this  was  decided,  that  if  the  partner  to  whom  the 
moncv  wlien  received  is  to  be  paid  ao;rees  that  he  will  take  no  steps 
to  collect  the  debts  himself,  that  will  be  a  sufiiL-ient  consideratitjn 
to  su])port  the  ])romise  to  pay. 

■^"When  a  ])artner  retires,  on  the  terms  that  the  continuing     *S(>0 
partners  are  to  get  in    the  okl  debts,  and  that  sucli  debts, 
wlien  got  in,  are  to  be  taken  into  account  in  ascerta"n-   ^p^jng  ,-„ 
ing  the   share  of  the  retiring  partner,  the  latter  will   ^lil^^'V'ccx.^lds"'' 
have  a  right  to   charge  the  continuing  partners  with   another, 
whatever  debts  they  may  choose  to  take  to  thetn selves  and  not  get 
in.     As  observed  by  Lord  Romilly:     "If  continuing  partners  who 
are  bound  to  get  in  debts  belonging  to  an  old  firm  think  fit  to  enter 
into  a  new  agreement   with  the  debtors  of  the   old  firm,  by  which 
those  debtors  become  the  debtors  of  the  new  firm,  and  the  debts  of 
the  old  firm  become  merged  in  that  of  the  new  firm  by  a  security 
taken  for  the  aggregate  debt,  such  continuing  partners  are  liable  to 
the  retiring  partners  for  the  amount  of  the  old  debt  as  one  of  the 
assets  received  by  them."  (e) 

20.  Assignment  of  share,  cfcc— When  a  partner  retires  or  dies, 
and  he  or  his  executors  are  paid  what  is  due  in  respect  ^o.  Assignment 
of  his  share,  it  is  customary  for  him  or  them  formally  by'l'Sig*""' 
to  assign  and  release  his  interest  in  the  partnership,  and  p"'"'"'^'"- 
for  the  continuing  or  surviving  partners  to  take  upon  themselves 
the  payment  of  the  outstanding  debts  of  the  firm,  and  to  indem- 
nify their  late  partner  or  his  estate  from  all  such  debts. 

An  assignment  of  all  the  partnership  stock,  debts,  sums  of  money, 
and  all  other  the  ])ersonal  estate  and  effects  of  the  as-  A^ip^j^^..^  ^r 
signors  as  partners,  did  not  before  the  Judicature  acts  <^'*'^'*- 
give  the  assignees  a  right  to  sue  one  of  the  assignors  for  a  debt  due 
from  him  to  the  partnership.  (/)    But  if  one  of  the  assignors  after 

((/)  See  Lewis  v.  Edwards!,  7  M.  &  W.  [e)  Loes  r.  Laforest,  14  Boav.  262. 

300,  where  such  an  atrreenu'iit  was  come  {/)  See  Aultou  r.   AtkLus,    18  C.  B. 

to  biHween  a  solvent  partner  and  the  249. 
assignees  of  a  bankrupt  partner. 

1137 


■807 


USUAL    CLAUSES. 


[book  in. 


the  execution  of  tlie  deed  releases  a  debt  which  has  been  assii^ned, 
or  negotiates  a  bill  held  by  the  firm,  he  becomes  liable  to  an  action, 
for  he  has  no  right  to  derogate  from  his  own  grant,   [g) 

An  assignment  by  a  partner  of  his  share  and  interest  in  the  firm 
stamponas-  ^^  ^^^*  co-partiiers,  in  consideration  of  the  payment  by 
outgohi'gpart-  ^^^®™  ^^  what  is  dnc  to  him  from  the  firm,  is  regarded 
"^'"-  as  a  sale  of  property  within  the  meaning  of  tlie  Stamp 

acts;  and  consequently  the  deed  of  assignment  requires  an  ad 
valorem  stamp,  (h)  But  if  the  retiring  partner,  instead  of 
*867  assigning  *his  interest,  takes  the  amount  due  to  him  from 
the  firm,  gives  a  receipt  for  the  money,  and  acknowledges 
that  he  has  no  more  claims  on  his  co-partners,  they  will  practically 
obtain  all  they  want;  and  such  a  transaction,  even  if  carried  out  by 
deed,  could  hardly  be  held  to  amount  to  a  sale,  and  no  ad  valoreni 
stamp,  it  is  apprehended,  would  be  payable.  {%) 

21.  Indemnity  to  outgoing  jpartner. — An  indemnity  is  ordi- 
narily given  by  a  bond  or  covenant  entered  into  by  the 
continuing  or  surviving  partners,  in  consideration  of 
the  assio-nment  to  them  of  all  the  share  and  interest  of  the  retiring 
or  deceased  partner.'     The  bond  or  covenant  should  be  joint  and 


21.  Usual  in- 
demnity. 


{g)  Aulton  v.  Atkins,  18  C.  B.  249. 

{}i)  Christie  v.  Commissioners  of  In- 
land Revenue,  L.  R.  2  Ex.  46;  Phillips 
V.  Same,  ib.  369;  Potter??.  The  Com- 
missioners of  Inland  Revenue,  10  Ex. 
147.  These  cases  overrule  Belcher  v. 
Sikes,  6  B.  &  C.  234. 

(0  In  Steer  v.  Crowley,  14  C.  B.  N.  S. 
337,  a  release  by  the  executors  of  a  de- 
ceased partner  did  not  state  the  consid- 
eration, and  bore  only  a  common  deed 
stamp;  and  it  was  held  that  the  deed 
was  a  good  document  of  title,  although 
some  penalty  might  be  payable  by  the 
parties  to  it,  or  their  solicitors,  for  not 
stating  the  consideration. 

^An  agreement  by  one  to  "release" 
his  retiring  partner  from  the  firm  debts, 
amounts  to  a  promise  to  pay  them. 
Griffith  V.  Buck,  13  Md.  102. 

An  agreement  for  the  dissolution  of  a 
partnership  provided  that  the  assets  of 
the  firm  should  remain  in  the  hands  of 
one  of  the  partners,  who  agreed  that  he 

1188 


would  therefrom  pay  the  debts  of  the 
partnership  as  they  matured,  and  should 
be  charged  interest  on  the  stock  and 
property  purchased  by  him,  and  on  all 
sums  received  by  him,  and  credited 
with  interest  on  all  sums  by  him  paid : 
Held,  that  he  only  agreed  to  apply  the 
assets  to  the  pajinent  of  debts,  and  did 
not  absolutely  assume  the  payment  of 
Ijthem.  Toplitf  v.  Jackson,  12  Gray, 
565. 

The  firm  of  A,  B  and  C  dirsolved 
partnership,  and  the  members  signed 
an  agreement  by  which  all  the  property 
of  the  firm  was  assigned  to  A  in  trust 
to  sell,  and  with  the  proceeds  to  pay  the 
debts  of  the  partnership.  A  agreed  to 
pay  B  and  C  $100  each  for  their  inter- 
est in  the  concern,  to  discharge  all 
the  firm  debts,  and  to  save  B  and  C 
harmless  therefrom.  B  and  C  indorsed 
on  the  instrument  their  receipt  for  the 
$100.  In  an  action  by  B  to  recover  from 
A  the  amount  of  a  debt  of  the  firm  that  he 


CHAP 


IX.] 


rSDAL    CLAl'SKS, 


*86; 


several,  {k)     The  effect  of  such  a  bond  or  covenant  is  to  render  a 
retiring  partner,  as  between  liimself  and  liis  late  co-jmrtners,  a 


h;ul  paid,  the  agreement  was  coristniod 
to  make  A  a  purchaser,  and  not  a  mere 
gratuitous  trustee,  and  the  as.sig-nnient 
of  the  partncrsliip  property  was  lichl  to 
constitute  a  sutticient  consideration  to 
support  A's  promise  to  pay  the  debts  of 
the  firm,  so  that  the  plaintitf  was  en- 
titled to  recover  the  actual  damage  sus- 
tained from  the  breach  of  the  contract. 
Rose  V.  Roberts,  9  Minn.  119. 

There  is  nothing  in  the  relation  of 
partners  which  makes  a  mortgage, 
given  by  one  to  the  other  on  dissolu- 
tion of  the  partnership,  to  indemnify 
him  against  the  partnership  debts, 
fraudulent.  Whitmore  v.  Parks,  3 
Humph.  95. 

If  a  partner  after  a  dissolution  of  the 
partnership,  assign  all  his  interest  in 
the  partnership  property  for  a  valuable 
consideration,  and  take  a  covenant  of 
indemnity  against  all  liability  for  the 
debts  of  the  partnership,  the  covenant 
does  not  cover  a  debt  which  does  not 
appear  upon  the  partnership  books,  and 
was  not  made  known  to  the  assignee  at 
the  time  of  the  contract  of  indemnity. 
Case  V.  Cushman,  3  Watts  &  S.  544. 

Upon  the  dissolution  of  a  co-partner- 
ship between  D.  and  H.,  H.  purcliased 
the  intcrestof  D.,  and  gave  to  him  abond 
signed  by  himself  and  another,  condi- 
tioned to  indemnify  and  save  D.  harm- 
less from  all,  and  singular  the  debts  and 
liabilities  of  the  firm,  at  the  end  of  the 
formal  part  of  the  bond  were  added  the 
words  ' '  liabilities  as  per  schedule  of  in- 
debtedness hereto  annexed.  "  In  an 
action  upon  the  bond:  Held,  that  the 
general  terms  of  the  condition  were  lim- 
ited and  qualified  by  the  added  clause; 
and  that  the  obligors  were  not  liable 
for  a  firm  debt  not  scheduled.  Holmes 
V.  Hubbard,  GO  N.  Y.  183. 


Where  one  of  two  partners  sells  out  his 
interest  to  the  other,  who  agrees  to  pay 
all  the  firm  debts  and  indenmify  thf 
selling  partner,  which  agretnient  is 
guaranteed  by  a  surety,  such  surety  is 
not  liable  in  an  action  V^rought  against 
him  by  a  creditor  of  the  firm  to  recover 
one  of  the  debts  so  guaranteed,  as  in 
such  case  there  is  no  privity  of  contract 
between  the  parties  to  the  suit.  Camj'- 
bell  r.  Lacock,  40  Pa.  St.  44>!. 

See,  also,  Mackintosh  v.  Tatnian,  ;-{8 
How.  Pr.  145. 

Where,  however,  on  the  dissolution  of 
a  partnership,  one  partner  takes  the 
partnership  effects,  and  executes  to  thf 
other  a  bond  with  suretj',  conditioned 
for  the  payment  of  all  the  partnership 
debts,  such  bond  is  in  equity  held  to  lie 
a  trust  fund,  in  which  all  the  creditors 
have  an  interest,  and  which  they  (the 
partners  being  insolvent)  can  subject  to 
the  payment.  Wilson  r.  Stillwell,  14 
Ohio  St.  464. 

See,  also,  Deval  r.  Mcintosh,  28  Ind. 
529. 

In  Hood  r.  Spencer,  4  McLean,  16S, 
it  was  held  that  a  bond  to  relieve  a  late 
co-partner  from  the  debts  of  the  finn 
and  to  pay  the  same,  is  not  a  contract 
of  indemnity  merely,  but  an  action  may 
be  maintained  upon  it  either  by  the 
obligee,  or  by  the  creditors  of  the  firm, 
for  non-payment  of  such  debts.  Hood 
i\  Spencer,  4  McLean,  168. 

If  a  partner  has  sold  out  to  his  co- 
partner, and  has  taken  a  bond  of  in- 
demnity as  security  that  the  latter  ^viU 
pay  the  debts  of  the  finn,  according  to 
agreement,  he  cannot,  it  is  held,  he 
substitutcfl.  in  the  place  of  the  cretlitors 
of  the  old  film,  to  enforce  their  claims 
against  such  co-partner,  or  enforce, 
against  his  co-partner,    executions  ol>- 


{k)  See,  as  to  this,  ante,  p.  372. 


1139 


*867 


USUAL    CLAUSES. 


[look  hi. 


snretj  only  for  the  payment  of  the  partnership  debts  (Z);"  and  to 
render  ]iim  their  specialty  creditor  if,  notwithstanding  their  indem- 
nity, he  is  compelled  to  pay  those  debts,  {rn) 


tained  against  himself  by  the  creditor, 
or  subject  the  partnership  propertj',  sold 
to  the  latter,  to  the  payment  of  the 
debts.     Griffin  v.  Orman,  9  Fla.  22. 

On  the  other  hand,  in  Men-ill  v. 
Green,  55  N.  Y.  270,  it  was  held  that 
where  one  partner,  after  being  bought 
out  by  his  co-partners,  under  covenant 
that  they  will  pay  the  firm  debts  and 
indemnify  him  against  them,  pays  debts 
and  becomes  their  surety,  he  is  entitled 
to  come  in  as  a  creditor  and  be  subro- 
gated to  the  rights  of  the  creditors 
whom  he  has  paid. 

When,  upon  plaintiff 's  retiring  from 
a  firm,  the  other  members  thereof  gave 
him  a  covenant  of  indemnity  against 
any  loss  or  damage  on  account  of  the 
firm  debts :  Held,  that  no  cause  of  ac- 
tion accrued  thereon  to  plamtiff  un- 
til he  was  subjected  to  damage  on  ac- 
count of  the  partnership  liabilities,  and 
that  the  statute  of  limitations  did  not 
run  until  then.  Carter  v.  Adamson,  21 
Ark.  287. 

"Wliere  one  purchases  the  interest  of 
one  of  the  partners  in  a  partnership, 
and  takes  his  place  in  the  firm,  not 
agreeing  to  pay  at  once  all  the  debts 
of  the  firm,  but  only  that  he  will  "  as- 
sume "  the  share  of  the  liabilities  of  the 
firm  which  belong  to  the  outgoing  part- 
ner, the  intent  and  meaning  of  such  as- 
sumptions is  to  indemnify  the  outgoing 
partner.  If  the  latter  is  obliged  to  pay 
any  of  the  old  debts,  under  such  ch-- 
cumstances,  then,  and  then  only,  he  is 
entitled  to  maintain  his  action.  Cole- 
man V.  Lansing,  65  Barb.  65. 

In  Peacey  v.  Peacey,  27  Ala.  683,  how- 


ever, it  was  held  that  on  the  dissolution 
of  a  partnership,  if  the  remaining  part 
ner,  who  takes  all  the  goods  and  partner- 
ship effects,  covenants  to  l^ecome  solely 
responsible  for  the  outstanding  partner- 
ship debts,  the  covenant  is  not  one  of 
indemnity  merely,  but  binds  him  to  dis- 
charge the  retiring  partner,  ■\vithin  a 
reasonable  time,  from  all  liability  for 
the  debts;  and  if  he  dies  without  com- 
plying with  his  engagement,  and  his 
estate  is  declared  insolvent,  the  retiring 
partner  has  a  claun  against  the  estate 
to  the  amount  of  the  outstanding  debts. 

On  the  dissolution  of  the  partnership 
of  A  and  B,  in  Jun3,  which  was  then 
insolvent,  A  and  C,  with  whom  A  formed 
a  new  partnership,  contracted  with  B 
to  pay  all  the  debts  due  from  the  late 
firm  of  A  &  B,  amounting  to  $1,735, 
and  also  to  save  B  harmless  from  any 
cost,  trouble  or  hability  on  account  of 
such  debts.  These  debts  were  all  then 
due  to  the  respective  creditors  of  A  and 
B;  and  A  &  C  j)roceeded  to  pay  them; 
but  on  the  24th  of  October  following, 
there  remained  of  such  debts  $(535  un- 
paid. B,  not  having  paid  any  part 
thereof,  nor  been  subjected  to  any 
trouble  on  account  of  them,  brought 
his  action  against  A  and  C  for  a  breach 
of  the  contract:    Held, 

1.  That  though  where  the  contract 
was  one  of  indemnity  merely,  no  action 
thereon  will  he,  for  the  liability  or  ex- 
posure to  loss,  until  actual  damage, 
capable  of  appreciation,  has  been  sus- 
tained by  the  plaintiff ;  yet  where  the 
contract  is  to  perform  some  act  for  the 
plaintiff"s  benefit  as  well  as  to  indemnify 


(0  Rodgers  v.  Maw,  4  Dowl.  &  L.  66; 
Oaldey  r.  Pasheller,  4  CI.  &  Fin.  207, 
ante,  p.  447. 

^  See  Jlaier  v.  Canavan,  8  Daly,  272, 

1140 


ante,  p.  440,  note;  Thurber  v.  Corbin,  51 
Barb.  216;  Thm-ber  v.  Jenkins,  3G  How. 
Pr.  66. 

(w)  Musson  V.  May,  8  V.  &  B.  194. 


CHAP.   IX.] 


USUAL    CLAUSES. 


*SG( 


It  is  to  be  observed,  tlmt  in  the  absence  of  any  agreement  to  that 
effect,  u  retiring   juirtner  or  tiie  executor  of  a  deceased   uiKhttoin- 
]>artner  has  no  right   to   an    indemnity  from  the  other  '^^"'"'J- 
partners,  except  so  far  as  he  may  be  entitled  to  have  the  assets  of 


and  save  him  harmless  from  the  conse- 
quences of  non-ptTfonnancc,  the  neg- 
lect to  perform  the  act,  being  a  breach 
of  contract,  will  give  an  an  immediate 
right  of  action;  consequently,  in  this 
case,  the  action  brought  bj'  B  was  sus- 
tainable. 

2.  That  it  was  the  duty  of  A  and  C, 
under  the  contiuct,  to  pay  the  debts  of 
A  &  B,  according  to  their  tenor,  which, 
as  they  were  all  then  due,  was  immedi- 
ately. 

3.  That  if  otherwise  they  should  be 
paid  in  reasonable  time,  whicli  had  then 
elapsed.  * 

4.  That  the  rule  of  damages  was,  the 
amount  of  debts  unpaid  at  the  com- 
mencement of  the  action  with  interest. 
Lathrop  r.  Atwood,  21  Conn.  117. 

So,  in  I3eny  v.  McLean,  11  Md.  92,  it 
wa.s  held  that  under  a  written  contract 
by  the  continuing  partners  in  a  finu  to 
pay  the  debts  of  the  fii-m  and  acquit  a 
retiring  partner,  but  not  stating  when 
they  are  to  be  paid,  those  which  will 
not  be  due  until  after  the  execution  of 
the  contract,  need  not  be  paid  until  they 
fall  due,  and  those  which  are  then  due 
are  to  be  piiid  in  a  reasonable  time. 
Beny  v.  McLean,  11  Md.  92.  See,  also, 
Dorsey  v.  Dashiel,  1  Md.  198;  Faust  v. 
Burgevin,  25  Ark.  170. 

A  and  B,  being  partners,  dissolved 
their  partnership,  A  giving  his  note  to 
B  for  his  interest  in  the  partnei-ship 
property  and  agreeing  to  pay  tdl  the 
partnership  debts,  except  a  note  to  one 
S.,  which  B  assumed  and  cigreed  to  pay. 
In  a  suit  by  B  against  A  on  the  note  of 
the  latter,  A  answered,  by  way  of  set- 
off, the  agreement  of  B  to  pay  the  note 
held  by  S.,  averring  that  it  was  due  and 
wholly  unpaid,  and  that  he,  A,  was  per- 
sonally liable  for  the  amount  thereof: 


Held,  that  the  answer  was  a  good  de- 
fence to  an  amouiit  equal  to  the  note 
due  to  S.     Mullendore  v.  Scott,  40  Ind. 

li:i 

Where,  upon  the  dissolution  of  a  finn, 
one  partner  covenants  with  his  co-part- 
ner to  hold  him  harmless  from  all  lia- 
bility or  oljjigation  to  pay  the  debts  of 
the  firm,  the  recover}-  of  judgment  on 
these  debts,  or  any  of  them,  is  a  bn-ach 
of  the  covenant.  Pope  v.  Hays,  19  Tex. 
37.5. 

So,  a  judgment  in  a  suit  against  B, 
one  member  of  a  dissolved  firm,  on  a 
finn  note,  for  want  of  an  affidavit  of 
merits.  Held,  to  be  prima  facie  evi- 
dence of  his  right  to  maintain  an  action 
against  C.  another  member  thereof,  on 
C's  covenant  of  indenmity  to  pay  all  the 
finn  debts;  notwithstanding  a  judgment 
had  been  recovered  in  anoth'-r  State  on 
the  same  note  against  all  the  members 
except  B,  who  had  not  then  been  served 
with  process.  In  B's  action  against  C 
the  validity  of  the  judgment  against  B 
could  not  be  inquired  into.  Bc'nnett  r. 
Cadwell,  70  Pa.  St.  2o3. 

The  plaintiif,  upon  retking  from  the 
firm  of  which  h(>  had  been  a  member, 
conveyed  to  his  co-partners  his  interest 
in  the  partnership,  the  latter  agreeing 
to  pay  all  the  debts,  and  save  him  harm- 
less therefrom.  Judgment  was  subse- 
quently recovered  again.st  the  plaintiff 
and  his  former  co-partnei-s  u^xtn  a  firm 
debt.  The  plaintiff  paid  a  portion  of 
the  amount  due  to  the  judgment  ci-edi- 
tors,  taking  from  them  an  agreement  in 
considi-ration  thereof  nut  to  molest  him 
or  take  his  property  upon  the  judgment, 
but  reserving  all  their  rights  against  all 
the  other  judgment  debtors:  Ihhl,  that 
the  plaintiff  might  recover  the  junomit 
so  paid  h\  an  action  against  his  former 
1141 


■867 


USUAL    CLAUSES. 


[book  III. 


the  firm  applied  in  payment  of  its  debts,  and  to  enforce  contribu- 
tion in  case  he  has  to  pay  more  than  his  share  of  those  debts.  Bnt 
if  all  the  assets  of  the  firm  are  assigned  to  the  continuing  or  the 


partners.  Brewer  v.  Worthington,  10 
AUen,  329. 

A  and  B,  who  were  partners  under 
the  firm  of  A  &  Co.,  contracted  with  C 
for  the  delivery  of  certain  stock  and  ma- 
terials to  them.  After  the  delivery  of  a 
portion,  B  sold  his  interest  in  the  busi- 
ness and  firm  to  D,  who  continued  the 
same  business,  under  the  same  firm, 
with  A,  B  taking  from  D  a  written 
agreement  "to  discharge  him  from  all 
liabilities  on  account  of  purchases  of 
stock  and  materials  as  one  of  the  origi- 
nal firm  of  A  &  Co."  The  rest  of  the 
stock  and  materials  was  thereafter  de- 
livered by  C,  who  did  not  know  of  the 
change  in  the  firm,  and  A  afterwards 
gave  to  C  a  note  signed  A  &  Co.  for  a 
portion  of  the  price,  dated  back  to  the 
time  when  A  &  B  were  in  partner- 
ship :  Held,  that  B  upon  paying  the 
note  and  balance  of  the  account,  might 
maintain  an  action  upon  the  agreement 
against  D  to  recover  the  same.  Nichols 
r.  Prince,  8  Allen,  404.  • 

Where,  on  the  dissolution  of  a  firm, 
one  of  the  partners  covenants  to  pay  all 
the  company  debts,  in  an  action  against 
him  for  a  breach  of  that  covenant  by  his 
partner,  who  has  paid  a  debt  of  the 
firm,  it  is  not  necessary  to  aver  notice  to 
the  defendant  of  the  debt,  nor  of  the 
suit,  recovary  and  payment.  Clough  v. 
Hoffman  5  Wend.  499. 

Two  partners  sold  their  partnership 
effects  to  a  third  person,  and  the  pai"t- 
uership  was  subsequently  dissolved. 
One  partner  then  assigned  to  the  other 
all  his  interest  in  the  partnership,  the 
assignee  taking  all  the  partnership  ef- 
fects into  his  own  hands :  Held,  that 
this  operated  as  a  discharge,  by  the  act 
of  the  parties,  of  a  covenant  of  the  as- 
signor, previously  made  with  the  as- 
signee, to  pay  the  debts  of  the  partner- 

1142 


ship   out    of   the    partnership    effects. 
Austin  V.  Cummings,  10  Vt.  26. 

D.  and  H.  entered  into  a  co-partner- 
ship in  brick- malving.  D.  gave  his  note 
for  one-half  the  bricks  on  hand,  and  for 
one-half  of  the  yard  and  the  brick  to  be 
made  for  three  years.  At  the  end  of  11 
months  the  partnership  was  dissolved. 
D.  had  in  the  meantime  paid  $200  on 
his  $500  note.  The  written  terms  of 
dissolution  specified  what  each  of  the 
partners  was  to  do,  but  said  nothing 
about  the  note :  Held,  that  the  pre- 
sumption was  that  it  was  not  extin- 
guished, but  was  to  be  paid.  Durham 
V.  Hartldt,  32  Ga.  22. 

A  bond  given  to  one  of  a  firm  upon 
the  sale  of  his  partnership  interest,  con- 
ditioned for  the  payment  of  the  partner- 
ship liabilities,  is  satisfied  by  the  pay- 
ment of  the  debts  to  the  amount  of  the 
penalty,  though  made  through  the  as- 
sistance of  a  succeeding  firm.  Perry  v. 
Spencer,  23  Mich.  89. 

A  guaranty  that  one  partner  in  a  dis- 
tillery shall  pay  a  government  tax,  and 
thereby  protect  the  interest  of  his  co- 
partner in  the  firm,  is  not  discharged 
by  such  partner's  paying  the  tax  out  of 
the  partnership  property  without  the 
consent  of  the  other,  but  if  it  is  so  paid 
with  his  consent,  this  will  be  a  compli- 
ance with  the  contract.  Smith  v.  Rid- 
dell,  87  m.  165. 

P.  and  K.  dissolved  partnership,  K. 
taking  the  partnership  property  and 
giving  P.  a  note  for  $938,  and  agreeing 
to  pay  all  partnership  liabilities.  K. 
subsequently  failed,  without  having  paid 
partnership  debts  to  the  amount  of 
$1500,  and  informed  P.  that  he  could 
not  pay  them,  and  that  P.  must  pay 
them.  Finally,  upon  K.'s  proposal,  P. 
agreed  to  pay  K.  $700,  upon  being  in- 
demnified, by  certain  persons  named, 


CHAP.  IX.]  PAETNERSIIIP    ARTICLES,    ETC.  *868 

surviving  partners,  it  is  only  fair  that  tliey  should  undertake  to  pay 
its  debts;  and  if  it  appears  that  it  was  tlie  intention  of  all  j)arties 
that  they  slionld  do  so,  effect  will  be  f^iven  to  such  intention,  al- 
thoui^h  the  undertaking  on  their  part  is  not  exi)licit  in  its  terms.  (/<) 
Wlren  a  retiring  partner  assigns  his  interest  in  the  jiartnert-hip 
assets,  and  obtains  from  the  continuini;  partners  ^^  .  , 

'  ^   1  Effect  of  ex- 

a  *covenant  of  indemnity,  his  lien   on  the  i)art-     *S68   pnjss  i"<k-inni- 

•^ '  ■•  ly  ou  lifu. 

nership  assets  seems  to  be  at  an  end. '  In  Re 
Langmead's  trusts  (c)  the  assignment  was  made  expressly  subject 
to  the  payment  of  the  retiring  partner's  share  o/  the  ])artnership 
debts.  The  continuing  partner  became  bankrupt;  and  the  retiring 
partner's  executors  were  compelled  to  pay  the  unsatisfied  ])artner- 
ship  debts.  It  was  nevertheless  held  that  they  had  no  lien  on  the 
specific  assets  of  the  old  firm,  but  were  confined  to  their  remedy  on 
covenant  for  indemnity. 

22.  Arhitration  clauses. — AVith  respect  U)  these,  it  o-y  Arbitration 
is  to  be  observed:—  ^•'""'*"'^- 

1.  That  an  agreement  to  refer  to  arbitration  is  one  which  a  court 
will  not  decree  to  be  specifically  jK-rformed  (^>);  and 

2.  That  it  is  one  which  (independently  of  the  Common  law  |)ro- 
cedure  act  of  1854)  cannot  be  effectually  set  up  as  a  defense  to  any 
action  relative  to  a  matter  agreed  to  be  referred  (^);  unless,  indeed 
the  reference  has  been  expressly  made  a  condition  precedent  to  the 
riglit  to  sue.  {r)  At  the  same  time  a  court  will  sometimes  decline 
to  interfere  between  partners  who  have  agreed  that  their  disputes 

ajrainst  all  said  partnership  debts,  which  418;  Street  r.  Rigby,  6  Ves.  818.  An 
indemnity  was  given,  whereupon  P.  sur"  action  will  lie  for  not  refening  in  pur- 
rendered  f  aid  note,  and  K.  paid  P.  the  suance  of  an  agreement  so  to  do,  Liv- 
balance,  after  deducting  .^700,  and  P.  ingston  r.  Ralli,  5  E.  &  B.  l;V2. 
discharged  the  mortgage  given  to  secure  {q)  Dawson  v.  Fitzgerald,  1  Ex.  D. 
the  same:  Held,  that  the  indemnity  2,'u;  Edwards  i\  Aberayron,  <tc.  Soc.  1 
was  a  sufficient  consideration  for  the  Q.  B.  D.  h(S'\;  Cooke  r.  Cooke,  4  Eq.  77; 
compromise,  an<l  that  P.  was  entitled  to  and  the  older  cases  referred  to  there, 
recover  said  $700  on  said  note,  the  (>■)  See  Scott  r.  Avery,  5  H.  L.  C.  811; 
transaction  being  free  from  fraud  on  the  Half  hide  v.  Penning,  2  Bro.  C.  C.  336. 
part  of  K.  Parmenter  i".  Kingsiey,  45  The  li\.«t  Ciise  is  generally  regarded  as 
Vt.  3G2.  oveiTuled,  but  omere  whether  it  is  not 

(h)  See  Saltoun  v.  Houstoun,  1  Bing.  capalile  of  being  supported  on  the  prin- 

433.  ciple  recognized  in  Scott  r.  Avery.     See 

'See  ante,  683,  note.  tlie  oltscrvatious of  Lord  St.  Leonards  in 

(o)  7  DeG.  ]M.  &  G.  353.     See,  too,  Dimsdale  r.  Kobertson,  2  Jo.  A:  Lat.  91. 

Lingen  r.  Simpson,  1  Sim.  &  Stu.  GtiO.  and  of  V.-C.  Wood  in  Cooke  r.  Cooke, 

i^p)  Agar  V.  Macklew,  2  Sim.  <k  Stu.  4  Eq.  77. 

1143 


*869  USUAL    CLAUSES.  [boOK  III. 

fthonld  be  referred  to  arl)itration,  and  wlio  liave  not  attempted  so  to 
settle  them,  (s) 

By  17  &  18  Vict,  c.  125,  which  contains  several  important  pro- 
17  &  IS  Vict.  visions  res])ecting  ai^recments  to  refer  to  arbitration,  it 
cLio.gii.  -g  ajjiongst  other  things  (by  §  11)  enacted  tluit,— * 

"  Whenever  the  parties  to  any  deed  or  instrument  in  writing,  to  be  here. 
*869  after  made  or  executed,  or  any  of  them,  shall  agree  (/)  that  any  then  *ex- 
ibtiJig  or  future  differences  between  them,  or  any  of  them,  shall  be  refen-ed 
to  arbitration,  and  any  one  or  more  of  the  parties  so  agreeing,  or  any  person  or 
17  &  18  Vict.  persons  claiming  through  or  under  him  or  them,  shall  nevertheless 
^'  '^'  commence  any  action  at  law  or  suit  in  equity  against  the  other  party 

or  parties,  or  any  of  them  or  any  person  or  persons  claiming  through  or  under  him 
or  them,  in  respect  of  the  matters  so  agreed  to  be  referred,  or  any  of  them,  it  shall 
be  lawful  for  the  court  in  which  action  or  suit  is  brought,  or  a  judge  thereof,  on  appli- 
cation by  the  defendant  or  defendants,  or  any  of  them,  after  appearance,  and  before 
plea  or  answer,  upon  being  satisfied  that  no  sufficient  reason  exists  why  such  matters 
cannot  be  or  oui.'hb  not  to  be  referred  to  arbitration  according  to  such  agreement 
as  aforesaid,  and  that  the  defendant  was  at  the  time  of  the  bringing  of  such  action 
or  suit,  and  still  is,  ready  and  willmg  to  join  and  concur  in  all  acts  necessary  and 
proper  for  causing  such  matter  so  to  be  decided  by  arbitration,  to  make  a  rule  or 
order  staying  all  proceedings  in  such  action  or  suit,  on  such  terms  as  to  costs  and 
otherwise,  as  to  such  court  or  judge  may  seem  fit;  provided  always  that  any  such  rule 
or  order  may  at  any  time  afterwards  be  discharged  or  varied,  as  justice  may  require." 

The  section  does  not  apj)ly  where  a  snbniission  to  refer  has  been 
revoked  before  action,  u)  !Nor  is  the  section  imperative;  and  the 
courts  in  the  exercise  of  their  discretion  have  declined  to  interfere 
where  there  were  several  matters  in  dispute,  some  only  of  which 
were  within  the  agreement  to  refer  (v);  where  one  of  the  parties 
had  become  bankrupt  (a?)  ;  where  there  was  a  honajide  suggestion 
of  fraud  (y);  where  there  was  really  no  question  in  dispute,  and  the 
defendant's  only  object  was  delay  (s);  where  the  object  was  to  stop 
a  suit,  and  not  really  to  settle  a  dispute,  which  the  defendant«de- 
sired  to  refer  before  the  suit  was  commenced,  {a) 

(s)  Waters  ».  Taylor,  15  Ves.  10.  {v)  Wheatley  v.    Westminster,    &c. 

{t)  In  Blyth  v.  Lafone,  1  E.  &  E.  435,  Coal  Co.  2  Dr.  &  Sm.  347. 
it  was  held  that  the  agreement  to  refer  (.r)  Pennell  v.  Walker,  18  C.  B.  651. 

must  be  contained  in  the  instiinnent  on  F  (y)  Wallis  v.  Hirsh,  1  C.  B.  N.  S.  316. 
which  the  dispute  arises.     But  this  has  (z)  Lury    v.   Pearson,   ib.   639.     The 

been  oveiTuled.    See  Randell,  Saunders,  true  grounds  of  this  decision  appear  to 

and  Co.  v.  Thompson,  1  Q.  B.  D.  748,  have  been  those  stated  above,  but  the 

and  Mason  v.  Haddan,  6  C.  B.  N.  S.  526.  report  is  obscure. 

(m)  Randell,    Saunders,  and  Co.   v.  («)   Corcoran  v.  Witt,  8  Ch.  476  n., 

Thompson,  1  Q.  B.  D.  748.  explained  in  16  Eq.  571. 

1144 


cii.vr.  IX.] 


taktm:.  ;:n'  autici.ks,  ktc. 


ro 


AVhere,  however,  there  is  a  land  fide  dispute  within  the  inciuiing 
of  an  a«rreeinent  to  refer,  and  there  is  no  satisfactory  reason  why 
such  dispute  should  not  be  settled  by  arbitration,  lei^jil  pro- 
ceedings will  be  stayed  (^');  even  although  the  *agrceinent     *S70 
to  refer  is  contained  in  articles  of  partnership  for  a  term  of 
years  which  has  expired,  (c) 

In  one  case  the  court  refused  to  interefere  where  the  i)laintiff 
sought  to  have  a  partnership  dissolved  on  the  ground  of  the  defend- 
ant's niisconduct,  and  to  have  a  receiver  appointed  (tZ),  but  this 
case  has  not  been  followed  ((?);  nor  is  there  any  reason  why  the 
court  should  not  appoint  a  receiver,  if  necessary,  pending  the  arbi- 
tration. (/') 

Under  a  general  submission  by  partners  of  all  matters  in  differ- 
ence between  them,  an  arbitrator  may  dissolve  the  Yov;i:xi>i 
partnership  ((7);  and  may  order  one  partner  to  payor  o'"'^"'''^'^'"- 
irive  securitv  for  the  ])avment  of  a  cert:iin  sum  to  the  other  (A);  and 
apportion  the  assets  between  them(i);  and  order  conveyances  to  be 
inade(/0;  and  direct  one  partner  to  sue  in  the  name  of  himself  and 
others,  and  give  them  a  bond  of  indemnity  (Z);  and  restrain  one 
])artner  from  carrying  on  business  within  certain  limits  (?//);  and 
direct  mutual  releases  to  be  executed.  (?i)  It  seems,  however,  that 
the  arbitrator  cannot  appoint  a  receiver  to  collect  and  get  in  the 
partnership  assets  and  credits  (0);  nor  direct  one  of  the  partners  to 


{b)  As  in  Plews  r.  Baker,  16  Eq.  564; 
Willcsfordv.  Watson,  8Ch.  473,  and  14 
Eq.  572;  Randeker  r.  Holmes,  L.  R.  1 
C.  P.  679;  Seligiuann  r.  LeBoutillicr, 
ib.  681 ;  Russell  r.  Pelliffrini,  6  E.  &  B. 
1020;  Hirsch  v.  Thum,  4  C.  B.  N.  S.  569. 

[c)  Gillet  V.  Thornton,  19  Eq.  599. 

{(I)  Cook  V.  Catchpole,  10  Jur.  N.  S. 
1068. 

{e)  Plews  V.  Baker,  16  Eq.  564;  GUlett 
V.  Thornton,  19  Eq.  599. 

(/)  See  as  to  this,  iufra,  note  (0). 

((/)  Green  v.  Warinfr,  1  W.  Blacks. 
475;  Hutchinson  r.  Whitfield,  Hayes, 
Ir.  Ex.  78.  Simmonds  v.  Swaine,  1 
Taunt.  548,  shows  that  a  dissolution 
need  not  be  awarded. 

(h)  Simmonds  r.  Swaine,  1  Taunt.  548. 

(t)  Lingood  v.  Eade,  2  Atk.  505;  Wood 
V.  Wilson,  2  Cr.  M.  &  R.  241;  Wilkin- 


son V.  Page.  1  Ha.  276. 

{k)  Wood  V.  Wilson,  2  Cr.  M.  k  R. 
241. 

(/)  Burton  v.  Wigley,  1  Binpr.  N.  C. 
665;  and  see  Goddart  v.  Mansfield,  19 
L.  J.  Q.  B.  305  ;  Phdips  v.  Knightley, 
2  Str.  903. 

[m)  Morley  r.  Newman,  5  D.  iii:  R. 
317.  In  Burton  v.  Wigley,  1  Bing.  N. 
C.  665,  the  award  penuitted  a  partner 
to  carry  on  business,  although  the  arti- 
cles provided  for  his  not  doing  so. 

(»)  Lingood  r.  Eade.  2  Atk.  505, 
where  the  arbitrator  diii'cted  such  re- 
leases to  be  settled  by  a  Master  in 
Clianc<>ry. 

(0)  Lingood  r.  Eade,  2  Atk.  505;  Et 
Mackay,  2  A.  &  E.  356.  But  a  receiver 
was  appointed  in  Routh  r.  Peach,  2 
Anstr.  519,  and  3  ib.  637. 

1145 


*871  USUAL    CLAUSES.  [rOOK  III. 

pay  money  to  liira  (the  arbitrator)  in  order  that  he  may  apply  it  in 
payment  of  certain  specified  debts.  (/>)  It  Itas  also  been 
*871  lield  that  an  arbitrator  *cannot  enter  into  the  question 
whether  any  part  of  a  premium  paid  on  entering  into  the 
partnership  shall  be  refunded,  unless  the  submission  pointedly 
raises  that  question  for  determination,  (q) 

23.  Penalties  and  liquidated  damages. — The  last  clause  in  a 
n  Penalties  partnership  deed  is  often  one  by  which  each  partner 
^^-  binds  himself  to  pay,  either  by  way  of  penalty  or  by 

way  of  liquidated  damages,  a  certain  sum  in  case  of  the  infring3- 
ment  by  him  of  any  agreement  contained  in  the  previous  clauses. 
A  stipulation  that  on  the  breach  of  any  agreement  in  the  articles,  a 
sum  shall  be  paid  by  way  of  penalty  is  of  little  real  use,  and  is 
sometimes  worse  than  useless,  for  the  sum  mentioned  will  not  be 
payable  unless  damage  to  its  amount  can  be  proved  (r);  and  on  the 
other  hand  the  penalty  generally  limits  the  compensation  which 
can  be  obtained,  even  although  damage  to  a  greater  extent  has  been 
sustained,  [s)  Moreover,  a  stipulation  that  for  any  breach,  however 
small,  a  large  sum  shall  be  paid  by  way  of  liquidated  damages,  is 
always  construed  by  the  courts  as  a  stipulation  for  payment  of  that 
sum  by  way  of  penalty,  (t)  An  agreement  to  pay  a  definite  sum 
as  liquidated  damages  in  one  or  two  specified  events,  e.  g.,  on  car- 
rying on  business  within  prescribed  limits,  may  no  doubt  prove 
useful  {tt)\  but  even  in  these  cases  it  must  not  be  overlooked,  that 
if  the  stipulated  sum  is  paid,  a  court  will  not  interfere  by  injunc- 
tion. (;»)  The  mere  existence  of  an  agreement  for  liquidated  dam- 
ages does  not,  however,  necessarily  make  a  contract  alternative,  and 
preclude  such  interference,  {y) 

{p)  Re  Mackay,  2  A.  &  E.  356.  be  referred  to  as  examples.    See,   too, 

(q)  See  Tattersall  v.  Groote,  2  Bos.  &  The  East  India  Co.  v.  Blake,  Finch.  117, 

P.  131.  where  it  was  held  that  though  a  court 

(r)  See  the  note  to  Gainsford  v.  Grif-  of  equity  would  relieve  against  a  penal- 

fith,  1  Wms.  Saund.  57.  ty,  it  would  not  relieve  against  payment 

(s)  See  Clarke  v.  Ld.   Abingdon,   17  of  liquidated  damages. 
Ves.  106.  (.r)  Sainter  v.  Ferguson,  1  Mac.  &  G. 

(t)  See  Kemble  v.  Fairen,  6  Bing.  286;  Woodward «.  Gyles,  2  Vem.  119. 
141;  Ranger  v.  The  Great  Western  Rail.  (//)  French  v.  Macale,  2  Dr.  &   War. 

Co.  5  H.  L.  C.  119.  269;  Coles  v.  Sims,  5  DeG.  M.  &  G.    1; 

(h)  Atkins  v.   Kinnear,  4  Ex.    776;  and  see  Avery  v.  Langford,   Kay,   663; 

Reynolds  v.  Bridge,  6  E.  &  B.  528,  may  Clarkson  v.  Edge,  33  Beav.  227. 
1146 


CUAP.  X.]  ACTIONS    BETWEEN    I'AUTNEUS,    ETC.  *8T2 


*CHAPTER  X.  *872 

OF  ACTIONS  BETWEEN  PARTNERSHIPS  AND  COMPANIES  AND  THEIR 
MEMBERS,  AND  BET^YEEN  THE  MEMBERS  THEMSELVES. 


SECTION  I.— GENERAL  OBSERVATIONS. 
1.  Law  hefore  the  Judicature  acts. 

The  mntnal  riijlits  and  obligations  of  partners,  shareholder?,  and 
directors,  having  been  examined,  it  is  proposed  in  the  next  ])lace  to 
consider  the  means  by  which  those  rights  and  obligations  can  be 
enforced. 

It  has  been  already  seen  (Bk.  ii.,  c.  3)  that  before  the  Judicatnre 
acts  there  was  no  method  by  which  an  ordinary  firm  j^,^saMjn«'cud- 
could  sue  or  be  sued  by  any  of  its  members,  either  at  partners. 
law  or  in  equity;  for  the  firm  as  distinguished  from  the  persons 
composing  it,  liad  no  juridical  existence.  All  proceedings,  there- 
fore, which  had  for  their  object  the  enforcement  of  the  mutual 
rights  and  obligations  of  partners,  had  to  be  taken  by  some  or  one 
of  the  members  of  a  firm  individually  against  some  others  or  other 
of  tliem  also  individually.  The  consequences  of  this  rule  were  im- 
portant, for  it  followed  from  it — 

1.  That  no  action  at  law  could  be  brought  by  one  partner  against 
another  for  the  recovery  of  money  c»r  ]>roi)crty  payable  to  the  firm 
as  distinguished  from  the  partner  suing; 

2.  That  no  suit  in  equity  was  maintainable  by  one  ]Kirtner  against 

another  with  respect  to  a  matter  in  which  the  firm  was  interested, 

without  bringing  all  the  members  thereof  before  the  court.     This 

rule  was  subject  to  exceptions,  as  will  be  seen  hereafter;  but  it  was 

established  as  a  rule,  and  flowed  from  the  non-recognition  of  the 

firm. 

1147 


*874:  ACTIONS    BETWEEN    PAKTNERS,    El'C.  [bOOK  III. 

87. >*  *Moreover,  until  the  law  was  altered  by  31  &  32  Yict.  c. 
116,  no  criminal  prosecution  was  sustainable  by  one  partner 
af,'ainst  another  for  stealing  the  property  of  the  fii-ni.  (a)  But  this  in- 
convenience has  been  removed  by  the  above  mentioned  statute,  (b) 

These  consequences,  which  were  much  more  serious  to  large 
Effect  of  incor-  Partnerships  than  to  small,  were  avoided  by  incorpo- 
poratiou.  rating  the  firm;  for    a   member   of  a  body  corporate 

might  always  sue  or  be  sued  by  it  just* as  if  he  were  not  a  member; 
and  whether  the  body  corporate  was  a  company  having  gain  for  its 
object  or  not,  is  and  always  was  wholly  immaterial  with  reference 
to  its  capacity  of  suing  and  being  sued. 

The  institution  of  a  public  officer  to  sue  and  be  sued  on  behalf 
Effect  of  ena-      of  the  members  of  an  unincorporated  companv,  is  not 

bling  company  nc         •  ±-       .^  i         i- 

to  sue  and  be     neccssariiy  so  eriicacious  lor  the  purposes  now  under  dis- 

sued  by  a  pub-  .  ,       .  .  pi  t^         t 

licofficer.  cnssion  as  the  incorporation  oi  the  compan}'.      lor  the 

public  officer  may  be  so  constituted  as  to  represent  the  members  as 
individuals,  and  only  to  represent  them  all,  and  not  all  less  some  or 
one  of  them.  If  in  such  a  case  he  sues  one  of  the  members  of  the 
company  which  he  represents,  he  in  fact  either  represents  the  mem- 
ber sued  as  well  as  all  the  other  members,  or  nobody  at  all,  and  in 
either  case  his  action  will  be  improper,  (c)  In  most  modern 
*S7I:     acts  of  Parliament,  however,  care  *has  i)een  taken   to    avoid 

(a)  In  R.  V.  Warburton,  L.  R.  1  Cr.  ment;  and  in  R.  v.  Burgess,  2  N.  R.  85, 
Ca.  Res,  274,  it  was  held  that  a  partner  and  in  R.  v.  Webster,  7  Jur.  N.  S.  1208, 
might  be  convicted  of  conspiring  with  a  member  of  a  friendly  society  was  con- 
others  to  defraud  his  co-partner  by  falsi-  victed  of  larceny,  and  in  R.  r.  Proud, 
fying  the  accounts  of  the  firm,  and  10  W.  R.  62,  of  embezzlement.  In  the 
thereby,  in  efiect,  robbing  his  co-part-  last  three  cases,  however,  there  were 
ner.  But  in  R.  v.  Evans,  9  Jur.  N.  S.  special  circumstances  as  regaxds  the 
184,  a  partner  who  misrepresented  the  possession  of  the  money  and  the  trust 
partnership  accounts,  and  thereby  ob-  reposed  in  the  prisoner.  A  shareholder 
tained  more  than  his  share  of  money,  in  a  banking  company  governed  by  7 
was  held  not  liable  to  conviction  for  ob-  Geo.  4,  c.  46,  was  convicted  of  embez- 
taining  money  under  false  pretences :  zlmg  money  of  the  company  in  R.  v. 
and  in  R.  v.  Loose,  29  L.  J.  M.  C.  633,  Atkinson,  Car.  &  Marsh.  525. 
R.  V.  Marsh,  8  Fos.  &  Fin.  523,  R.  v.  {h)  See  on  it,  R.  v.  Smith,  L.  R.  1  Cr. 
Bren,  3  N.  R.  176,  members  of  friendly  Ca.  R.  266. 

societies  indicted  for  stealing  the  mon-  (c)  See  Hichens  v.  Congreve,  4  Russ. 

eys  of  the  societies  were  held  not  liable  562;  McMahon  v.  Upton,    2  Sim.   473; 

to    conviction.       However,    in    R.    v.  Hughes   v.   Thorpe,   5  M.  &    W.   656; 

McDonald,  7  Jur.  N.  S.  1127,  a  servant  Seddon  v.  Connell,    10  Sim.   58.     See, 

who  was  paid  a  salary  and  a  percentage  too,  ^?er  Lord  Eldon  in  Van  Sandau  v. 

of  profits  was   convicted  of  embezzle-  JMoore,  1  Russ.  460  and  472. 
1148 


CHAP.  X.]  GENERAL    OBSERVATIONS.  *S75 

this  objection,  and  to  render  the  public  oflicer  the  representative 
of  *the  company  as  distinct  from  the  individuals  composiui;  it;  and 
where  this  is  done,  legal  proceeding's  between  the  public»otMcer  and 
those  individuals  or  any  of  them,  are  theoretically  as  unobjection- 
able as  are  legal  proceedings  between  incorporated  companies  and 
their  shareholders.  The  tendency  in  modern  times,  moreover,  is 
to  regard  comjianies  empowered  to  sue  and  be  sued  more  in  the 
light  of  cor])()rate  bodies  than  formerly,  and  to  treat  public  officers 
as  the  representatives  of  collective  wholes  rather  than  as  the  rep- 
resentatives of  the  members  individually.  (<J) 

The  inability  oX^jirni  to  sue  one  of  its  nien)bcrs,  and  vice  versa, 
arope  from  the  circumstance  that  in  an  action  by  a  Krm  i.epni  pro<ecd- 
a^xmiist  one  or  its  meml)ers,  or  nre  versa,   tlie  member  unincorpi.riued 

,        ,       ,  1    •       •  IV  ^         1     •       ^  and  unprivi- 

in  question  must  be  both  a  idaintiiT  and  a  detendant,   le-L-do.mixi- 

■i  '-  ,  nii-'S  anil  tlielr 

Practically  it  is  oi'teii  extremely  incDUvenient  to  have  re-  nK'inijcis. 
course  to  the  intervention  of  a  trustee,  and  to  jirocure  agreements  to 
be  made  with  him  so  as  to  Qiiable  him  to  sue  and  be  sued  thi.Teon. 
But,  inconvenient  as  this  was,  it  was  only  tlirough  the  intervention  of 
a  trustee  that  agreements  between  ]tartners  and  the  firms  to  which 
they  belonged,  could  be  so  entered  into  as  to  be  enforceable  by  action 
at  law.  {e)  An  ngreement  by  each  partner  with  his  co-partners  might 
indeed  be  framed  so  as  to  enable  one  to  be  sued  by  the  others,  if  care 
was  taken  to  exclude  the  partner  sued  from  all  share  in  what  was 
sought  to  be  recovered  from  him,  and  to  exclude  the  partner  suing 
from  all  obligation  to  contribute  to  his  own  payment  (/);  but  an 
agreement  drawn  so  as  to  accomplish  both  these-  objects,  was  not 
generally  convenient. 

It  was  not,  however,  competent  for  partners  to  establish,  even  as 
amongst  themselves,  a  rule  that  some  officer,  e.f/,  the  treasurer  or 
secretary  of  the  firm  for  the  time  being,  should,  as  it  were,  repre- 
sent the  firm  and  sue  and  be  sued  on  its  behalf  stipulation 
♦accordingly.  Consistently  with  the  established  *S75  &o'.' foMim.7' 
law,  eficct  could  not  be  given  to  such  a  rule,  and  sui"*''*" 
it  was  simply  nugatory,  (g) 

(d)  See  the  next  section,  sub-dms-  (/)  Radenhurst  r.Bates,3Bing.  4G3. 
ion,  ;3.  ig)  See  Evans  r.  Hooper,  L.  R.   I.  Q. 

(e)  See  Bedford  r.  Bnitton,  1  Bing.  B.  D.  45;  Comer  t'.  Miixwell- Irwin.  Ir. 
N.  C.  399,  as  to  an  action  by  a  partner  Rep.  IOC.  L.  354;  Gray  v.  Peai-son,  L. 
against  the  trustees  of  himself  and  co-  R.  5  C.  P.  568,  the  case  of  a  mutual 
partners.  manne  iiisui-auce    society;     Hybart  v. 

1149 


*876  ACTIONS    BETWEEN    PARTNERS,    ETC.  [bOOK  III. 

In  consequence  of  this  doctrine,  companies  which  were  neither 
I'ntting  a  cred-  incorporated   nor   empowered  to  sue  their  own  share- 
.sharehoMer.  ,  holders   by   public  officers,    frequently    found   it   ex- 
tremely difficult   to  compel  the  payment  of  money  due  to   them 
from  such  shareholders   by  any   direct   proceeding  against  them. 
This  difficulty  led  to  the  crooked  expedient  of  "  putting  a  creditor 
on  a  shareholder  ;"  that  is  to  say,  of  compelling  a  shareholder  to 
pay  what  he  owed  to  the  company  by  inducing  some  creditor  of 
the  company  to  single  him  out  and  sue  him  for  the  company's  debt 
at  the  costs  of  the  company.     This  expedient  was  usually  found  to 
answer  the  purpose,  inasmuch  as  the  shareholder  could  only  resist 
the  creditor's  action  by  pleading  the  non-joinder  of  the  other  share- 
holders in  abatement  ;  and  this  it  was  almost  always  impossible  to 
do  with  effect.     Eather  therefore  than  allow  the  creditor  to  obtain 
judgment,  the  unfortunate  shareholder  made  terms  with  the  direc- 
tors.    It  is  obvious  that  the  grossest  oppression  might  be  exercised 
in  this  manner,  and  whatever  might  be  said  in  defense  of  putting  a 
creditor  on  an  obstinate  shareholder  who  would  not  pay,  and  could 
not  be  otherwise  made  to  pay,  what  he  justly  owed  to  the  company, 
nothing  could  possibly  be  said  in  its  favor  in  any  other  case.     For- 
,   tunately,  courts  of  equity   would  always  interfere  in 

Interference  of  >''  t.       ^  t"]!  t 

a  court  of  such  cases,  and  both  restrain  proceedings  by  the  credi- 

equity  in  '  '^  ,,  j      i    <■•  •   i 

such  a  case.  ^or  and  compel  those  who  "put  him  on,"  to  deal  lairly 
with  the  person  sued.  Whatever  the  rights  of  the  creditor  might 
have  been,  if  he  had  been  suing  hondjide  (A),  he  was  not  regarded 
in  cases  of  the  present  description  as  having  any  greater  rights  than 

those  whose  tool  he  was.  {i)  If  the  shareholder  sued  was 
*876     entitled  to  have  the  *accoants  of  the  company  taken,  and  to 

have  its  assets  applied  in  payment  of  "its  debts,  the  court 
would  make  a  decree  accordingly  {k),  if  the  necessary  parties  were 
before  the  court.  {I)  But  a  court  of  equity  would  only  interfere  to 
protect  the  shareholder  on  the  terms  of  his  doing  what  was  just 

Parker,  4  C.  B.  N.  S.  209,  the  case  of  a  84,  and  Bargate  v.  Shortridge,   5  H.  L. 

cost-book  mining  company.   By  32  &  33  C.  297;  Horn  v.  Kilkenny,  &c.  Rail.  Co. 

Vict.  c.  19,  calls  may  now  be   sued  for  1  K.  &  J.  399.    See,  also,  Woodhams  v. 

by  the  pm-suer.  Anglo- Australian    Co.     2    DeG.   J.   & 

[h)  If  he    was    so    suing  the  court  Sm.  162. 

would  not  interfere,  Green  v.  Nixon,  23  (k)  Femihough  v.  Leader,  4  Ra.  Ca. 

Beav.  530;  Beckt?.  Dean,  3  Jur.  N.  S.  14.  373,  and  Lewis  t;.  Billing,  ib.  414. 

(0  See  Taylor  v.  Hughes,  2  Jo.  &  Lat.  (1)  See  Sibley  v.  Minton,  27  L.  J.  Ch. 

24;  Shortridge  v.  Bosanquet,  16  Beav.  53. 
1150 


CHAP.  X.]  ACTIONS    BKTWKKN    PAKTNKRS,    ETC.  *b77 

towards  tlie  company;  and  would,  if  tlierc  was  reason  to  believe 
that  he  ouf^ht  to  pa}'  what  the  coinj)an3'  soui^ht  to  make  liiui  pay, 
require  him  to  pay  that  sum  into  court,  (7^) 

The  mere  fact,   moreover,  that  a  shareholder  in  a   company  is 
being  sued  by  a  creditor  at  the   instance  of  the  com-   windin^upin 
pany,  is  not  sufficient  to  induce  a  court  to  make  an   suchucusc. 
order  for  winding  up  the  company,  {n) 


2.     Effect  of  Judicature  acts. 

Tlie  general  effect  of  the  Judicature  acts,  so  far  as  they  relate 
Effect  of  the  to  legal  proceedings  by  partnerships  and  companies, 
acts!'^     ^  has  been  already  investigated  (Bk.  ii.,  c.  3);  and  it  was 

then  seen  that  a  firm  can  now  sue  and  be  sued  in  its  mercantile 
name;  that  where  parties  are  numerous  and  have  a  common  inter- 
est, some  of  them  may  sue  and  be  sued  on  behalf  of  all  in  respect 
thereof.  Further,  there  is  now  the  same  facility  in  arranging  par- 
ties to  actions  in  all  divisions  of  the  High  Court  as  there  was  for- 
merly in  arranging  parties  to  suits  in  equity;  and  the  fact  that  an 
acc<^unt  has  to  be  taken  in  order  to  ascertain  what  is  due  from  one 
party  to  another  is  no  longer  any  reason  why  an  action  by  one  against 
the  other  should  fail;  at  most,  such  a  circumstance  may  render'it 
expedient  to  transfer  the  action  from  one  division  of  the  High  Court 
to  the  other  at  some  stage  of  the  action.  Nor  is  there  any  danger 
now  of  an  action  for  an  account  being  held  unsustainable  on  the 
ground  that  an  action  for  damages  is  the  proper  remedy,  {o) 

*With  res])ect  to  actions  by  the  firm,  it  has  been  alread}^  *S77 
pointed  out  that  the  name  of  the  firm  is  only  a  compen- 

,.  .  J.         1  •  1        •      !•     •  1       1  Actions  hv  niul 

dious  expression,  for  denoting  the  indiviouals  compos-  ajriiinst  tuo 
ing  the  firm  when  the  name  of  the  firm  is  used.     It  has 

(;h)  SeeCuttsr.  Ridcl.'ll,  1  DoCt.&S.  Court  of  Chancery   to  ent-rtain  a  suit 

226;  Sibley  r.  Minton,  27  L.  J.  Ch.  53.  for  an    account  where    tln'ro    was   no 

This  last  was  the  case  of  a  cost-book  partnortiliip,    trust,  or  franJ,   Smith   v. 

mining     company,    a    shareholder    in  Ixn-eaux.  2  DeG.J.<fe  Sni.  1;    Moxon 

which  would  not  pay  his  calls.  r.    Ikijjht,  4    Ch.    292;     TIemings    r. 

(«)  See,   infra,  book  iv.  ch.  3,  §  4,  Pugh,  4  Gitf.  456;  Ban-y  v.  St-^'en.s,  31 

and  Ex  parte,  Wyld,  1  Mac.  &  G.  1  ;  Beav.  258.    See,   also,  a-t  to  claims  for 

£j-7)rt>7e  Lawton,  1  K.   &   J.   204;  Ex  mere  damages,  Great  Wr^stern  Ins.  Co. 

parte  Wwi&on,  3  De  G.  &  S.  253;    Ex  r.  Cunlitfe,  9  Ch,  525:   I)iii,c,in  r.   Liin;- 

parte  Wise,  1  Drew,  465,  ley,  2  Mc  k  G,  30;  Cl.»for.l  v.  Ihooks,  13 

(0)  See  as  to  the  jurisdiction  of  the  Yes,  132, 

1151 


*87S  ACTIONS    BETWEEN    rARTNEKS,    ETC.  [UOOK  III. 

not  yet  been  decided  wliether  an  action  in  the  name  of  the  firm  be 
maintained  by  or  against  one  of  its  own  members;  but  the  writer 
sees  no  difficnlty  in  principle  in  supporting  sucli  an  action;  tlie 
firm  being  regarded  for  the  purposes  of  the  action  as  one  collective 
whole.  (/>)  This,  however,  is  comparatively  an  unimportant  matter; 
for  if  an  action  in  that  form  cannot  be  maintained,  it  is  plain  that 
one  partner  can  sue  another  whenever  he  has  legal  or  equitable 
rights  to  be  enforced  or  adjusted,  (q) 

"With  respect  to  actions  by  or  against  some  partners  or  members 
Actions  by  or  of  Companies  on  behalf  of  themselves  and  others,  it 
on  behaff  o/  must  be  bomc  in  mind  that  suits  in  this  form  have 
others.  Iq^„  ]^(3gj-^  familiar  in  courts  of   equity,  and   certain 

rules  respecting  them  have  been  settled  whicli  are  not  interfered 
with  by  the  Judicature  acts.  These  rules  will  be  fully  investigated 
presently. 


SECTION    II.— PARTIES    TO    ACTIONS     BETWEEN    PARTNERS    AND 

SHAREHOLDERS. 

1.  General  rule  as  to  partnership  actions. 

In  actions  between  partners  not  involving  any  partnership  account 
or  any  interference  with  persons  against  whom  no  relief  is  sought, 

the  general  principles  applicable  to  actions  generally  must 
^'878     be  observed,  (r)     J3ut  partnership  disputes  ^usually  involve 

the  taking  of  some  account  in  which  all  the  partners  are 
interested,  or  the  granting  of  an  injunction  or  the  appointment  of  a 
receiver,  which  materially  aff'ects  them  all.  Hence,  it  has  long  been 
a  rule  in  Chancery  that  where  the  number  of  partners  is  not  great 
they  must  all  be  parties  to  a  suit  for  <an  account  if  within  the  juris- 
diction of  the  court  (-s-);  and  subject  to  the  question  how  far  the 
firm  can  be  treated  as  representing  them  all,  this  rule  is  still  in  force 

(;j)  Such  actions  are  common  in  Scot-  aside  a  fraudulent  transaction  in  which 

land.  the  two  clef endants  had  concuiTed ;  then 

{q)  There  may,  however,  still  be  diffi-  A  &  B  became  bankrupt;  it  was  held 

culties  in  framing  an  action  properly,  as  that  the  joint  assignees  of  A  &  B  could 

in  Robertson  v.  Southgate,  6  Ha.  536.  not  proceed  with  the  suit  against  C. 

In  that  case  there  was  a  partnership  of  (/•)  Ante,  book  i.  ch.  3. 

three  persons,  A,  B  and  C;  A  retired,  (s)  See  Hills  v.  Nash,  1  Ph.  594. 
B  filed  a  bill  against  A  and  C,  to  set 
1152 


CHAP. 


X.] 


ACTIONS  iji;twi;i:n  paktnkks,  etc. 


'■^(b 


Upon  a  similar  princi]>lc,  where  a  creditor  of  a  firm  sought  ])ay- 
meiit  of  his  debt  out  of  the  estate  of  a  deceased  part-  Action aminn 
iier,  tlie  surviving  ])artners  had  to  be   made  co-defend-   Ji^'^d'V.unner 
ants  with  tlie  executors  of  tlie  deceased,  (t) '     Probably 
in  this  case  the  firm  wouhl  now  sutficieiitly  repres.ent  the  survivors. 

It  follows  from  the  same  ])rii)c*i|)Ie   that  to  an  action  for  a  disso- 
lution and  winding  up  of  an  ordinary  partnershij).  all  Actions  for 
the  partners  within  the  jurisdiction  n^ust  be  parties  (w);'   dissolution. 


(0  Wilkinson  r.  Henderson,  1  M.  & 
K.  582.  This  suLgect  will  be  examined 
hereafter. 

'  See  ante,  485,  note. 

A  creditor  of  an  insolvent  partner- 
ship may  properly  bring  a  joint  action 
against  the  firm's  assignee  for  benefit 
of  creditors,  the  representatives  of  a  du^- 
ceased  pai-tnt'r,  and  the  survi%'ing  part- 
ners, to  compel  the  assicrnoe  to  account 
and  pay  over  to  plaintiff"  his  share  of 
the  proceeds  of  the  partnership  property 
and  (it  being  alleged  in  the  complaint 
that  the  suiTiving  partners  are  insol- 
vent), to  recover  of  the  representa*^ives 
the  Ixilance  of  plaintiff's  claim.  Haines 
F.  Hollister,  64  N.  Y.  1. 

In  an  action  against  a  wifo  who  is  a 
member  of  a  firm,  to  subject  her  interest 
therein  to  the  payment  of  a  debt  of  her 
husband,  the  other  membei-s  of  the 
firm  are  necessary  parties.  Westphal 
V.  Henney,  49  Iowa,  542. 

Partnership  creditors  need  not  be 
made  parties  to  an  action  of  settlement 
between  partners.  Gridley  v,  Conner, 
2  La.  Ann.  87. 

(m)  Evans  r.  Stokes,  1  Keen,  24;  Rich- 
ardson t'.  IIa';fir.g3,  7  Beav.  301;  Har- 
vey r.  Bignold,  8  ib.  M3;  Deeks  v. 
Stanhope,  14  Sim.  57;  Wheeler  r.  Van 
Wart,  9  ib.  193;  Long  r.  Yonere,  2  ib. 
369;  Moffat  r.  Farquharsor,  2  Bro.  Q. 
C.  338;  Ireton  v.  Lewis,  Finch,  96. 

'  Fuller  r.  Benjamin,  23  Me.  255 ; 
Waggoner  r.  Gray,  2  Hen  &  M.  603  ; 
Gray  r.  Larrimore,  2  Abb.  U.  S.  542  ; 
McKaig  r.  Hebb.  42  Md.  227  ;  Francis 
V.  Lavine,  21   La.  Ann.  265.     See,  also. 


Wells  p.  Strange,  5  Ga.  22. 

So,  on  a  bill  by  the  assignee  of  a 
share,  for  the  settlement  of  a  firm  ac- 
counts, all  the  partners  must  be  made 
parties  defendtmt.  Fourth  Nat')  Bank  r. 
CaiTolton  Kailroivt,  11  Wall.  624. 

Where  A  and  B,  partners,  sold  a  stock 
of  goods  to  C  and  D.  partnei-s,  faking 
their  notes  for  the  amount,  and  D  aftcr- 
warils  withdrew  from  the  latter  fii-m, 
and  A  became  partner  with  C  by  pur- 
clia.se,  paying  for  the  interest  by  a  re- 
ceipt against  the  notes  originally  given 
by  C  and  D :  Hehl,  that  B  had  no  inter- 
est in  this  new  partnership,  and  was  not 
entitled  to  be  made  a  party  to  a  bill  by 
A,  for  a  settl-ment  and  account.  How- 
ell r.  Harvey,  5  Ark.  270. 

Where  A.  B  and  C  are  in  partnership, 
and  C  sells  all  his  in^.n-ost  in  the  prop- 
erty, and  credits  to  D.  who  takes  his 
place  in  the  firm,  and  a  bill  for  settle- 
ment and  account  is  subsequ.mtly  filed 
by  B  ao-ainst  A  and  D,  C  need  not  be 
made  a  party.  Howell  c.  Harvey,  5 
Ark.  270. 

A  l)ill,  filed  .Tanuarj',  1>67.  set  out  a 
co-partn"rship  V)etween  two  in  the  busi- 
ness of  lumbering,  farming,  trade  and 
navigation,  from  1815  to  1845,  when, 
one  of  the  co-pai-tners  having  died  intes- 
tate, the  plaintiffs,  being  the  sole  heirs 
of  the  deceased  member,  were  admitted 
into  the  firm  by  the  surviving  partners, 
wlicreupon  the  partnership  l>usiness 
continued  until  1862  ;  that  in  1844,  an- 
other pei-son  was  a<.lmitted  into  a  par- 
ticular branch  of  the  partnership  busi- 
ness, which  continued  untU  1854,  when 

1153 


*ST8 


ACTIONS    BETWEEN    TARTNEKS,    ETC. 


[book  III. 


and  that  the  representatives  of  deceased   partners  must  be  parties 
also  if  tliey  have  any  interest  in  the  partnership  accounts,  (v)' 


he  sold  out,  received  from  the  co-part- 
nersliip  his  share  of  the  profits,  and  ac- 
counted for  his  share  of  the  property,  and 
at  the  same  time  the'plaintitfs  purchased 
the  other  partner's  interest  in  this 
branch  of  the  business  ;  that  the  gen- 
eral business  of  the  co-partnership  con- 
tinued until  1862,  when  the  original 
surviving  partner  died  testate,  and  the 
defendants  were  appointed  executors  of 
his  will  ;  that  the  plaintiffs  claimed  an 
account  of  all  partnersliip  transactions 
from  1845  to  1862,  as  well  as  those 
prior  in  1845.  On  demurrer  :  Held,  1. 
That  the  bill  was  not  multifarious. 

2.  That  the  new  partner  in  the  par- 
ticular branch  of  the  partnership  busi- 
ness need  not  be  made  a  party. 

3.  That  the  bill  was  brought  by  the 
proper  plaintiffs,  they  suing  as  partners 
and  not  simply  as  heirs.  Warren  v. 
Warren,  56  Me.  360. 

One  of  several  partners  ^\^(\.  a  bill 
against  the  others  to  obtain  a  dissolu- 
tion, and  damages  against  A,  one  of 
the  defendants,  for  false  representations, 
whereby  a  great  loss  had  accrued  to 
the  partners.  A  decree  was  rendered 
against  A,  and  the  bill  dismissed  as  to 
the  others,  on  a  suggestion  that  the 
matters  of  the  suit  had  been  adjusted 
by  them:  Held,  that  this  was  errone- 
ous, as  one  could  not  be  permitted  to 
sue  separately,  leaving  grounds  for 
suits  among  the  rest;  nor  could  he  have 
a  decree  for  damages  which  belonged  to 
all  the  partners  except  A,  a  suggestion 
of  adjustment  bemg  no  evidence  that 
the  complainant  had  succeeded  to  the 
rights  of  the  others;  and  as  neither  A 
nor  any  property  of  his  was  within  the 
^  state,  the  mere  joinder  of  some  of  the 
partners  with  him,  as  fictitious  defend- 
ants, could  not  confer  jurisdiction  as  to 
him.  Maude  v.  Rodes,  4  Dana,  144. 
No  hearmg  can  be  had  upon  a  bill  in 
1154 


equity,  founded  upon  articles  of  co-part- 
nership, and  naming  all  the  pai-tners  as 
defendants,  if  the  return  upon  the  sub- 
poena does  not  show  that  all  the  de- 
fendants res'ding  within  the  State  have 
been  duly  summoned  to  answer  the  bill, 
although  those  defendants  who  have 
been  summoned  have  appeared  and  de- 
murred thereto.  Homer  v.  Abbe,  16 
Gray,  543.  See,  also,  Stout  v.  Fortner, 
7  Iowa,  183. 

When  a  suit  to  dissolve  a  partnership 
involves  the  question  whether  certain 
property  is  the  homestead  of  one  part- 
ner or  partnership  property,  because 
bought  with  firm  funds,  the  wife  of  such 
partner  is  a  necessary  party.  Rhodes 
V.  Wihiams,  12  Nev.  20. 

{)■)  See  Cox  r.  Stephens.  9  Jur.  N.  S. 
1144,  and  2  N.  R.  506;  Baboo  Janokey 
Doss  V.  Bindabun  Doss,  3  Moo.  In 
App.  175,  and  Cawthom  v.  Chalie,  2 
Sim.  &  Stu.  127,  where  it  appears,  that 
a  surviving  partner  will,  if  necessary, 
be  constituted  the  legal  personal  repre- 
sentative of  the  deceased. 

3  See  Burchard  v.  Boyee,  21  Geo.  6. 

The  surviving  pai-tner  is  a  necessary 
party  to  a  bill  in  equity  brought  by  the 
administrator  of  a  deceased  partner 
praying  that  a  previous  decree,  substan- 
tially releasing  a  partnership  debt,  may 
be  set  aside,  and  the  unpaid  balance  of 
th?  debt  decreed  to  him  as  administra- 
tor.    Wicldiffe  V.  Eve,  17  How.  468. 

The  surviving  partner  is  a  proper  co- 
defendant  to  a  bill  inequity  which  seeks 
to  enjoin  the  administratt  r  of  a  deceased 
partner  from  suing  the  complainant  at 
law.  upon  notes  given  in  unsettled  deal- 
ings between  complainant  and  the  de- 
ceased partner,  relating  to  partnership 
affairs,  and  to  compel  an  accounting  in 
respect  to  those  dealings.  Scott  v. 
Scott,  33  Ga.  102. 

A  bill  by  a  surviving  pavtnor  for  an 


CHAP.  X.] 


PARTIES. 


*87b 


I'lit  filthoui;])  in  an  action  for  obtaining  payment  of  a  proportion 
of  an  unascertained  sum,  all  the  persons  interested  in  ^pji^n  f^r 
that  sum  must,  as  a  general  rule,  be  parties,  yel^  where  ^Ssu^^*''" 
the  sum  to  be  divided  is  ascertained,  and  the  shares  into 
which  it  is  to  be  divided  are  also  ascertained,  an  action  for  the  pay- 
ment of  one  of  those  shares  may  be  maintained  without  making 
the  persons  interested  in  the  other  shares  parties.  («)* 

So,  where  the  account  which  is  sought  is  one  in  which  gub-partner- 
the  ]>artnership  is  not  concerned,  it  is  not  necessary  or  ^^'p- 
proper  to  make  all   the  ])artners   parties.     If,  therefore,  a 
partner  has  *agreed  to  share  his  profits  with  a  stranger,  and     *S79 
the  latter  seeks  an  account  of  those  profits,  he  should  bring 
his  action  against  that  one  partner  alone,  and  not  make  the  others 
parties,  (y)     Where,  however,  an  "equitable  mortgagee  of  a  share 
in  a  mine  which  the  mortgagor's  co-partners  had  a  right  to  buy 
brings  an  action  for  /oreclosure,  all  the  partners  ought  to   be  par- 
ties. (2) 


account  and  to  enforce  his  equities 
against  land  owned  bj'  the  firm,  bj-  a 
jiale  thereof,  and  for  payment  of  the 
balance  due  him  b\-  the  administrator, 
projwrly  joins  both  the  heir  and  the  ad- 
ministrator as  defendants.  Dilworth  r. 
Mayfield,  36  Miss.  40.  See.  also,  Can- 
non V.  Copeland,  43  Ala.  201. 

Where  a  part  of  real  estate,  belong- 
ing to  a  partnership,  was  sold  by  the 
guardian  of  the  heir  of  the  partner  in 
possession:  Held,  that  the  administra- 
tor of  such  heir,  after  his  death,  was  a 
proper  party  to  a  suit  in  equity  by  the 
other  partner  to  recover  his  share  of  the 
proceeds.  McGuire  v.  Ramsey,  9  Ark. 
518. 

Where  complainant  in  chancery,  -who 
sues  as  administrator  of  a  decea-sed  part- 
ner, praying  an  account  of  partnership 
conceiTif',  alli'gos  in  his  bill  that  he  is 
the  sole  heir  of  the  deceased  partner,  the 
fact  that  he  is  not  does  not  make  the 
bill  abate  for  want  of  necessary  pai-ties, 
since  a  decree  in  his  favor  as  adminis- 
trator would  not  interfere  with  the 
rights  of  others  who  might  claim  a  dis- 
tribution, after  the  complainant  receiv- 


ed the  money  decreed  to  him.  Moore 
V.  Huntington,  17  Wall.  417. 

Whi^ro  a  partner  in  a  right  of  pre- 
emption to  a  lot  of  land  neglects  or  re- 
fuses to  join  his  co-partner  in  obtaining 
an  allowance  of  their  claim,  his  heirs 
cannot  come  into  equity  for  a  division  of 
such  lot  afr<^r  such  co-partner  has  se- 
cured it  all  to  h.imself.  Farber  v.  Levi, 
1  Morr.  (Iowa  I,  -372. 

(x)  See  Weymouth  v.  Bo5-er,  1  Ves. 
J.  416;  Smith  r.  Snow,  3  Madd.  10. 
Compare  Hills  r.  Nash,  1  Ph.  594. 

*  A  bill  in  equity  by  one  partner  against 
one  of  his  thr('(>  co-partners  to  recover 
one-fourth  of  $3,211,  alleged  to  have 
been  gotten  by  the  latter  three  by  mis- 
take in  the  dissolution  settlement,  is 
demurrable  for  non-joinder  of  the  two 
other  partners.  Johnston  v.  Freer,  51 
Ga.  313. 

(//)  Brown  r.  De  Tastet,  Jac.  284, 
Raymond's  case,  cited  by  Lord  Kldou 
in  K.r  parte  Barrow,  2  Rose.  2")5;  Bniy 
V.  Fromont,  (3  Madd.  5,  and  see  Killock 
r.  Gi-eg,  4  Russ.  285. 

(r)  Redraayne  r.  Forster,  2  Eq.  467. 

1155 


^S79 


PARTIES. 


[book  III. 


Again,  if  a  person  has  been  induced  by  the  fraud  of  tlie  defend- 
ant to  purcliase  si i ares  from  him,  he  is  entitled  to  brin_i^ 

Shares  pur-  l  '  , 

chased  on  the      ^n  actiou  for  a  return  of  the  purchase   money,  and  tor 

faith  of  lalse  '  '' 

statements.  j^j^  indemnity,  and  the  only  necessary  party  to  such  an 
action  is  the  person  who  sold  the  shares,  {a) 

Again,  where  persons  have  been  induced   by  fraud  to  subscribe 
to  a  bubble  company,  each  one  may  institute  an  action 

Bubble  com-  i       J '  ./ 

panies.  qjj  j^jg  own  behalf  against  those  who  have  fraudulently 

obtained  his  money,  for  a  return  thereof;  and  in  such  a  case  it  is 
not  necessary  that  the  other  persons  defrauded  should  be  parties  to 
the  action,  or  be  represented  therein.  (J) 

With  reference  to  the  question  of  parties  to  actions  for  the  re- 
^     ^     ,         scission  of  contracts  on  the  o-round  of  fraud,'  the  case 

Fraud  not  on  ^ 

piaintifif alone,  ^f  Macbridc  V .  Lindsay  (c)  is  of  considerable  impor- 
tance. There  the  plaintitf  had  been  induced  by  the  fraudulent  rep- 
resentations of  the  directors  of  a  chartered  company  to  become  a 
member  of  the  company,  and  he  filed  a  bill  against  the  company 
and  its.  directors,  praying  for,  amongst  other  things,  a  return  of  all 
moneys  paid  by  him  to  the  company,  with  interest,  and  for  an  in- 
junction to  restrain  the  making  of  further  calls  upon  him,  and  for  an 


(ff)  See  Stainbank  v.  Fernley,  9  Sim. 
556;  Mare  v.  Malachy,  1  M.  &  Cr.  559; 
Turner  v.  Hill,  Turner  v.  Tyacke,  Tur- 
ner u.  Borlase,  11  Sim.  1,  16,  17. 

(6)  Colt  V.  Woollaston,  2  P.  W.  154; 
Green  v.  Barrett,  1  Sim.  45;  Blain  v. 
Agar,  2  Sim.  289;  Cridland  r.  De  Mau- 
ley, 1  DeG.  &  S.  459. 

^  In  an  action  by  a  partner  against  his 
co-partner  to  obtain  a  dissolution  of  the 
partnership,  on  the  ground  of  a  fraudu- 
lent sale  of  the  property  of  the  partner- 
ship by  the  latter,  it  is  proper  to  make 
the  fraudulent  vendee  a  party.  Webb 
V.  Helion,  3  Robt.  625. 

Where  suit  is  brought  by  one  of  two 
partners  against  the  other,  to  obtain  an 
accounting  and  payment  of  a  balance 
justly  due  from  the  defendant  to  the 
plaintiff,  and  to  set  aside  as  fraudulent 
a  release  from  liability  as  such  partner, 
executed  by  the  plamtiff  to  the  defend- 
ant, a  third  person  who  has  fraudulent- 
ly and  without  consideration*  obtained 

1156 


from  the  defendant  portions  of  the  part- 
nership property,  may  also  be  made  a 
party,  in  order  to  subject  the  property 
so  held  by  him  to  the  payment  of  any 
balance  due  from  the  defendant  to  the 
plaintiff.  Wade  v.  Rusher,  4  Bosw. 
537 

Upon  a  bill  for  an  account  alleging 
that  complainant  sold  his  interest  in  a 
firm  to  one  of  the  membors  thereof  for 
less  than  its  value,  through  fraud  of  the 
vendee,  and  that  the  firm  has  been  dis- 
solved, the  third  partner  cannot  be  made 
a  party  defendant,  as  no  decree  can  be 
rendered  against  him.  Hu'sch  v.  Adler, 
21  Ark.  338. 

One  partner  who  brings  his  bill  for 
relief  against  a  note  fraudulently  ob- 
tained, should  join  as  defendant  his  co- 
partner who  participated  in  the  fraud 
on  him.  Williams  v.  Nicholson,  25  Ga. 
560. 

(c)  9  Ha.  574.  See,  also,  Seddon  v. 
Connell,  10  Shn.  58. 


CHAP.  X.]  ACTIONS   BETWEEN   PAETNEKS,    ETC.  *880 

indemnity  against  any  liability  in  respect  of  the  engagements  of  the 
company.  A  demurrer  to  this  bill  was  allowed,  on  the  ground  that 
the  fraud  of  which  the  plaintiff  complained  gave  him  no 
right  to  rescind  his  contract,  except  *a  right  common  to  *8S0 
himself  and  others  who  were  not  re])resentcd  in  the  suit. 
This  case  appears  to  the  writer  extremely  difficult  to  reconcile  witli 
others  in  which  false  prospectuses  have  been  issued,  but  obsonations 

1  •    1  II  11111  .•    ■•       on  Macbride ». 

in  wJjicli  nevertheless  one  shareholder  has  successfully   unAsay. 
maintained  a  suit  against  a  company  and  its  directors  for  a  rescis- 
sion of  his  contract  to  take  shares,  {d) 

Whether  in  an  action   against  the*  e.xecntor  of  a  partner  for  an 
account  lor  profits  made  by  wrongfully  employing  the  ^(.,1,,^ 
assets  of  the  deceased  in  the  business  of  a  firm  of  which  n*-'">'"^t  I'^^cu- 

tors  lur  iic- 

the  executor  is  a  member,  it  is  necessary  to  make  tlie  count  of  profits. 
other  members  of  the  firm  parties,  is  not  always  easy  to  decide. 
The  rule  appears  to  be  that  they  are  necessary  parties  if  the  ac- 
count sought  is  an  account  of  all  the  profits  made  by  the  use  of  the 
capital  of  the  deceased;  but  not  if  the  account  is  confined  to  so 
much  of  those  profits  as  the  executors  have  themselves  received,  [e) 
Although  a  person  may  have  no  interest  in  the  account  to  be 
taken,  and  would  therefore  be  an  improper  party  to  an  ^^^  ^^^ 
action  confined  to  such  account,  yet  if  an  injunction  is  "^e injunction, 
sought  to  be  obtained  against  him  specially,  he  must  be  made  a 
party.  For  this  reason,  the  bank  of  England  and  Sherifts  are  often 
made  parties  to  actions  in  which  they  have  no  real  interest.  {/) 

2.   Where  some  partners  may  sue  or  he  sued  on  lehaJf  of 
themselves  and  others. 

It  has  been  held   in   many  cases,  that  to  a  bill  praying  for  a  dis. 
solution  of  a   partnership,  all    the  partners,  however  someonbehuu 

...  1   .1      .  ,       of  themselves 

numerous,  are  necessary  parties,  and  that  consequently  and  others. 

(rf)  See,  for  example,  Kisch  r.  Cen-  "Wales,  on  the  other,   are  certainly  em- 

tral  Railway  of  Venezuela,  3  DeG.  J.  &  barrassing. 

Sm.  122,  and  Smith  r.  Reese  River  Co.  (c)  See  Vyse  r.   Foster,  8  Ch.   309, 

2  Eq.  264,  noticed  i>i//-rt,  under  the  head  and  L.    R.  7   H.   L.   318;   Simpson   v. 

Rescission  of  Contract.     As  to  actions  Chapman,  4  DeG.  M.  k  G.  154.     Coni- 

insuch  cases  by  one  shareholder  on  be-  pare  McDonald  r.  Richardson,  1  G iff.  81. 

half  of  himself  and  others,  see  Croskey  (/)  See,   for  example,    VuUiamy   c. 

.r  Bank  of  Wales.  4  Giff.  314,  noticed  Noble,  3  Mer.   o93;  Bevan  v.  Lewis,  1 

infra,  p.   8.'^9.    Macbride  r.   Lindsay,  on  Sim.  3TG. 

the  one  hand,  and  Croskey  v.  Bank   of  Mn  an  action  for  an  injimction,  and  a 

1157 


*SS1  PAKTIES SOME   ON    BEHALF,    ETC.  [bOOK  III. 

a  bill  filed  by  some  on  beluilf  of  themselves  and  othei-s,  and 
*881  praying  for  a  ^dissolution,  is  bad  on  demurrer,  {g)  This 
rule  is  supposed  to  admit  of  no  exception,  and  it  has,  though 
with  expressions  of  regret,  been  held  to  apply  to  unincori^o rated 
companies  as  well  as  to  ordinary  partnerships.  (A)  Tlie  reason 
given  for  the  rule  is,  that  the  affairs  of  a  partuer.-^hip  cannot  be 
finally  wound  up  and  settled  witliout  deciding  all  questions  arising 
between  all  the  partners,  which  cannot  be  done  in  the  absence  of 
any  one  of  them,  (i) 

Even  if  a  partnership  is  empowered  to  sue  and  be  sued  by  a  public 
Presence  of  officer,  his  presence  is  not,  in  an  action  for  a  dissolution, 
not^ufficie'^Dt.     equivalent  to  the  presence  of  all  the  partners,  {h) 

But  notwithstanding  these  numerous  authorities,  it  may  be  per- 
No  instance  of  mittcd  to  doubt  whether  it  can  be  considered  as  a  rule 
soTuUoifwhe're  admitting  of  no  exception  whatsoever,  that  to  every  ac- 
wLl^uKiore  tion  for  a  dissolution,  all  the  partners  must  individually 
the  court.  -^^  parties.  All  that  can  on  principle  be  requisite,  is  that 

every  conflicting  interest  shall  be  substantially  represented  by  some 
person  before  the  court.  If,  which  is  possible,  the  interest  of  each 
partner  conflicts  with  that  of  all  the  otliers,  then  all  must  undoubt- 
edly be  parties.  But  if  the  partners  are  numerous,  and  it  can  be 
shown  that  they  are  divisible  into  classes,  and  that  all  the  individ- 
uals in  each  class  have  a  common  interest,  then  although  the  inter- 
est of  each  class  conflicts  with  tliat  of  every  other  class,  there  seems 
to  be  no  reason  why,  if  each  class  is  represented  by  one  or  two 
individuals  composing  it,  a  decree  for  a  dissolution  should  not  be 

receiver  to  close  the  business  of  a  special  v.  Bignold,  8  ib.  343  ;  Deeks  v.  Stan- 
partnership  formed  under  the  statute,  hope,  14  Sim.  57;  Wheeler  v.  VanWart, 
on  the  ground  of  msolvency,  it  is  neces-  9  Sim.  193;  Long  v.  Yonge,  2  Sim.  369; 
saiy  to  bring  before  the  court,  as  parties,  Ireton  v.  Lewis,  Finch,  96;  Moffat  v. 
all  who  have  an  mterest  to  have  the  Farquharson,  2  Bro.  C.  C.  338. 
members  of  the  firm  retain  control  of  {h)  See  cases  in  last  note  and  Van- 
the  assets.  Where  one  of  the  special  Sandau  v.  Moore,  1  Russ.  441  ;  and 
partners,  is  deceased,  his  executors  or  ad-  Davis  v.  Fisk,  in  Farren  on  Life  Assur- 
niinistrator  should  be  joined  as  defen-  ances,  and  cited  by  counsel  in  Younge's 
dants.       Especially     should    they    be  Reports,  p.  425. 

brought  in  where  the  decedent  had  cove-  (/)  See    Richardson  v.    Hastmgs,    7 

nanted  that  the  partnership  should  con-  Beav.  307. 

tinue  for  a  term  of  years.     Walkenshaw  {k)  See  Van  Sandau  v.  Moore,  1  Russ. 

V.  Perzel,  4Robt.  (N.  Y.)  426;  32  How.  441;  Davis  v.  Fisk,  cited  in  You.  425; 

Pj._  233.  Abraham  v.  Hannay,  13  Sim.  581;  Seld- 

{g)  Evans  v.  Stokes,  1  Keen,  24;  Rich-  don  v.  Connell,  10  Sim.  58. 
ardson  v.  Hastings,  7  Beav.  301;  Harvey 
1158 


CHAP.  X.]  ACTIONS    BE'nVEEN    PAKTN'P:KS,    ETC.  *882 

made,  (l)    There  is  not,  *liowever,  so  fur  :is  tlio  writer  is  aware,     *SS2 
any  case  in  which  a  decree  fur  a  di,ssulntiun  has  actually 
been  made  in  the  absence  of  any  of  the  partners. 

In  an  action  not  claiming  a  dissolution,  the  question  of  parties 
turns  entirely  on  the  nature  of  the  right  sought  to  be  AcUonnotiu 

J  r?  o  terras  suc-kiiig 

enforced.  If  an  account  is  required,  and  it  is  one  in  a dissoimion. 
which  the  intere-t  of  each  partner  is  distinct  from  and  in  conflict 
with  that  of  all  the  others,  then  all  tlie  })artners,  liowever  numer- 
ous, must  be  parties,  and  their  representation  by  others,  or  by  a 
])ublic  officer  or  secretary,  will  not  be  sufficient.  (771)  On  the  other 
hand,  if  there  are  no  such  conliicting  interests  as  above  supposed, 
it  will  be  sufficient  if  each  distinct  interest  is  represented  by  a 
]jarty  to  the  record,  (/i) 

It  was  held  in  Walworth  v.  Ilolt(o),  that  where  partners  are  too 
numerous  to  be  lirouglit  before  the  Court,  and  they  are  Walworth  v. 
divisible  into  clas.-ts,  and  all  the  individuals  in  one  ^"^*- 
class  have  a  common  interest,  a  suit  instituted  by  a  few  individuals  of 
that  class  on  behalf  of  themselves  and  all  the  other  individuals  of  the 
same  class  a<;ainst  the  other  members  of  the  company,  is  sustainable. 
Since  this  decision,  there  have  been  many  suits  by  some  shait'lujld- 
ers  on  behalf  of  themselves  and  others,  praying  for  very  general 
accounts  (but  studiously  avoiding  a  prayer  for  a  dissolution),  and 
such  suits  have  been  successful  whenever  the  interest  of  the  absent 
partners  has  been  the  same  as  that  of  the  plaintiffs  on  the  record. 

For  example,  it  was   held  in   Apperley  v.   Page  (p),  that  a  bill 
might  be  tiled  by  some  of  the  shareholders  of  a  pro-  Appcrieyv. 
visionally    registered  railway   company   on    behalf  of  ^''^'^■ 

(?)  See  Richardson  v.  Larpont,  2  Y.  Abraham  r.  Ilannay,  13  ib.  581;   Mc- 
&  C.  C.  514,  and  the  observations  of  Alahon   v.    Upton,  2  ib.  473;  Sibley  i\ 
Lord  Cottenham  in  Walworth  r.  Holt,  4  Minton,  27  L.  J.  Ch.  53. 
M.    &  Cr.   &JO.      As  to  Cockburn  v.  (»)  Comp.  Harrison  v.  Brown,  5  De- 
Thompson,  16  Ves.  321,  see  the  obs.  of  G.  &  Sm.  728. 

V.-C.  Shadwell,  2  Sim.  380,  and  observe  {o)  4  M.  &  Cr.  619.  Cockburn  v. 
that  the  real  object  was  to  make  the  de-  Thomp.'^on,  16  Yes.  321,  is  an  earlier  de- 
fendants account  for  the  money  they  cision  on  this  point.  See,  too,  Good  v. 
had  received,  and  that  the  question  Wewitt,  13  Ves.  397.  See,  as  to  some 
as  to  want  of  parties  was  not  raised  on  behalf.  Sec,  in  Ciises  of  vohnitary  so- 
with  reference  to  that  part  of  the  cieties  assuming  to  be  corporations, 
prayer  of  tlie  biU  which  sought  a  disso-  Lloyd  r.  Loaring,  6  Yes.  773. 
lution.  (  p)  1   I'h.  779.       Compare  Sibson  r. 

(m)  See  Van  Sandau  v.  Moore,  1  Russ.  Edgeworth,  2  DeG.  &  Sm.  73. 


441;  Selddon  v.  ConneU,   10  Sim.   58; 


1159 


*8S3  PARTIES — SOME    ON    BEHALF,    ETC.  [bOOK  III. 

themselves  and  all  the  other  shareholders,  except  the  defendants, 
against  the  directors;  although  fhe  bill  prayed  not  only  for  the  ct>l- 

lection  of  the  joint  property  and  its  application  in  discharge 
*8S3     of  the  *  joint  liabilities,  but  also  for  the  distribution  of  the 

surplus  amongst  the  shareholders,  {q) 
"When  no  dissolution  is  claimed,  and  no  winding  up  of  the  ])art- 
Actionsnot        ncrsliip  is  sought,  an  action  may  be  properly  instituted 

seeking  divis-  r>  \  ./  r      i        ./ 

ion  of  assets.  by  some  01  a  number  of  numerous  partners,  on  behalf 
of  themselves  and  all  others  whose  interest  is  identical  with  their 
own;  and  this  form  of  action  is  constantly  adopted  wdiere  numerous 
partners  seek  to  make  their  managers  account  for  secret  benefits 
and  advantages  obtained  by  them  in  breach  of  the  good  tkitli  owing 
to  those  whose  affairs  they  conduct  {r)\  or  to  rescind  contracts  into 
which  the  partnership  has  been  induced  to  enter  by  false  and 
fraudulent  representations,  {s)  So  in  the  case  of  mutual  insurance 
societies  and  friendly  societies,  one  member  may  sue  the  trustees  or 
committee  and  one  of  each  class  of  members  as  representing  all  the 
other  members,  where  the  object  of  the  action  is  to  obtain  payment 
of  what  is  due  to  the  plaintiff,  {t) 

Again,  for  the  purpose  of  rescinding  an  agreement  illegally  en- 
Actionsto  tered  into  by  the  directors  of  an  unincorporated  com- 
torrt-ronfim-'  P^'^J^  o**  ^^^  the  purpose  of  restraining  them  from 
proper  acts.  doiug  that  which  is  illegal,  an  action  may  be  instituted 
by  one  shareholder  on  behalf  of  himself  and  all  the  others,  except 
the  defendants,  against  those  directors.  Thus  in  Gray  v.  Chap- 
lin {ii)^  it  was  held  that  one  of  the  shareholders  of  a  company 
was  entitled  to  file  a  bill  on  behalf  of  himself  and  other  sharehold- 
ers, to  set  aside  an  agreement  entered  into  by  the  managers,  con- 
trary to  the  company's  act  of  Parliament;  because  whatever  bene- 
fits might  be  reserved  to  the  shareholders  by  the  agreement,  they 

iq)  See,  for  other  instances,  Cramer  v,  Hichens  v.  Congreve,  4  Russ.  562;  Tay- 

Biid,  6  Eq.  143;  Wilson  v.  Stanhope,  2  lor  v.  Salmon,  4  M.  &  Cr.  134;  Beckk 

Coll.  629;   Harvey  «.  Collett,  15  Sim.  Kantorowicz,  3  K.  &  J.  237. 

332;  Cooper  v.  Webb,  ib.  454;  Clements  (s)  See  Small  v.  Attwood,  You.  407. 

V.  Bowes,  17  Sim.  167,  and  1  Drew,  684;  {t)  See  Pare  v.  Clegg,  29  Beav.  589; 

Richardson  v.  Hastings,  7  Beav.   323;  Bromley  v.  Williams,  32  ib.  177;  Har- 

Butt  V.  Monteaux,  1  K.  &  J.  98;  Shep-  vey  v.  Beckwith,  2  Hem.  &  M.  429. 

pard  V.   Oxenford,   ib.   491;   Sibson  v.  [u)  2  Sim.  &  Stu.    267,  reversed   on 

Edgeworth,  2  DeG.  &  S.  73.     Compare  appeal,  on  the  ground  of  delay  and  ac- 

Williams  v.  Salmond,  2  K.  &  J.  463.  quiescence,  2  Russ.  126. 

{)■)  Chancey  v.  May,  Free,  in  Ch.  592; 

1160 


CHAP.  X.]  PARTIES — SOME   ON    BEHALF,    ETC.  *885 

*\vere  all  to  be  considered  as  interested  in  liaving  the  direc-     *>^ 4 
tions  of  the  act  complied  with. 

AVhere  a  company  is  incorporated,  and  its  directors  or  some  share- 
holders have  done  or  are  doinj;  that  which  other  share-    wh.rcc.m 
holders  disapprove,  and  bnn^  an  action  to  redress  or  puratc-o. 
prevent,  the  followinij  rnles  are  to  he  observed: — 

1.  If  the  matter  complained  of  is  one  which  gives  a  rii^lit  of  action 
to  the  company  as  a  collective  whole,  the  company  oncfht  to  sue  in 
its  corjiorate  name,  and  an  action  by  one  member  on  behalf  of  hiiii- 
self  and  others  is  impro])er,  (x) 

2.  Again,  if  the  complaint  relates  to  some  matter  of  internal  man- 
agement as  to  which  a  majority  is  competent  to  decide,  the  action 
should  be  bronght  In'  the  majority  in  the  name  of  the  company,  (i/) 

3.  But  if  those  who  have  the  management  of  the  alfairs  of  the 
company  will  not  bring  an  action  in  its  name  when  the  sharehold- 
ers require  it,  having  a  right  so  to  do,  or  if  directors  or  shareholders 
have  done  or  are  about  to  do  that  which  is  wrong,  even  if  sanctioned 
by  a  majority,  then  an  action  by  some  of  the  members  on  behalf  ot 
themselves  and  others  may  be  sustained;  for  otherwise  the  dissen- 
tients would  be  without  redress,  (s)  In  suits  thus  constituted,  courts 
of  equity  have  compelled  directors  to  account  for  moneys  impro])- 
ev\y  a]>plied  (a);  have  declared  resolutions  fraudulent  and  void(7y); 
have  restrained  the  carrying  out  of  agreements  under  the  seal  of  the 
company  (<?);  restrained  the  application  of  the  funds  of  a  company 
to  unauthorized  purposes  {d),  e.g.^  defraying  the  expense  of 
a])plications  to  Parliament  (e);   restrained  the  ^construction     *S85 

(t)  Gray  r.  Lewis,  8  Ch.  10.35;  Rus-  (//)  Preston  r.  GrdiKl  Collier  Dock  Co. 

sell  V.  Waketield  Waterworks  Co.   20  11  Sim.  ;t27. 

Eq.  474.  (CI  .Miuiiiscll  r.  Midland  Groat  West- 

(//)  McDoug-ali  V.  Gardiner,  1   Ch.  D.  erii  (Ir.'huid)  Kail.  Co.    1  Hem.  &  M. 

1.3;  Mozlcy  r.  Alston,  1  Ph.  790;  Foss  v.  130. 

Harljottle,  2  Ha.  461.  ((/)  Colman  r.  Eivstem  Counties  Rail. 

{z)  See  the  last  two  notes  and  the  Co.  10  Beav.  1;  Salomons  v.  Laing,  12 
cases  infra.  See  Duckett  v.  Gover,  6  }3eav.  339  and  377;  Munt  i\  Shrewsbun- 
Ch.  D.  82,  where  the  phxintiff  was  al-  and  Chester  Rail.  Co.  13  Beav.  1;  Bag- 
lowed  to  amend  by  adding  the  company  shaw  r.  P'astem  Union  Rail.  Co.  7  Ha. 
as  a  plaintill"  imder  Order  xvi.,  Rule  2.  114,  and  2  Mac.  &  G.  389;  Simpson  r. 
This  ciise  is  important,  as  the  plaintiff  Pt'iiison.  10  Ha.  51;  Vance  r.  Eiust  L;in- 
had  no  authority  from  the  company  to  cas.  Hail.  Co.  3  K.  k  J.  .50. 
use  its  name.  {<■)  See  the  last  two  cases,  and  Lj-der. 

(rj)  Bryson  r.  Warwick  Canal  Co.  4  East  Bengal  Rail.  Co.  30  Beav.  10. 
DeG.  M.  ct  G.  711. 

1101 


*886  ACTIONS    BETWEEN    PARTNERS,    ETC.  [boOK  III. 

of  part  of  a  railway  instead  of  the  whole  of  it  (,/);  restrained  tlie 
improper  declaration  of  dividends  (g)\  set  aside  an  imj^roper  for- 
feiture of  shares  (A);  restrained  the  traiisfer  of  tlie  business  of  one 
company  to  another  company  (^) ;  set  aside  agreeraen  ts  for  sncli  traiis- 
fer  (/fc);  set  aside  fraudulent  purchases  {l)\  restrained  loans  to  di- 
rectors {in)\  restrained  a  division  of  assets  amongst  a  m  ijority  of 
members  to  the  exclusion  of  tlie  rest,  (/z-) 

An  action  by  one  member  on  behalf  of  himself  and  others  may 
even  be  maintainable,  wliere  an  action  with  like  objects  would  fail 
if  instituted  by  the  company  in  its  corporate  capacity;  e.  g.,  where 
the  complaint  is  of  fraud  imputable  to  the  company  as  a  body,  but 
not  imputable  to  the  members  individually,  {p) 

In  such  cases  as  the  foregoing,  the  company,  as  such,  is  a  proper 
Company  and  party,  becausc  it  is  the  company  as  such  which  is  sought 
er'^paruesm'^^'   to  be  afFectcd  by  the  judgment  of  the  Court  {p)\  and 

such  cases.  ,i         t         ,  ■      ^•     •  ^       ^^  u-  i 

the  directors  individually  are  proper  parties,  because 
they  are  the  j)ersons  to  be  affected  in  the  first  instance,  and  some 
judgment  against  them  personally  is  also  usually  necessary.  If, 
however,  a  judgment  against  the  company  is  all  that  is  required, 
there  is  no  necessity  to   make   the  directors  parties   individually. 

Thus,  where  a  suit  was  instituted  for  the  purpose  of  prevent- 
*886     ing  a  *company  trom  delegating  its   powers  and,   in   fact, 

transferring  its  business  to  another  company,  a  bill  by  one 
of  the  shareholders  in  the  first  company,  on  behalf  of  himself  and 
all  the  other  shareholders  therein,  against  botli  companies,  was  held 

if)  Cohen    v.   Wilkinson,    12  Beav.  Rail.  Co.   5  Jur.  N.   S.   1096;   Hare  v. 

125,  and  1  Mac.  &  G.   481.  Hodgson  r.  London  and  N.-W.  Rail.  Co.  IJ.  &  H. 

Powis,  12  Beav.   392  and  529,    and   1  252,   which   shows  that  the  company 

DeG.  M.  &  G.  6.  which  has  agreed  to  take  the   business 

ig)  Bloxam  v.  MetropDlitan  Rail.  Co.  ought  to  be  a  party. 

•S  Ch.  337;  HooleiJ.  Great  Western  Rail.  {k)  Clinch  ».  Financial  Corp.    5  Eq. 

Co.   ib.  262;   Dumville  v.  Birkenhead,  450,  and  4  Ch.  117. 

&c.,  Rail.  Co.    12  Beav.  444;  Carlisle  i\  {I)  Atwool  v.   Merryweather,   5  Eq. 

South-Eastern  Rail.    Co.    1  Mas.  &    G.  464,  note. 

6S9;  Hemy  v.  Great  Northern  Rail.  Co.  (m)  Bluck  v.  Mallalue,  27  Beav.  398. 

4  K.  &  J.  1,  and  1  DeG.  &  J.   606.     As  (?0  Menier  r.  Hooper's  Telegraph  Co. 

to  actions  to  restrain  the  payment   of  9  Ch.  350. 

dividends  actually  declared,  see  infra,  (o)  See  the  observations  of  Lord  Cot- 

p.  888.  tenham  in  Vigers  v.  Pike,  8  CI.  &   Fin.' 

{h)  Sweny  v.  Smith,  7  Eq.  324.  647,  648. 

(i)  Beman  v.  Rufford,  1    Sim.   jST.  S.  {p)  See    Bagshaw    v.    The  Eastern 

550;  Charlton  v.  Newcastle  and  Carlisle  Union  Rail.  Co.  7  Ha.  114. 

1162 


CHAP.  X.J  PARTIES — SOME   ON    BEHALF,    ETC.  *S87 

])roper  in  point  of  form,  altliou^li  none  of  the  directors  of  eitiier 
company  were  parties  in  person,  (q) 

The  cases  above  referreJ  to  show  that  it  is  competent  for  one 
shareholder  to  institute  an  action  on  behalf  of  himself  Actions  i.y 
and  co-shareholders,  for  the  purpose  of  obtaining  relief  tocmtn^u 
in  respect  of  illegal  acts  done  or  contemplated  by  di- 
rectors; moreover,  an  action  in  tliis  form  is  sustainable  to  prevent  or 
set  aside  a  transaction  which  is  a  fraud  by  a  majority  on  a  minority  (?•); 
but  courts  will  not  interfere  in  actions  so  constituted,  if  the  relief 
sought  is  in  respect  of  acts,  the  legality  or  illegality  of  which  de- 
pends on  the  voice  of  a  majority  of  the  shareholders,  who  are  n<»t 
themselves  chargeable  with  fraud,  (s)  If  such  last-mentioned  acts 
are  sanctioned  by  the  majority,  the  Court  cannot  interfere  at  all,  and 
if  they  are  not  so  sanctioned,  the  majority  shuuld  themselves  api)ly 
to  the  Court,  and  institute  proceedings  in  the  name  of  the  com- 
])any.  (t)  If  it  is  thought  necessary  to  bring  an  action  before  the 
views  of  the  majority  are  known,  or  if  the  majority  are  too  indifier- 
ent  to  take  any  ])roceedings  to  enforce  obedience  to  their  own  resolu- 
tions, the  pro])cr  course  to  be  taken  by  those  who  determine  to  appeal 
to  the  Court  is  to  take  upon  themselves  the  responsibility  of  bring- 
ing an  action  in  the  name  of  the  company.  Such  an  action  will  not 
be  stayed  unless  it  a])])ears  that  the  majority  disap])rove  it.  (u) 

*When  an  action  is  brought  by  some  shareholders  on  be-     *8S7 
half  of  themselves  and  others,  it  should  appear  in  the  state- 
ment of  claim, (1),  that  the  plaintiffs  are  shareholders  (x);   Frame  of  ac- 
and,  (2),  that  they  are  suing  on  behalf  of  themselves  ou  uhair,  .i:c. 

{q)  Winch  v.  The  Birkenhead,  Lane.  wards  v.  Tlie  Shrewsbury  and  Birm. 

and  Chesh.  RaU.  Co.  5  DeG.  &  Sra.  562.  Kail.  Co.  2  DeG.  &  Sm.  537:  Yetts  v. 

(r)  Atwool  V.  Merryweather,   5  Eq.  The  Norfolk  Rail.  Co.  3  ib.  293;  Stevens 

464;  Menier  v.  Hooper's  Telegraph  Co.  v.  The   South  Devon  Rail.   Co.   9   Ha. 

9  Ch.  350.  313.     See  iufra,  p.  895,  et  seq. 

is)  McDougaU  v.  Gardiner,  1  Ch,  D.  it)  McDougall  v.  Gardiner,  1  Ch.  D. 
13;  Russell  V.  Wakefield  Waterworks  13;  Mozley  r.  Alston,  1  Ph.  790. 
Co.  20  Eq.  474;  Foss  v.  Harbottle,  2  (»)  The  Exeter  and  Crediton  Rail. 
Ha.  461;  Mozley  v,  Alston,  1  Ph.  790  ;  Co.  i .  Buller,  5  Ra.  Ca.  211,  where  the 
Lord  V.  The  Governor  and  Co.  of  Cop-  bill  was  filed  in  the  name  of  the  conipa- 
per  Miners,  2  Ph.  740;  Bailey  v.  The  ny,  although  the  defendants  had  posses- 
Bhkenhead,  Lanca.'.,  and  Cheshire  sion  of  the  seal.  See,  also.  East  Pant 
Junction  Rail.  Co.  12Beav.  ^^33;  Browne  du,  &c..  Mining  Co.  v.  Merryweather,  2 
r.  The  Monmouthshire  Rail,  and  Canal  Hem.  &  M.  254;  Atwool  v.  Merry- 
Co.  13  Beav.  32;  Kent  r.  Jackson,  14  weather,  5  Eq.  464. 
Beav.  307,  and2DeG.M.&G.  49;  In-  (.r)  Banks  r.  Parker.  16  Sim.  176; 
derwick  v.  Snell,  2  Mac.icG.  216;   Ed-  Walburu  v.  IngUby,  1  M.  &.  K.  61. 

1163 


*888  ACTIONS   BETWEEN    PARTNERS,    ETC.  [iJOOK  III. 

nd  others.  If  this  last  does  not  appear,  tlie  action  will  be  treated  as 
that  of  the  ostensible  plaintiffs  alone,  {y)  But  any  one  shareholder 
can,  it  is  said,  maintain  an  action  against  a  company  to  restrain  an 
illegal  act  (s);  and  if  a  plaintiff"  sues  alone  when  he  ought  to  sue  on  be- 
half of  himself  and  others,  an  amendment  would  probably  be  allowed. 
Moreover,  if  there  are  conflicting  interests,  care  must  be  taken 
Conflicting  ^o  have  each  separate  interest  substantially  represented 
interest.  j^^   some   pcrsou   wlio   is   a   party  to   the   action,  (s) 

Therefore,  where  there  is  a  dispute  about  a  call  which  some  share- 
Actions  to  re-  holders  have  paid  and  others  have  not,  those  who 
have  not  paid  cannot  sustain  an  action  on  behalf  of 
themselves  and  those  who  have  paid,  against  the  directors,  trustees, 
and  secretary  of  the  company,  for  a  general  account  of  the  part- 
nership debts  and  assets,  and  to  have  the  property  of  the  concern 
applied  in  discharge  of  its  liabilities.  To  an  action  with  such  ob- 
jects, some  at  least  of  the  class  of  shareholders  who  have  paid  the 
call  ought  to  be  made  parties,  {a)  Again,  with  respect  to  actions 
Actions  to  re-     to  restrain  the  improper  payment  of  a  dividend,  it  is 

strain  payment  i        i  i     ./  7 

of  dividends,  to  be  remembered  that  the  declaration  of  a  dividend 
confers  on  each  shareholder  a  legal  title  to  his  share  of  it;  and,  con- 
sequently, even  although  the  dividend  may  have  been  improperly  de- 
clared, payment  of  it  will  not  be  restrained  in  an  action  by  one 
*888  shareholder  against  the  company  and  its  directors  *only.  On 
these  grounds,  in  Carlisle  v.  South-Eastern  Railway  Com- 
pany, an  injunction  to  restrain  the  payment  of  a  dividend  already 
declared  was  refused,  although  an  injunction  to  restrain  the  future 
declaration  of  dividends,  except  out  of  profits,  was  granted,  (i^) 

These  cases  are  sufficient  to  show  that,  in  order  that  an  action 
idenityof  maybe  sustainable  by  one  or  more  persons  on  behalf 
interests.  ^j^  tliemselves  and  others,  it  is  essential  that  the  intei-- 

[ij]   Baldwin  v.  Lawrence,  2  Sim.   &  cases.     If  the  plaintiff  does  not  know 

Stu.  18;  Cooper  v.  Powis,  3  DeG.  &  S.  who  they  are,    see  Hodgldnson  v.  Na- 

688.  tional   Live  Stock  Insurance    Co.     26 

{z)  See  Hoole  v.  Great  Western  Eail.  Beav.  473,  and  4  DeG.  &  J.  422. 

Co.  3  Ch.  262.  {h)  Carlisle  t\  South  Eastern  Rail.  Co. 

(rt)  See  Richardson  v.  Larpent,  2  Y.  1  Mac.  &  G.  689.     See,  also,  Fawcett  '•. 

&  C.  C.  507;  Lovell  v.  Andrew,  15  Sim.  Laurie,  1   Dr.   &  Sm.    192.      Compare 

581;  Sharpe  v.  Day,  1  Ph.  771;  Lund  v.  Hoole  v.  Great  Western  Rail.  Co.  3  Ch. 

Blanshard.  4  Ha.  9;  and  see  Seddon  v.  262.  where  one  of  the  defendants  was 

Connell,  10  Sim.  58,  and  Abraham  r.  held  sufficiently  to  represent  others  in 

Hunnay,  13  ib.  581,    as  to  the  insuffi-  the  same  interest, 
ciency    of   the  public    officer  in  such 

1164 


CllXP.  X.]  PARTIES — SOME   ON    BKIIALF,    ETC.  *S89 

ests  of  the  plaintiffs  on  the  record,  and  of  those  others  whcun  tlicy 
assume  to  represent,  should  be,  in  a  judicial  point  of  view,  identical, 
and  be  proved  to  be  so  by  the  j)laintiffs.  (c)  Consecpiently  a  share- 
holder in  a  company  who  has  sold  his  shares,  and  has  no  longer  any 
interest  in  the  company,  caimot  sustain  an  action  on  behalf  of  him- 
self and  the  other  shareholders  for  an  account  of  the  dealings  and 
transactions  of  the  company  or  of  its  directors,  and  to  liave  its  assets 
applied  in  discharge  of  its  liabilities.  For,  whether  he  is  or  is  not 
still  under  liabilities  from  which  he  is  entitled  to  be  freed,  he  has 
no  right,  having  sold  all  his  intei-est  in  the  company,  to  assume 
to  rej)rosent  those  with  whom  he  has  no  longer  anything  to  do.  (d) 
Upon  the  same  principle  it  has  been  said,  that  a  sharehohler  who 
is  a  mere  trustee,  having  no  beneficial  interest  in  the  company,  is 
not  a  proper  person  to  sue  on  behalf  of  himself  and  other  share- 
holders, {e) 

Neither  can  an  action  by  one  shareholder  on  behalf  of  himself 
and   others   be  maintained  bv  a   person  who  does  not   Plaintiff  a 

'■  niinuiK'o  of  a 

honestly  rejiresent  the  interests  of  his  co-shareholders,  rival (joiupuuy. 
but  who  is  the  nominee  of  a  rival  companv.  (y)     A  bill  by 
such  a  ^plaintiff  has  even  been  taken  off  the  file,  (g)     But     *8S0 
the  mere  circumstance  that  the  ]>laintiff  has  bought  a  share 
recently  to  enable  himself  to  bring  an  action,  does  not  warrant  the 
Court  in  dismissing  it.  (//) 

It  was  at  one  time  considered  that  a  suit  by  one  person  on  behalf 
of  himself  and  others  was  not  sustainable  unless  the  in-  j^j^^j  ^^  -^  ^f 
jury  of  which  he  complained  was  such  as  to  give  him   »^'»^"- 
and  them  a  right  to  sue  jointly,  and  that  it  was  not  sufficient  tiiat 
each  should  have  a  right  to  sue  separate!}':  and  accordingly  it  was 

(c)    See,   further,    Ward   v.   Sitting-  (d)  Doyle  v.  Muntz,  5  Ha.  509. 

bourne  and  Shoerness   Rail  Co.  9  Ch.  (e)  lljid.  sed  qiKere. 

488;  Clayr.  Rutlbrd,  8  Ha.  281;  Wil-  (/)  Forrest  r.  Manchester,  &c.  Rail, 

liarasr.  Salinond.  2K.  &  J.463;Sibson  Co.  4  DoG.  F.   &  J.   126.      See.   also, 

r.  Edgeworth,  2  DoG.  &  S.  73;  in  which  Hare  r.    London  and   North  We.stern 

case  the  defendant  pleaded  that  the  in-  Rail.  Co.  1  J.  &  H.  2")2,  and  Thom;\s  r. 

teresta  of  the  plaintitf  and  those  he  as-  Holjler,  4  De(j.  F.  &  J.  199. 

auraed  to  represent,  were  not  identical.  (//)  Robson  r.  Dodds,  8  Eq.  301. 

See,  also,  Thomas  v.  Hobler,  4  DeG.  F.  (/<)  Bloxani  r.  Metropolitan  Rail.  Co. 

<fe   J.    199;  which  shows    that  if   the  3  Ch.  'XM;  Seaton  r.  Grant,  2  Ch.  4o9. 

plaintiff   makes    an    alternative    ca.se,  See,    further,   on  this   subject,    On-  r. 

neither  alternative  must  be  opposed  to  Glasgow,  &'c.  Rail.  Co.  3  McQu.   799; 

the  interests  of  those  whom  he  assumes  Rogei-s  r.  0>:ford,  Sec.  Rail.  Co.  2   DeG 

to  represent.  k  J.  GG2. 

1165 


*890  ACTIONS   BETWEEN    PARTNERS,    ETC.  [bOOK  III. 

held  that  where  persons  having  no  previons  connection  with  eacli 
other  had  been  induced  to  subscribe  to  a  loan  or  for  sliares  in  a  corn- 
Actions  for        pany  by  fraud,  a  suit  by  one  of  them  on  behalf  of  liim- 

rccovorv  of  i        j       j  •> 

subscriptions     self  and  otlicrs  to  obtain  a  return  of  their  subscriptions 

in  cnses  of  .,.         ■,   ,  ■,  ■,         ., 

fraud.  could  uot  be  Sustained :  tor  although  each  subscriber  was 

entitled  to  have  his  money  back,  the  subscribers  had  no  joint  right 
of  action,  {i)  But  in  another  case  the  contrary  was  decided  (A-);  it 
being  considered  that  the  subscribers  to  a  cora]iany  had  such  a  com- 
munity of  interest  in  the  funds  subscribed  as  to  entitle  them  to  sue 
jointly  for  their  return.  (^)  Practically  this  point  is  not  now  of 
much  importance,  owing  to  the  modern  rule  as  to  mis-joinder  of 
plaintiffs,  (m) 

An  action  by  one  or  more  persons  on  behalf  of  themselves  and 
Further  obser-   Others,  may  be  instituted  without  the  consent  of  such 
Uonsby'some'    othcrs  (??-);  and  even  against  their  consent  if  the  ob- 
ject of  the  action  is  to  prevent  or  obtain  redress  in  re- 
spect of  an  illegal  act.  (o)     But  an  action  by  one  or  more  on 
*890     behalf,  etc.,  is  the  *action  of  those  who   are  named  on  the 
record  as   plaintiffs,  and  whatever  is  a  defense  as  against 
them  is  a  defense  to  the  action,  whatever  might  have  been  the  case 
if  other  persons  had  been  plaintiffs  on  the  record.  { p) 

AVhere  an  action  is  instituted  by  one  member  of  a  company  on 
behalf  of  himself  and  others  for  the  protection  of  the  funds  of  the 
company  and  the  action  is  successful,  the  plaintiffs  are  only  enti- 
tled to  their  costs  as  between  party  and  party,  although  in  one 
sense  the  funds  out  of  which  those  costs  are  to  be  paid  belong  to 
the  plaintiffs  themselves,  {q) 

(?)  Jones  V.  Garcia  del  Rio,  Turn.  &  (o)  White  r.  Carmarthen  Rail.  Co.  1 

Rnss.  297;  Croskey  v.  Bank  of  Wales,  4  Hem.  <fe  M.  786.     See,  also  Bloxam  r. 

Giff.  314.     See,  also,  Hallows  v.  Femie,  Metropolitan     Rail.    Co.    3    Ch.    337. 

8  Ch.  467.  Compare  Lund  v.  Blanshard,  4  Ha.  299. 

{k)  See  Beeching  v.  Lloyd,  3  Drew.  {p)    Burt  i\  British  Nation  Insur.  Co., 

314,  where  the  demurrer  was  overruled.  nhi  supra,  where  the  plaintiff  was  held 

This  case,  although  prior  to  Croskey  v.  barred  by  his  own  acquiescence  in  the 

Bank  of  Wales,  was  not  cited  in  it.  matters  complained  of.     See,  too,  Scarth 

[1)  See  the  last  note.  v.  Chadwick,  14  Jur.  300,  where  the  de- 

(wi)  See  infra,  p.  890.  fendants  got  rid  of  the  suit  by  paj-ing 

{n)  Burt  V.  British  Nation  Assur.  Co.  the     plaintiff    all     that    he    was    en- 

5  Jur.  N.  S.  555,  affirmed  on  appeal,  4  titled  to. 

DeG.  &  J.  158;  Williams  v.  Salmond,  2  (g)  Morgan  v.   Great  Eastern  Rail. 

K.  &  J.  463.  Co.  1  Hem.  &  M.  560. 
116G 


CHAP.  X.]  ACTIONS    BY    AND    AGAINST    PUBLIC    OFFICKRS.  *S91 

Accounts  taken  in  an  action  hy  one  shareholder  on  belialf  of  him- 
self and  others  hind  all  of  them,  (r) 

It  seems  that  unless  there  are  twenty  persons  at  least  whose  in- 
terests are  tlie  same,  one  or  mure  of  tliem  will  not  he  allowed  to 
represent  the  others,  (s) 

Before  quitting:  this  part  of  the  subject,  it  is  necessary  to  notice 
the  important  rule  relatini^  to  the  misjoinder  of  parties,    jf js;oin.ier of 
Formerly,  if  a  hill   was^lilcd    hy  some  on   behalf  of  pi'''"'*"^. 
themselves  and  others,  and   it  turned  out  that  any  of  the  persons 
thus  included  as  plaintills  had  no  rii,dit  to  sue,  or  had  interests  con- 
flicting with  that  of  the  plaintiffs  on  the   record,  the  bill   was  dis- 
missed (^);  but  now  the  Court  has  j.ower  to  grant  relief  and  to 
modify  its  decree  according  to  the  s]iecial  circumstance  of  the  case, 
and  for  that  purpose  to  direct  amondnients,  and  to  treat  any  one  or 
more  of  the  plaintiff's  as  if  he  or  they  was  or  were  a  defendant  or 
defendants  to  the  action,  and  the  remaining  plaintiff  or  plaintifls 
was  or  were  the  only  plaintiff  or  plaintiffs  on  the  record,  {u).     Ac- 
cordingly if  an  action  is  brought  by  one  shareholder  on  be- 
half of  himself  and  others,  *and  it  appears  that  the  interest     *s!tl 
of  some  of  the  persons  thus  re])rescnted    is  different  from 
that  of  the  plaintiff,  the  action  may  nevertheless  be  sustained,  (a*) 

3.  Of  actions  hy  and  against  puhUc  officers. 

Upon  the  ground  that  the  public  officer  of  a  company  only  rep- 
resents the  shareholders  as  a  collective  whole,  and  not  Representation 

,       of  parties  by 

any  one  or  more  of  them  as  against  the  others  (y),  it  pubuc  officer*. 
was  twice  held  by  Lord  Eldon,  that  a  suit  for  the  dissolution  of  a 
company  empowered  to  sue  and  be  sued  by  its  secretary  was  defec- 
tive for  want  of  parties,  although  tlie  suit  was  instituted  by  one 
shareholder  on  behalf  of  himself  and  others,  against  the  secretary 
and  the  directors   of  tlie  company,  {z)     In   tracing  the  history  of 

(r)  See  Singleton  v.  Sehvj-n,  9  Jur.  N.  Vict.  c.  S6,  §  40. 

S.  1149.  (.T)  Hallows  v.   Femie,    3  Ch.   407; 

(s)   See  Harrison   v.   Stewardson,   2  Jones  r.   Rose,  4  Ha.  52.     See,   too. 

Ha.  530;     But  see  Fripp  r.  Chard  Rail.  Clements  r.  Bowes.  1  Drew,  634;  Sturp- 

Co.  11  Ha.  258.  »'•  The  Eastern  Union  Rail.  Co.  7  Did. 

(0  In  Spittal  r.  Smith,  Taml.  45;  the  M-  ^  <-^- 1^0.  181. 

bill   was  dismissed   as  to  some  of  the  (.'/)  See  anie,  p.  873. 

plaiiititls  only.  (-1  I'avis  r.  Fisk,   cited  in  You.  425; 

(i(J  See  Ord.  xvi.  r.  \'.\,  tuid  15  and  16  and  Van  Sandau  r.  Mooiv.  I  Ifiiss.  441. 

IICT 


*892  ACTIONS   BETWEEN   PARTNERS,    ETC.  [bOOK  III. 

joint-stock  companies  in  the  celebrated  case  of  Van  Sandau  v. 
Moore,  Lord  Eldon  prominently  alluded  to  the  inability  of  a  pub- 
lic officer  to  represent  the  company  in  suits  between  its  mem- 
bers («),  and  tliis  doctrine  was  carried  out  to  its  full  extent  by  the 
late  Y ice-Chancellor  Shadwell  {h)  who  held  (c)  that  neither  the  act 
of  Y  Geo.  4,  c.  46,  nor  tlie  subsequent  act  of  1  &  2  Vict.  c.  96,  em- 
powered the  public  officer  to  represent  all  the  meinborsof  the  com- 
pany except  one,  in  a  suit  between  him  and  them  as  members.  But 
notwithstanding  these  authorities  an  action  may  be  instituted  by 
the  public  officer  of  a  company  against  some  of  its  members,  if  the 
question  in  dispute  is  one  between  the  company  as  a  collective 
whole,  on  the  one  side,  and  those  individual  members  on  the  other; 
and  it  has  accordingly  been  held  that,  under  the  Joint-stock  banking 
act,  7  Geo.  4,  c.  46,  it  is  competent  for  a  public  officer  of  a  com- 
pany governed  by  tliat  act,  to  sue  the  directors  of  the  com- 
*892  pany  for  the  purpose  of  making  them  account  for  ^-'breaches 
of  trust  and  mismanagement;  and  in  such  an  action  none 
of  the  shareholders  need  be  parties,  although  the  coni])any  lias 
ceased  to  carry  on  buiness,  except  for  the  purpose  of  winding  up  its 
affairs,  {d)  So  the  public  officer  is  tlie  proper  person  to  sue  a 
shareholder  for  calls  made  payable  by  him  to  the  company,  {e) 


4.  Actions  hy  and  against  incorjjorated  companies. 

An  incorporated  company  can  only  sue  and  be  sued  in  its  cor- 
Actionsbe-  poratc  name;  and  this  rule  applies  as  much  to  actions 
porated  cum-      bv  and  agamst  its  owu  members  as  to  actions   by  and 

panics  and  ',  ^,  .  ti«j_ii  iij 

their  members,  agamst  Other  pcrsous.  Accordmgly  it  has  been  held 
that  a  registered  joint-stock  com])any  can  support  an  action  against 
one  of  its  own  shareholders  for  damages  for  a  libel  on  the  company 


(a)  See  1  Russ.'  460    and  472,   and  expressed  in  Hughes  v.  Thorpe,  5  M.  & 

Hichens  v.  Congreve,  4  Russ.  562.  W.   656.     See,   too,   Ex  parte  Hall,  3 

(6)  In  McMahon   v.   Upton,  2  Sim.  Deac.  405.     As  to  other  companies,  see 

473;  Seddon  v.   ConneU;  10  Sim.   58;  Lawrence  v.  Wynn,    5  M.   &  W.  355; 

Abraham  v.  Hannay,  18  Sim.  581.  Skinner  v.  Lambert,  4  Man.  &  Gr.  477; 

(c)  In  Seddon  v.  ConneU,  10  Sim.  58.  WiUs  v.  Sutherland,  4  Ex.  211,  affirmed 

{d)   Harrison  v.   Brown,    5   DeG.    &  in  error,  5  Ex.  715,  in  each  of  which  an 

Sm.  728.  action  for  calls  by  a  public  officer  was 

(e)  See,  as  to  banking  companies  gov-  successful.     See,   too,   Smith  v.  Golds- 

emed  by  7  Geo.   4,  c.   46;  Chapman  v.  worthy,  4  Q.  B.   430;  Reddish  v.  Piii- 

Milvain,  5  Ex.  61,  removing  the  doubt  nock,  10  Ex.  213. 

1168 


CHAP.  X.]  ACTK'NS    UETWEEX    PARTNERS,    ETC.  *S93 

])nl)lished  by  him.  (/)  A  t^liareliolder  of  an  iiicorj»oratcel  com- 
pany may  be  a  creditor  of  or  delator  to  the  company,  just  as  if  he 
were  not  a  member  of  it.  It  Ibllows  from  tiiis  that  he  ma}-  not 
only  sue  it,  but  havin<^  obtained  jnd<;meiit  airainst  it,  lie  may 
execute  that  jndi^mcnt  airainst  liis  eo-sharehoidcrs,  if  they  are  liable 
to  be  proceeded  a;^ainst  in  that  way  by  ordinary  creditors.  More- 
over, a  court  will  nut  interfere  at  the  instance  of  the  shareholders 
proceeded  against,  and  stay  execution  against  them,  either  on  the 
ground  that  the  plaintiff  is  himself  a  member  of  the  company,  and 
bound  therefore  to  contribute  to  his  own  ])ayment,  or  u])on  the 
ground  that  the  rights  of  the  parties  cannot  be  ascertained  without 
taking  the  accounts  of  tlie  company.  In  the  case  supposed  the 
plaintiff  is  a  creditor  of  the  comj^any,  and  no'  the  less  so  for  being 
a  shareholder  in  it;  and  to  de])rive  him  of  his  rights  as  a 
creditor  would  be  to  *defeat  one  t)f  the  objects  for  which  the  ^893 
company,  as  such,  has  any  existence.  ((/)  But  one  share- 
holder will  not  be  allowed  to  buy  up  and  put  in  force  against  a 
co-shareholder  a  debt  of  the  companj'',  if  the  object  of  the  execu- 
tion creditor  is  to  obtain  by  means  of  that  debt  payment  of  other 
monies  to  which  he  is  not  justly  entitled.  (A) 

The  cases  in  which  some  of  the  members  of  an  incorporated 
company  can  sue  or  be  sued  on  behalf  of  themselves  and  others 
have  been  already  considered.  {{) 


SECTION  III.— CASES  IN  WHICH  COURTS  WILL  NOT  INTERFERE  BE- 
TWEEN PARTNERS  AND  MEMBERS  OP  COMPANIES. 

There  are  tliree  general  rules   by  which   courts  of  equity  were 
iiilluenced  when  their  interference  was  sought  by  one  General  rules 
partner  against  another,  and  to   which  it   will  be  con-   eueHVetwet'ii 
venient  at  once  to  refer;  for  it  is  apprehended  that  the  i'"""'^"- 
same  rules  will  be  observed  by  all  divisions  of  the   High  Court  in 
all  actions  which  before  the  Judicature  acts  would  have  been  suits 
in  equity;  in  other  words,  in  all  actions  for  specific  performance, 

(/)  Metropolitan  Saloon  Omnibus  Co.  (/»)  Woodhams  v.  Anglo-Austrah'an. 

r.  Hawking,  4  H.  &  N.  87.  &v.    Co.   2   DoG.   J.   &  Sm.  162,   and 

(7)    See   Rhcam   r.    Smith,    2     Ph.      other  cases  referred  to  at  the  end  of  this 
726;  Hardinge  v.  Webstor,  1  Dr.  &  Sm.      section. 
101.  (1)  Ante,  p.  884. 

'*  1169 


^89-i  ACTIONS  betwp:en  pai;  ker  ,  etc.  [book  hi. 

for  an  account,  for  a  receiver,  for  an  injunction,  and  in  those  ac- 
tions for  fraud  in  which  equitable  reh'ef  as  distinguished  from  the 
simple  recovery  of  damages  is  sought.  Tlie  rules  in  question,  how- 
ever, have  no  application  to  cases  in  which  prior  to  the  Judicature 
Acts  one  partner  could  have  sued  another  at  law.  The  rules  alluded 
to  are,  1,  not  to  interfere  except  with  a  view  to  dissolve  the  partner- 
ship; 2,  not  to  interfere  in  matters  of  internal  regulation;  3,  not  to 
interfere  at  the  instance  of  persons  who  have  been  guilty  of  laches. 

*S94     *1.     Of  the  rule  not   to  interfere   except  with  a  view  to 

a  dissolution. 

Formerly  courts  of  equity  were  averse  to  interfering  at  all  be- 
Npcessityof       twoeu  One  partner   and  another,  unless  it  was  for  the 

praying  fra  ,,,.,.  ,,  ,  i.  •  c   '  i. 

dissolution.  pnrpose  ot  dissolving  the  partnerslup  ;  or,  it  it  was 
dissolved  already,  of  finally  winding  np  its  ntfairs.  Hence  it  will 
be  found  on  reference  to  the  older  reported  decisions,  that  if  a  dis- 
solution was  not  sought,  the  Court  would  not  decree  a  partnership 
account,'  nor  restrain  a  partner  from  infringing  the  ]iartnership  ar- 
ticles, nor  protect  the  partnership  assets  from  destruction  or  waste. 
This  rule,  at  no  time  perhaps  very  inflexible,  has  gradually  been 
relaxed;  it  having  been  discovered  to  be  more  conducive  to  justice 
to  interfere  to  prevent  some  definite  wrong,  or  to  redress  some 
particular  grievance,  than  to  decline  to  iutei-fere  at  all  unless 
complete  justice  can  be  done  by  winding  up  the  partnership, 
and  in  that  manner  settling  all  disputes.  At  the  same  time  so 
difiicult  is  it  to  shake  off  o'd  associations,  and  to  run  counter 
to  established  rules,  that  traces  of  the  aversion  alluded  to  may 
yet  l)e  found  in  the  decisions  of  the  courts,  and  es]iecially  in  those 
which  relate  to  the  specific  perlonnanee  of  agreements  to  form 
partnerships,  and  in  those  M-hich  rehite  to  the  appointment  of 
receivers  and  managers.  Indeed,  notwithstanding  tlie  extent  to 
which  the  rule  has  been  relaxed  in  actions  for  an  account,  or  for  an 
injunction,  one  of  the  first  points  for  consideration  even  now,  when 
one  partner  sues  another  for  equitable  relief,  is,  can  relief  be  had 
without  dissolving  the  partnership?  Undoubtedly  it  may,  much 
more  certainly  than  formerly,  but  not  always  when  perhaps  it 
ouffht.      "Whithout  stopping  to  inquire  how  the  ques- 

Modern  rule.  .         .  ,  ,    .  ^.       ,  ,-,.  „    .-,  „- 

tion  is  to  be  answered  m  any  particular  ease  (tor  that 
'  See,  posi,  947. 

1170 


CHAP.  X.]  MATTERS    OF    INTERNAL    RKGULATION.  *805 

will  be  disciippcd  liereafter),  it  may  be  stated  as  a  cjeneral  proyx)- 
sition,  that  courts  will  not,  if  they  can  avoid  it,  allow  a  partner  to 
derive  advantage  from  his  own  misconduct  by  compelling  his  co- 
partner to  submit  either  to  continued  wrong,  or  to  a  dissolution  (j)\ 
and  that  rather  than  permit  an  improper  advantage  to  be  taken  of 
a  rule  designed  to  operate  for  the  benefit  of  all  parties,  courts  will 
interfere  in  modern  times  where  formerly  they  would  have 
'^declined  to  do  so.  At  the  same  time  courts  will  not  take  *S05 
the  management  of  a  going  concern  into  their  own  liands, 
and,  if  they  cannot  usefully  interfere  in  any  other  manner,  they 
will  not  interfere  at  all  unless  for  the  purpose  of  winding  up  the 
partnership. 


2.  Of  the  rule  not  to  interfere  in  matters  of  internal  regulation. 

A  court  of  justice  will  not   interefere  between  ]iartners  merely 
because  they  do  not  agree.     It  is  no  part  of  the  duty  Disinclination 

JO  i  "'to  interfure 

of  the  Court  to  settle  all  partnership  S(piabbles:  it  ex-  [^'J;  Pf^/^^;";^, 
pects  from  every  ])artner  a  certain  amount  of  forbear-  reguiaiion. 
ance  and  good  feeling  towards  his  co-partner;  and  it  does  not  regard 
mere  passing  im])roprieties,  arising  from  infirmities  of  temper,  as 
sufficient  to  warrant  a  decree  for  dissolution,"  or  an  order  for  an  in- 
junction, or  a  receiver,  {k)  And  when  partners  have  themselves 
ao-reed  that  the  manarrement  of  their  affairs  shall  be  entrusted  to 
one  or  more  of  them  exclusively,  the  Court  will  not  remove  the 
managers,  or  interfere  with  them,  unless  they  are  clearly  acting 
illegally  or  in  breach  of  the  trust  reposed  in  them,  (l) 

This  principle  has  been  extended  to  companies,  and,  as  a  general 
rule,  it  mav  be  stated   that  a  Court  will   not  interfere  internal  man- 

'  •'  .  aguniiMit  of 

between  members  of  companies  for  the  purpose  of  en-  companies, 
forcing  duties  ari.'^ing  out  of  matters  which  are  jiroperly  the  subject 
of  internal  regulation.     It  will  not  interfere  to  control  a  majority, 
unless  it  sees  that  the  majority  has  been  or  is  doing,  or  is  about  to 
do,  that  which  it  is  illegal  even  for  a  majority  to  do;  and  it  follows 

ij)  See  Fairthorno  r.  Woston,   o  Ha.  r.  llornor,  5  Price,  537;  Wardor  r.  Stil- 

:]92.  well,  3  Jur.  N.  S.   9;  Anderson  r.  An- 

'  See  ante,  p.  227,  and  notes.  dorson,  25  Beav.  190. 

(A-)  See  Marshall  r.   Colman,  2  J.  &  (/)  See  Lawson  t\  Morgan,  1  Price. 

W.  266;  Smith  r.  Jeyes.   4  Beav.  50:);  307;  Waters  v.  Taylor,  15  Ves.  10. 
Lawson  r.  Morgan,!  Price,  307;  Cofton 

1171 


*896  ACTIONS  bi;tween  partners,  etc.  [bookiii. 

from  this,  that  the  Court  will  not  interfere  in  mutters  properlj^  the 
subject  of  internal  management  until  all  reasonable  attempts  have 
been  made  to  take  the  sense  of  the  general  body  of  partners  on  the 
matters  in  question;  nor  even  then  unless  it  is  called  upon  to  in- 
terfere to  give  effect  to  the  will  of  the  majority  against  a  factious 
minority. 

The  leading  decisions  on  this  subject  are  Carlen  v.  Drury,  Foss 
V.  Harbottle,  and  Mozley  v.  Alston,  which  will  serve  to 
*S96  ■^illustrate  the  application  of  the  principle  in  question,  as 
well  to  unincorporated  as  to  incorporated  companies. 

In  Carlen  v.  Drury  (m),  a  large  number  of  persons  were  partners 
Complaints  in  a  conccm  called  The  Bankside  Brewery,  and  six  of 
able  directors,  th^m  Oil  behalf  of  tlieiiiselves  and  co-partners,  Hied  a 
Drury!"'  bill  against  the  managers  and  others,  alleging  circum- 

stances of  gross  mismanagement  and  neglect  on  the  part  of  the 
managers,  and  praying  for  an  account,  a  dissolution,  and  a  receiver. 
It  appeared  that  by  the  company's  deed  of  settlement,  the  man- 
agers might  be  removed  at  any  general  meeting;  that  general  meet- 
ings were  to  be  held  at  Lady-day  and  Michaelmas,  or  within  a 
month  after,  at  such  place  as  the  managers  should  appoint;  that  a 
committee  of  twelve  persons  should  be  annually  elected  for  audit- 
ing accounts,  and  advising  the  managers;  that  if  the  managers 
should  misbehave  themselves,  this  committee,  or  any  seven  of  them, 
should  have  the  power  of  calling  a  special  general  meeting  of  share- 
holders to  report  thereon;  and  that  no  dissolution  should  be  made 
without  the  consent  of  a  majority  of  three-fourths  of  the  share- 
holders at  a  general  meeting.  A  motion  for  an  injunction  and  a 
receiver  was  refused  with  costs,  the  Court  not  being  satisfied  that 
the  means  of  redress  provided  by  the  parties  themselves  in  the  ar- 
ticles were  not  effectual,  and  being  of  opinion  that  the  plaintiffs 
had  a  remedy  in  their  own  hands  to  which  they  had  not  resorted. 
From  the  judgment  of  Lord  Eldon,  it  appears  that  the  Court  would, 
if  necessary,  have  compelled  the  managers  to  call  meetings;  that  in 
a  case  of  delinquency  clearly  made  out,  the  Court  would  have  acted 
without  hesitation;  but  that  there  must  have  been  a  positive  neces- 
sity for  the  interference  of  the  Court  arising  from  the  refusal  or 
neglect  of  the  committte  to  act;  and  that  the  Court  would  not  in- 

(m)  1  V.  &  B.  154.     See,  also,  Waters      dith,  3  V.  &  B.  180;  Miles  v.  Thomas,  9 
Taylor,  15  Ves.  10;  Ellison  v.  Bignold,       Sim.  606. 
2  Jac.  &  W.  503;  Beaumont  v.   Mere- 

1172 


CHAP.  X.]  MATTERS    OF    INTERNAL    REGULATION.  *S97 

terfere  before  tlie  parties  liad  tried  that  jurisdiction  which  the  arti- 
cles had  themselves  provided. 

In  Foss  V.  Ilarbottle  (;i),  two  members  of  an 

^    ^'  AUcicred  fraud 

incor])orated  *comDany,  called  The  Victoria  897*  ju^^"^'''"^''"' 
Park  Company,  filed  a  bill  against  the  directors 
and  others,  charging  them  w^tli  a  variety  of  fraudulent  and  illegal 
acts,  whereby  the  property  of  the  company  was  misap-  p^^^^,  jj^ 
plied,  aliened  and  wasted,  and  pra3Mng  that  the  de-  ^"'=- 
fendants  might  make  good  to  the  company  the  losses  sustained  by 
the  acts  complained  of,  and  that  a  receiver  might  be  appointed  to 
apply  the  property  of  the  compan}'  in  discharge  of  its  liabilities, 
and  to  secure  the  surplus.  The  general  result  of  the  act  incorpora- 
ting the  company  was  (in  the  opinion  of  the  Court)  to  make  tlie 
directors  the  governing  body,  subject  to  the  superior  control  of  the 
proprietors,  wlio,  when  assembled  in  general  meeting,  had  power  to 
originate  proceedings  for  any  purpose  within  the  scope  of  the  com- 
pan)''s  powers,  as  well  as  to  control  the  directors  in  any  acts  which 
they  might  have  originated.  The  Court  was  of  opinion  that  the 
acts  of  the  defendants  complained  of  were  of  such  a  nature  as  to  be 
capable  of  confirmation  by  a  majority  of  the  members  of  the  com- 
pany; that  it  did  not  appear  that  any  attempt  had  been  made  to 
bring  those  acts  before  a  general  meeting  of  the  shareholders;  and 
that  under  those  circumstances,  tiie  Court  conld  not  interfere  at  the 
snit  of  a  minority,  whatever  it  might  have  been  induced  to  do  if 
proper  means  had  been  resorted  to  and  found  ineffectual  to  set  the 
general  body  of  shareholders  in  motion. 

In  Mozely  v.  Alston  {o),  a  bill  was  tiled  by  two  shareholders  of  a 
railwav  companv  airainst  the  companv  and  its  directors,   r»'ro(tors  im- 
alleging  that  tlie  hitter  had   been  illegally  appointed;    i"J»i"^'J- 
that  they  had  possession  of  the  seal  of  the  corporation;  ston/^^  "'  '^'" 
and  that  they  were  about  to  nse  it  for  various  improper  purposes. 
The  bill  prayed  that  the  directors  who  were  defendants,  might  be 
restrained  from  acting  as  directors,  and  be  ordered  to  place  the  seal, 
and  the  books  and  documents  of  the  company,  under  the  control  of 
its  lawful  directors.     It  appeared  from   the  statements  of  the  bill 
that  a  majority  of  the  shareholders  agreed  with  the  plaintiffs  in 

(»)  2  Ha.  461.     Compare  Atwool  v.  (o)  1  Ph.  790.     Compare  Atwool   r. 

Men-ywcather,  5  Eq.  464  /;.,  which  was  Men-ywoather,   5  Eq.  464.    where  the 

also  a  case  of  fraud,  but  a  majority  of  votes  of  the  defendants  turned  the  scale 

the  shareholders  excluding  the  defend-  and  the  suit  succeeded, 
ants,  supported  the  bill. 

1173 


*898  ACTIONS    BETWEliN    PARTNERS,    ETC.  [liOOK  III. 

their  view  of  the  illegality  of  the  defendants'  appointment,  and  the 
court  held  that,  if  that  were  so,  there  was  nothing  to  prevent 
*S98  the  company  from  filing  a  "bill  in  its  corporate  character  to 
remedy  the  alleged  evils;  and  that  as  the  plaintiffs  showed 
no  reason  to  justify  them  alone  in  applying  to  the  Court  for  re- 
dress, they  were  not  entitled  to  its  assistance. 

These  cases  have  been  followed  by  a  variety  of  others,  {p)  One 
Bailey  V.  Birk  ^^  ^^^®  most  characteristic  of  this  class  is  perhaps  Bailey 
KaiiwaycoiS-  ^.  The  Birkenhead,  Lancashire,  and  Cheshire  Junction 
"^"  Eailway  Company  (^),  where  a  bill  was  filed  by  one  of 

a  set  of  shareholders  in  an  amalgamated  company,  alleging  that  an 
unfair  and  unnecessary  call  had  been  made  upon  that  set,  and  seek- 
ing to  restrain  proceedings  to  enforce  payment  of  the  call.  Lord 
Langdale  thought  that  the  case  could  only  be  considered  as  an  at- 
tempt to  induce  the  Court  to  interfere  in  the  internal  management 
of  the  affairs  of  a  company,  and  to  take  upon  itself  to  determine  a 
question  which  might  and  ought  to  be  determined  by  the  share- 
holders themselves  at  general  meetings. 

Again  in  the  Scotch  case  of  Orr  v.  Glasgow,  &c.,  Eailway  Com- 
go^V'Raifway  P^^J  (^)'  ^  ^"^^  ^^^  instituted  against  a  railway  company 
Company.  q^^^  ||-g  directors,  seeking  redress  on  the  ground  that  the 

directors  were  also  directors  of  a  rival  company,  and  were  acting  in 
the  interests  of  that  company  to  the  prejudice  of  the  shareholders 
in  the  first  company.  The  specific  relief  sought  was,  that  certain 
calls  might  be  set  aside,  and  that  monies  already  paid  for  calls  pre- 
viously made  might  be  returned;  but  the  suit  was  dismissed,  on  the 
ground  that  although  the  acts  of  the  directors  were  beyond  their 
powers,  it  was  competent  to  the  shareholders  to  ratify  and  adopt 
those  acts,  and  the  suit  was  not  instituted  for  the  protection  of  a 
majority  of  shareholders, 

McDougaiii;  '^^^  latest  casc  on  this  subject  is  McDougall  v.  Gard- 

Gardiner.  jjjgj.  ^^.^^  where  the  Court  was  asked  to  restrain  directors 

[p]  See,  in  addition  to  those  mention-  kinson  v.  National  Live  Stock  Insurance 

ed  in  the  text,  Edwards  v.  ITie  Shrews-  Co.  26  Beav.  473,  and  4  DeG.  &  J.  422, 

bury  and  Birmingham  Rail.  Co.,  2  DeG.  where,  however,  relief  was  sought  in  re- 

&  Sm.  537;  Yetts  v.  The  Norfolk  Rail.  spect  of  other  matters  than  the  call. 

Co.  3  ib.  293;  Kent  v.  Jackson,  14  Beav.  (s)  10  Ch.  606,  and  1  Ch.  D.  13.     The 

.367,  and  2  DeG.  M.  &  G.  49;  Inderwick  decision  of  V.-C.  Malms,  in  20  Eq.  383, 

V.  Snell,  2  Mac.  &  G.  216.  was  reversed,  and  the  previous  decisions 

[q)  12  Beav.  433.  of  the  same  judge  in  Featherstone  v. 

(r)  3  MacQu.   799.    Compare  Hodg-  Cooke,  16  Eq.  298,  and  Trade  Auxiliary 

1174 


ClIAl'.   X.]  MATTICKS    UV    I.NTKUNAL    lil.Ci  I  LATKJX.  *899 

from  carryiiifr  *out  certain  arraiigoiiieiits  witliuiit  subinittiii"'  *S09 
tlieiu  to  the  shareholders  and  to  compel  the  directors  to  call 
a  meeting.  The  shareliulders  had  tlieniselvus  power  to  cull  a  meet- 
ing and  it  did  not  a])pear  that  a  majority  of  the  shareholders  could 
not  control  the  directors  without  the  assistance  of  the  Court,  which 
was  therefore  refusetl. 

Other  instances  will  be  referred   to  hereafter  when   treatinf'  of 
injunctions. 

In  such  cases  as  these,  those  who  complain  of  the  manafiuf 
body,  should,  before  appealing  to  the  Court,  endeavor  course  to  be 
to  bring  their  grievances  before  their  fellow  sharehold-  luiaoluy. 
ers,  and  ascertain  what  the  views  of  the  majority  are.  (t)  If  the 
majority  disapprove  the  conduct  complained  of,  they  can  sue  in 
the  name  of  the  company,  and  so  obtain  redress  (m);  or  if  the  de- 
fendants prevent  that  course  by  turning  the  scale  of  votes,  a  bill 
by  one  shareholder  on  behalf  of  himself  and  others  may  be  sup- 
])orted.  {v)  If,  however,  the  majority,  acting  bona  fde,  agree 
with  and  sanction  the  course  adopted  or  proposed  to  be  adopted  bv 
the  managing  body,  and  \f  that  course  is  not  illegal  if  ap- 
proved ly  the  majority,  the  Court  clearly  cannot  interfere.'  But 
if  that  course  will  be  a  fraud  on  the  minority,  or  illegal,  althouijh 
sanctioned  by  the  majority  of  shareholders,  then,  even  if  it  is  ai)- 
proved  by  all  of  them  exce[)t  one,  the  Court  will  interfere  at  the 
suit  of  that  single  dissentient  shareholder,  and  protect  him  and 
his  interests:  and  in  such  a  case  it  is  not  essential  that  he 
should  a])peal  to  the  other  shareholders  before  applviuf  to  the 
Court,  {x) 

Co.  V.  Tickers,  ib.,  can  hardly  be  relied  should  be  proceeded  with,      llie  same 

ijpon.  course  was  adopted   in    Ea.st   Pant  du 

(0  See  the  foregoing  cases.  Lead  Mining  Co.  2  Hem.   &.   M.   254, 

(«)  See  the  observations  in  Foss  v.  where  the  bill  was  ultimately  taken  off 

Harbottle,   and  Mozley  v.  .-Alston,    and  the  file. 

McDougall  V.   Gardiner,    1   Ch.  D.  13,  {v)  See  Atwool  v.   Merryweather,   5 

above  referred  to.     In  The  Exeter  and  Eq.  464,    where  a  bill  by  one  share- 

Creditoil  Rail.  Co.   v.    Duller,    5  Rail.  holder  on  behalf  of  himself  and  others. 

Ca.    211,   a    minority  filed   a  bill    m  was  ultimately  successful;  although   a 

the    name  of  the  company,    and  the  bill  by  the  company  had  been  taken  off 

Court  ordered   a  motion    to  take  the  the  tile. 

bill  off  the  file  to  stand  over  until  a  '  As  to  the  powers  of  a  majority,  see 

general    meeting  of  shareholdei-s    had  ante,  598,  and  not«s. 

Ijeen  called,   and  their  opinion   taken  (.r)  See  Gregory  v.  Patchett,  33  Beav. 

upon  the  question    whether    the  suit  595;  Atwool  r.  Mereweather  ?  5  Eq.  464. 

1175 


■^901  MATTERS   OF   INTERNAL    REGULATION.  [bOOK  III. 

Majority  not      *900         *As    an   illustration    of  the  proposition   that 

interlered  with  ,  .      .  ,     ^        -     j^      r         t         •  ^^      •  l'  J.^ 

it  they  are  not  the  maiontv  Cannot   be  interiereu  with   it  they 

doing  what  is  ,.."..,,         ,     ^  ,  .       ,  n 

illegal.  are  not  doing  wliat  is  illegal  tor  them  to  do,  reference 

Lord  t)  Copper    niav  be  made  to  the  case  of  Lord  v.  The  Governor  and 

MiuLTs'  com-  ■'  ,  .       T-i       1        I    /    \        1 

pany.  Company  ol  Copper  Miners  in  England  (y),  where  a 

shareholder  in  an  incorporated  mining  company  filed  a  bill  to  re- 
strain the  governing  body  from  vesting  the  property  of  the  com- 
pany in  trustees  for  the  benefit  of  its  creditors.  Lord  Cottenham 
(reversing  the  decision  of  Y.-C.  Kniglit  Bruce)  allowed  a  demurrer 
to  the  bill,  on  the  ground  that  it  was  competent  for  a  majority  of 
shareholders  to  sanction  such  a  proceeding,  and  that  it  appeared 
that  in  tact  they  had  sanctioned  it. 

The  important  principle  that  one  out  of  any  number  of  share- 
otherwise  if  holders  or  partners  is  entitled  to  the  protection  of  the 
isiiiegai.^^^  ^  court  against  tlieillegal  acts  of  the  others  (s),  altliongh 
he  stands  alone,  was  emphatically  declared  and  strictly  carried  out 
by  Lord  Eldon  in  Natusch  v.  Irving  {a)  and  Const -y.  Harris  {h), 
both  of  which  have  been  referred  to  in  a  former  part  of  tliis  work 
at  considerable  length,  (c)  In  those  cases  Lord  Eldon  was  dealing 
with  partnerships  and  unincorporated  companies;  but  precisely  the 
same  principle  applies  to  all  companies,  whether  incorporated  by 
act  of  Parliament,  charter,  letters  patent  or  registration. 

Thus,  in  Adley  v.  The  "VVhitstable  Company  {d),  Lord  Eldon 
AdieyuThe  restored  a  member  of  a  company  incorporated  by  act 
Company.^  of  Parliament,  to  rights  from  which  he  had  been  un- 
lawfully excluded  under  color  of  a  by-law  of  tlie  company. 

In  Preston  v.  The  Grand  Collier  Dock  Com- 
Grand    '  -H-QOl     T)any  (e)  the  *Yice-Chancellor  of  England  over- 

Collier  Dock  ^^i./\/  ^    '^ 

Company.  ruled  a  demurrer  to  a  bill,  the  object  of  whicli 

was  to  set  aside  an  arrangement  on  the  ground  of  fraud,  and  to 

The  contrary  receives  some  countenance  fully  removed. 

from,  but  is  not  really   wan-anted  by  f^:)  i.  e.   illegal  although  sanctioned 

Edwards  v.  Shrewsbury,  &c.  Rail.  Co.  2  by  a  majority. 

DeG.  &  S.  537.  («)  ^^ow.  on  Partn.  App.  398. 

(y)  2  Ph.  740.      See,  too,  Gregory  v.  (fc)  T.  R.  518,  519. 

Patchett,  33  Beav.   595;  Kent  p.  Jack-  (c)  Ante,  i^.  T'Ol,  et  seq.      See,   too, 

son,  14  Beav.  367,  and  2  DeG.  M.  &  G.  Chappie  v.  Cadell,  Jac.  537. 
49;  The  Exeter  and  Crediton  Rail.  Co.  (rfj  17  Ves.  315,  and  19  ib.   304,    and 

V.  Buller,  5  Rail.  Ca.  219;  Inderwick  v.  1  Mer.    107,  where  a  decree  for  an  ac- 

Snell,  2  Mac.  &  G.  216,  where  directors  count  of  profiles  was  made, 
complained  that  they  had  been  wrong-  (cj  U  Sim.  327. 

1176 


CIIAl".  X.]  ACTIONS    BETWEEN    PAKTNERS,    ETC.  *1;()2 

com])el  certain  shareholders  to  pay  calls,  althou;j:h  it  had  hccn  i:i 
effect  unanimouslj  resolved  at  a  special  general  meeting  of  th-.- 
company  that  no  calls  should  be  made  upon  them.  So  pj.j„„„  ,, 
in  iJeman  v.  Eufford  (/),  the  court,  at  the  suit  of  a  li""^^'!' 
small  minority  of  shareholders  in  a  railway  company,  restrainc<l 
what  in  effect  would  have  been  a  transfer  of  the  busine^  of  the 
business  of  that  company  to  another  company,  although  the  great 
majority  of  sliareholders  in  the  former  were  desirous  that  such 
transfer  should  be  made.  So  the  court  has  interfered  to  ])revent 
an  im])roper  payment  of  dividends  (y);  and  to  prevent  a  payment 
of  dividends  in  shares  [h)\  and  to  protect  the  preference  share- 
holders in  a  company  against  the  directors  and  other  shareliolders, 
who  intended  to  make  an  illegal  apportionment  of  dividends.  (/) 
Upon  the  same  principle,  the  court  has  over  and  over  again  inter- 
fered, at  the  instance  of  a  minority  of  sliareholders,  to  prevent  an 
application  of  the  funds  of  companies,  to  pur])oses  foreign  to  those, 
to  attain  which  alone  such  companies  were  funned,  {k) 

If  a  company  incorporated  for  a  special  purpose  is  exceeding  its 
powers  to  the  detriment  of  the  public,  an  action  by  the  -^[".^'^.'[J  .'^7 
Attorne3'-General  will  lie;   as  an   illustration  of  this,  ocnerui, 
reference  may  be  made   to  Attorney-General    v.  Great  Northern 
Railway  Company  (l\  where  a   railway  company  was  restrained 
from  carrying  on  extensive  dealings  in  coals. 

Where  a  ti-aud  on  a  company  is  complained  of  bv  a  Frauds snnc- 
minority  onlj'  of  its  shareholders,  considerable  difficulty  mujority. 
arises;  for  a  transaction  which  is  a  fraud  on  the  company 
may  be  repudiated  or  adopted  by  it  at  its  option.     *llence,  if    *902 
a  majority  of  the  shareholders  not  implicated  in  the  fraud, 
bond  fide ^  elect  to    ratify  the    transaction  which    they   might,  if 
they  chose,  rc])udiate,  it  seems  that  the  court  will  not  interfere  at 
the  instance  of  the  minority  (m);  but  if  the  fraud  is  a  fraud  by 

(/)    1   Sim.   N.   S.   550.     See,  too,  too,  Carlisle  v.  The  Southeast*^m  Rail. 

Winch  V.  Bii-kenhead,  &c.,  Rail.  Co.  5  Co.  1  Mac.  &  G.  689,  and  on  the  rijrhts 

DeG.  &  Sm.   562;  Salomons  r.   Laing,  of  preference  shareholders,  oji/c,  p.  797. 

12  Beav.  377;  CHnch  v.  FinanciiU  Cor-  (A-)  See  infra,  under  the  head  Injunc- 

poration,  5  Eq.  450  and  4  Ch.  117.  tion,  where  the  cases  will  be  found  col- 

(q)  Bloxam  v.  Metropolitan  Rail.  Co.  lectod. 

3  Ch.  337.  {I)  1  Dr.  k  Sm.  154. 

{h)  Hoole  V.  Great  Western  Rail.  Co.  (»/)  SeeFoss  r.  Harl>ottlc  nnd  Mozl'\v 

3  Ch.  262.  <".  Alston,  uhi  supra,  and  7>e/- Wood.  V. 
(/■)  Henry  r.  Great  Northern  Rail.  Co.  C,  in  Clinch  r.  Financial  Corp.  5  V.i\. 

4  K  k  J.  1,  and  1  DeG.  k  J.  606.     See,      A<1. 

1177 


«902  ACTIONS    BETWEEN    PARTNERS,    ETC.  [liOOK  II!. 

the  majority  upon  the  minority  the  court  will  protect  such  minor- 
ity- (^0 

After  the  fore:^oing  remarks,  it  scarcely  requires  to  be  mentioned 

tliat  the  court  will  interfere  to  control  a  factious  minor- 
Factious  ,  ,  ,  .  p    ,  1         1        i.'    1  ! 

minority  ^ty  whicii  impedes  the  execution  oi  tlie  lawtul  resolu- 

tions of  the  majority,  {o)  Nor  can  Mozley  v.  Alston  {p)  be  con- 
sidered as  inconsistent  with  this  proposition;  for,  althoug-h  in  that 
case  the  court  certainly  did  refuse  to  interfere,  it  was  not  called 
upon  to  do  so  in  a  suit  projierly  framed;  and  it  is  tolerably  clear 
from  the  judgment,  that  if  the  majority  had  chosen  to  institute  a 
suit  in  the  name  of  the  corporation,  the  court  would  have  acted 
very  differently,  {q) 


3.  Oft/ie  rule  not  to  interfere  at  the  instance  of  persons  wJio  have 
been  guilty  of  laches. 

Independently  of  the  Statutes  of  Limitations,  a  jilaintiff  ma.> 
Laches  a  bar  be  precluded  by  his  owu  laclies  from  obtaining  equit- 
uquity?  '"^  ^^1®  yq\M.  Laches  presupposes  not  only  hipse  of  time, 
but  also  the  existence  of  circumstances  which  render  negligence 
imputable;  and  unless  reasonable  vigilance  is  shown  in  the  prosecu- 
tion of  a  claim  to  equitable  relief,  the  court,  acting  on  the  maxim, 
vigilantihus  non  dormientihis  subveniunt  leges,  will  decline  to  in- 
terfere. ('/') ' 

(n)  See  Atwool  v.  Merrj-weather,    5  the  facts,  but  also  as  to  the  reasons  for 

PJq.  464,  «.;  and  the  cases  of  illegality  the  judgment, 

referred  to  above.  [r)  Laches   may  preclude  relief,  al-- 

(o)  See  the  Exeter  and  Crediton  Eail.  though  actual  ;       nfc  or  mtelligent  ac- 

Co.  V.  BuUer,  5  Rail.  Ca.  211,  in  which  quiescence  on  the  part  of  the   plaintiff 

the  court  did  so  interfere.     See.   too,  may  not  be  proved,  see  Evans  v.  Small- 

Fraser  v.  Whalley,  2  Hem.  &  M  10.  combe,  L.  R.  3  H.  L.  256. 

[p)  1  Ph.  790,  and  ante,  p.  897.  ^  See  Stout  v.  Seabrook,  30  N.  J.  Eq. 

{q)  See,  also,  McDougall  v.  Gardiner,  187,  and  Hall  v.  Clagett,   48  Md.  224  ; 

1  Ch.  D.    13.     In  Miles   v.  Thomas,  9  (laches  a  bar  to  a  bill  for  an  account.) 

Sun.   606,  V.-C.   Shadwell  declined  to  Delay  in  demanding  a  partnership  ac- 

restram  the  sailing  of  a  ship,  although  countmg  to  constitute  laches,  must  have 

it  would  seem  that  the  majority  of  the  occurred  subsequent  to  the  dissolution 

shareholders  of  the  company  to  which  of  the  co-partnership,  and  for  so  long  a 

the  ship  belonged,  were  opposed  to  her  period  as  to  make  the  claim  stale.     Har- 

sailing  on  the  voyage  on  which  she  was  ris  v.   Hillegass,  5   Pacific  Coast  L.   J. 

aljout  to  be   sent.     The  report  of  this  240. 

case  is,  however,  obscure,  not  only  as  to  A  decree  requu-ing  a  co-partner  to  ac- 

1178 


ClIAP.  X.] 


EFFECT    OF    LACHES. 


■0<  3 


luiespfiice 
in  accuunta. 


*Iq  the  early  case  of  Sherman  v.  Sherman  (s),  two  per-     *903 
sons   had  dealings   as   merchants;   one  of  them  died;    his 
widow  filed  a  bill    for  an  account,  but,  altliou<^h    the  toasuitfor 
Statute  of  Limitations  did  not  apply,  the  bill  was  dis-  ^hc'rmani;. 
missed,  on  the  ground  that   many  years  had  elapsed  's'lermuu. 
since  the  dealings   in  question  had  taken  i)Iace,  and  the  deceased 
had  allowed  any  claims  he  might  have  had  to  slumber,  {t)     Again, 
M'here  an  account  has  been  rendered,  and  has  been  long  j^^^^, 
acquiesced  in,  unless  fraud  be  proved,  a  court  will  not 
re-open  it,  although  the  account  may  be  shown  to  be  erroneous, 
and  although  no  liual  settlement  was  ever  come  to.  (w)'     The  same 
principle  is  acted  on  in  taking  accounts;    for  charges  long  improp- 
erly made  and   acquiesced   in,  or  long  omitted  to  be   made,  and 
known  so  to  be,  are  regarded,  in  the  absence  of  fraud,  as  having 
been  made  or  omitted  by  agreement,  and  the  question  of  mistake 
will  not  be  gone  into,  {x) 

In  actions  by  shareholders  against  companies  and  their  directors, 
the  laches  of  the  plaintitt' frequently  proves  fatal  to  his  Lnciies  in  pro- 
case.     Thus,  in  Gray  v.  Chaplin  {y),  the  directors  of  a  ^'-"'^^^"'^ 


nsaiiist  compa- 
nies. 


canal  company  made  an  agreement  for  letting  tolls  for 

i^       -  '->  117  Sett  ins;  aside 

ninety-nine  years,  which  agreement  was    both   ultra  agreements. 
vires  and  detrimental  to  the  interests  of  the  public.   crayv.chapUn 
After  the  agreement  had  been  acted  upon  for  forty-seven  years 
without  any  complaint  being  made,  a  bill  was  filed  by  two  share- 


count,  should  be  denied  in  every  case 
where  it  appears  the  party  seeking  the 
account  has  by  his  laches,  rendered  it 
impossible  for  the  court  to  do  full  justice 
to  both  parties.  Stout  v.  Seabrook, 
sit})ra. 

In  Foster  r.  Ris^on,  17  Gratt.  .S21,  it 
was  held  that  if  the  cause  of  action  in  a 
suit  by  one  partner  against  his  co-part- 
ner, for  the  settlement  of  the  partner- 
ship accounts,  be  one  to  which  the  stat- 
ute of  limitations  applies,  but  the  lapse 
ef  time  since  such  action  accrued  be  not 
such  as  to  bring  the  case  within  the 
statute,  laches  and  lapse  of  time  cannot, 
in  themselves,  constitute  a  bar  to  the 
suit.     Foster  v.  Rison,  17  Gratt.  321. 

(s)  2  Vem.  276. 

It)  See,  too,  Stuai-t  v.  Mellish,  2  Atk. 


610. 

(m)  Scott  V.  Milno,  5  Beav.  215,  and 
on  appeal,  7  Jur.  709.  See,  too,  Wil- 
liams V.  Page,  24  Beav.  654;  Stupart  r. 
Arrowsmith,  3  S.  M.  &  G.  176  noticed 
infra,  p.  904. 

1  See  Heai-tt  v.  Coming,  3  Paige,  566. 

A  formal  settlement  will  not,  four 
years  after  it  has  been  made  between 
partners  who,  having  equally  att<;nded 
to,  will  be  presumed  equally  cognizant 
of,  its  atraus,  be  disturbed,  on  the  evi- 
dence of  several  debtors  who  testif\",  in 
general  terms,  to  errors  in  the  charges 
against  them  on  the  partnership  books. 
Coleman  v.  Marble,  9  La.  Ann.  476. 

{x)  Thornton  v.  Proctor,  1  Anst.  94. 
and  see  pp.  779,  7S4. 

(jf)  2  Russ.  126. 

1179 


^904  ACTIONS    BETWEEN    TAKTNERS,    ETC.  [bOOK  III. 

holders  on  behalf  of  themselves  and  the  other  shareholders  to  set 
aside  the  agreement  and  for  an  account.  A  great  majority  of  the 
shareholders  disavowed  the  suit,  but  the  Yice-Chancellor  held  that 
this  was  immaterial  (s),  and  he  made  an  order  for  a  receiver- 
Upon  appeal,  however,  from  this  order,  Lord  Eldon  held,  that  the 
plaintiffs  could  not  avail  themselves  of  the  interest  which  the 
public  might  have  in  the  matters  complained  of;  and  that,  what- 
ever relief  might  be  obtained  bj  the  Attorney-General  on 
*904r  *  behalf  of  the  public  (a),  the  plaintiffs  were  precluded  by 
their  own  laches  and  acquiescence  from  disturbing  the  posses- 
sion of  the  lessee  of  the  tolls,  at  all  events  before  the  hearing  of  the 
cause  and  in  the  absence  of  the  Attorney-General  to  represent  the 
public.  The  order  for  the  receiver  was  accordingly  discharged. 
What  became  of  the  suit  afterwards  does  not  appear,  but  Lord  El- 
dou's  judgment  left  the  plaintilis  small  hopes  of  obtaining  a  decree. 

In  Graham  v.  The  Birkenhead,  &c.,  Eailway  Company  (h),  a  suit 
Compelling  was  instituted  by  a  shareholder  in  a  company  to  re- 
wo^ki*^*^"^  *^^  strain  the  completion  of  a  part  only  of  the  company's 
kenheafi^Raif'  works.  Tlicrc  had  becii  several  suits  for  the  same  pur- 
way  Company,  j^qqq  instituted  by  Other  shareholders,  but  for  reasons 
to  which  it  is  not  material  to  advert,  those  suits  were  never  effect- 
ually prosecuted.  It  had  been  known  for  a  considerable  time  that 
it  was  not  intended  by  the  directors  to  complete  the  company's 
works  as  originally  contemplated,  and  that  in  fact  there  were  not 
sufficient  funds  for  that  purpose.  It  was  also  well  known  that  the 
directors  had  for  some  time  been  completing  part  of  the  works.  It 
was  held  that  those  who  disapproved  of  the  application  of  the  com- 
pany's funds  to  that  limited  extent,  ought  to  have  taken  proceed- 
ings to  stop  it  at  once;  and  that  having  regard  to  the  laches  of  the 
plaintiff  he  was  not  entitled  to  relief. 

In  Stupart  v.  Arrowsmith  (c),  a  suit  was  instituted  by  a  share- 
Makinggood      holder  in  a  compauy  agaiust   its  directors    and   others 

breaches  of  n         t  i-   '  it  i  •       i        /> 

trust.  lor  the  purpose  of  compelling  tfiera  to  restore  funds  of 

A?ruwsmith.      the  compauy  alleged  to  have  been  illegally  applied    in 
buying  up  shares  {d),  and   for  a  general   account.     It   appeared, 

{z)  See  2  Sim.  &  Stu.  267,  and  2  Russ.  Jackson,  14  Beav.  367,  and  2  DeG.  M. 

132,  note.  &  G.  49;  Gregory  r.  Patchett,  33  Beav. 

(«)  See  ante,  p.  901.  595;  Scott  v.  Izon,  34  Beav.  434. 

(&)  2  Mac.  &  G.    146,  and   12  Beav.  (d)  See,  as  to  this,  Evans  v.  Coventry, 

460.  8  DeG.  M.  &  G.   835,  and  otlier  cases, 

(c)  3  Sm.  &  G.  176.     See.  too,  Kent  v.  mite,  p.  592,  et  r.j. 

1180 


CHAP.  X.]  EFFECT  OF  LACHES.  *0U5 

liowever,  that  tlic  alle<^ed  illoi^al  purchase  of  shares  liad  not  taken 
pUice,  and  that  the  directors  had  laid  accounts  before  the  sliare- 
holders  showing  the  amount  of  the  company's  receipts  and  expen- 
diture, and  the  bahance  to  be  divided;  that  these  accounts  had  been 
adopted  at  a  general  meeting,  and  that  payments  had  been 
made  to  some  of  the  shareholders  upon  the  footing  of  *these  *905 
accounts.  The  suit  was  not  instituted  until  three  years 
after  the  adoption  of  the  accounts,  at  the  meeting  referred  to,  and 
it  was  held  that,  under  these  circumstances,  and  no  fraud  having 
been  proved,  the  plaintiff  was  not  entitled  to  the  interference  of 
the  Court. 

In  Burt  V.  British  Nation  Assurance  Association    {e)    a  suit  by 
a  director  complaining  of  various  improper  acts  done  Burt  v.  British 
before  he   became   a   director,    was  dismissed,  on  the  ^''*"""- 
ground  that  for  two  years  he  had  had  the  means  of  knowing  what 
had  been  done,  and  had  sanctioned  what  he  afterwards  sought  to 
impeach. 

It  has  even  been  held  that  a  person  who  acquires  a  share  from  a 
former  shareholder  is  precluded  from  complaining  of  what  his 
predecessor  could  not  complain  of  himself  (f) 

Again,  a  person  who  seeks  to  rescind  an  agreement  for  fraud 
must  bring  his  action  within  a  reasonable  time  after  he  has  dis- 
covered the  fraud.  {(/) 

With  respect  to  companies,  by  far  the  most  important  decisions 
upon  the  subject  of  laches  and  acquiescence  are  those  Application  of 
in  which  the  foregoing  principles  were  held  to   be  ap-  e'lpierin'wuld- 
plicable  to   questions  arising    in    winding   up  compa-   p.u,i"s. '^'''"' 
nies;  for  it  is  now  settled  that  if  a  i)erson  has  retired  Brotiicrhood's 

.  , .  -,  case. 

from  a  company   pursuant   to   an   invalid  agreement,  ^jn^ncombc's 
which  all  the  shareholders  must  be  considered  as  hav-  case. 
ing  known,  and  which  they  have  long  suffered  to  remain  unim- 
peached,  such  person  cannot  afterwards  be  placed  on  the  list  of 
contributories.  (A) 

{e)  4  DeG.  &  J.  158.    See,  also,  Peek  '   {h)  Brotherhooa's  case,  31  Beav.  365. 

r.  Gurney,  13  Eq.  79;  Hunter  r.   Stew-  affirmed  on  appeal,  4  DeG.  F.  &  J.  566, 

art,  4  DeG.  F.  &  J.  168.  and  confirmed  by  Evans  v.  Smallcombe, 

(/)  Ffooks    V.    South- Western  Rail.  L.  R.  3  H.  L.   249.      See.   as  to  these 

Co.  1  Sm.  &  G.  142;  Peek  r.  Gurney,  13  cases,  ante,  p.   740  X  seq.    See,  also, 

Eq.  79.  Hunt's  case.  32  Beav.   387;  Grejjory  v. 

Ig)  Sharpley  v.  Louth  and  East  Coast  Patchftt,  'do  ib.  595. 
Rail.  Co.  2  Ch.  D.  663.     See  infra. 

1181 


*906  ACTIONS   BETWEEN   TARTNERS,    ETC.  [bOOK  III. 

The  doctrine  of  laches  is  of  great  importance  where  persons  have 
,    ^     .  aorreed  to  become  partners,  and  one  of  them  lias  unfairly 

Laches  m  en-         »  i  '  " 

forcing  a-ree-    ]gft  the  other  to  do  all  the  work,  and  then,  there  being 

ments  lor  . 

partnerships,  a  profit,  comes  forward  and  el  aims  a  share  of  it.*  In 
such  cases  as  these,  the  plaintiff's  conduct  lavs  him  open  to  the  re- 
mark that  nothing  would  have  been  heard  of  him  had  the 
*906  joint  adventure  ended  *in  loss  instead  of  gain  ;  and  a  court 
will  not  aid  those  who  can  be  shown  to  liave  remained  quiet 
in  the  hope  of  being  able  to  evade  res]>onsibility  in  case  of  loss,  but 
of  being  able  to  claim  a  share  of  gain  in  case  of  ultimate  success. 
Tiius,  in  Co  well  v.  "Watts  {i)  the  plaintiff  and  tlie  defendant  had 
agreed  to  take  land  for  the  purpose  of  improving  it, 
and  letting  it  upon  building  leases.  Along  lease  was 
accordingly  obtained,  and  was  taken  in  the  name  of  the  defendant. 
The  plaintiff  then  applied  to  the  defendant  to  enter  into  a  written 
agreement  upon  the  subject  of  their  joint  adventure,  but  this  the 
defendant  declined.  The  defendant  also  assumed,  to  act  as  sole 
owner  of  the  land  obtained;  he  removed  the  plaintiff's  cattle  from 
it,  and  borrowed  money  on  a  mortgage  of  tlie  land,  and  expended 
such  money  in  building  upon  it.  The  plaintiff  all  this  time  did 
nothing,  although  he  was  aware  of  what  was  going  on.  After  a 
lapse  of  eighteen  months  the  plaintiff,  by  his  solicitor,  called  upon 
the  defendant  to  perform  the  original  agreement;  and  the  defend- 
ant declining,  a  suit  for  specific  performance  was  instituted.  The 
bill,  however,  was  dismissed  with  costs,  on  the  ground  that  the 
plaintiff  had  by  his  conduct  induced  the  defendant  to  suppose  that 
the  plaintiff  had  abandoned  the  speculation,  and  that  the  defend- 
ant had  the  sole  right  to  the  land. 

The  doctrine  now  under  discussion  is   especially  applicable  to 
,    ^      ^         minino:  and  other  partnerships  of  a  highlv  speculative 

Laches  where  o  i  '  s      .       i 

partnership  is     character.     Minins:  Operations  are  so  extremely  doubt- 

a  mining  part-  n      i  ^ 

uersbip.  f^-^j  ^s  to  their  ultimate  success,  that  it  is  of  the  high- 

est importance  that  those  engaged  in  them  should  know  on  whom 
they  can  confidently  rely  for  aid;  if,  therefore,  a  person  engages  in 
a  mining  adventure  in  partnership  with  others,  and  disputes  arise 
between  them,  and  he  is  denied  a  partner's  rights,  he  should  be 
careful  to  assert  his  claims  whilst  the  dispute  is  fresh;  for  if  belies 
by  until  the  mine  has  been  rendered  prosperous  by  his  co-partners, 

1  See  the  general  doctrine  of  laches  as      ered  in  1  Story's  Eq.  Jur.  §  771. 
a  bar  to  specific  performance,   consid-  (0  2H.  &  Tw.  22t. 

11S2 


CHAP.  X.]  EFFECT    OF    LACIILS.  "O'tT 

and  lie  then  comes  forward  insisting  on  Lis  rii^lits  as  a  pa]-tnor,  and 
seeks  equitable  as  distinguished  from  legal  relief,  he  will  be  refused 
it;  on  the  ground   that  he   has  applied  for  it 
too  late.  ( J?)     On    this  principle,  *  in  Senhuuse     *007  cSiun.*"' 
Christian  {k),  where  several  persons  were  lessees 
of  a  colliery,  and  the  lease  being  about  to  expire,  one  of  them  ob- 
tained a  renewal  of  it  in  his  own  name.  Lord  R't.-slyn  dismissed 
with  costs  a  bill  filed  by  the  others  claiming  the  benefit  of  the  re- 
newed lease.     The  plaintiffs  had  allowed  the  defendant  to  work  the 
colliery  single-handed  at  a  great  expense;  and  although  they  were 
aware  of  all  the  facts  when  the  original  lease  expired,  they  did  not 
take  any  proceedings  to  enforce  their  rights  until  four  years  after- 
wards.    This  case  was  referred  to  with  aii])robation  by  Lord  Eldon, 
in  the  case  of  Norway  v.  Rowc  (1),  in  which  he  refused  j;^^yayv. 
a  motion  for  a  receiver  made  on  behalf  of  a  person   ^^owe. 
claiming  to  be  a  partner,  but  whose  rights  had  been  long  denied. 

Again,  in   Prendergast  v.   Tiirton  {m),  where  the   capital    sub- 
scribed for  working  a  mine  was  spent,  and   tiie  plain-  prcndergast  >: 
tiffs  refused  to  contribute  more,  but  the  other  partners  Tunon. 
did  contribute  more,  and  ultimately,  after  a  lapse  of  some  years, 
succeeded   in  making  the   mine   profitable,  and   then  the  plaintiffs 
came  forward  claiming  their  shares  in  the  concern,  their  bill   was 
dismissed  by  the  Yicc-Chancellor  Knight  Bruce,  and  his  decision 
was  afiirmed  on  appeal.     The  same  doctrine  was  applied  in  Clegg 
V.  Edmonson  (t^),  the  facts  of  which  were  similar  to  cig^^, 
those  of  Senhouse  v.  Christian,  already  referred  to.    In  Edmonson, 
two  respects  Clegg  v.  Edmonson  goes  further  than  the  other  cases; 
for  first,  the  defendants  had  brought  in  no  fresh  capital,  the  mine 
having  paid  its  own  expenses;  and   secondly,  although  the  plain- 
tifls  had  not  asserted  their  claims  by  legal  proceedings,  they  had 
constantly  insisted  on  their  right  to  participate  in  the  profits  ob- 
tained  by  the   defendants    under   the   renewed   lease.     Upon  this 
point,  however,  it  Avas  observed  by  the  Lord  Justice  Turner,  that 

{j)  See,  in  addition  to  the  case  cited  thority  in  support  of  the  doctrine  act<^d 

below,  Alloway  r.  Braine,  26  Beav.  575,  on   by   Lord    Rosslyn  in    Senhouse   r. 

and  Walker  v.  Jeffi-eys,  1  Ha.  :>41.  Christian. 

(/.)  Cited  19  Ves.  157,  and  reported  in  (»i)  1  Y.  &  C.  C.  98.  and  on  appo:ii. 

a  note  to  19  Beav.  ,3-56.  13  L.  J.  Ch.  2:58. 

(/)   19  Ves.    144.    There  were  more  (n)  8  DeG.  M.  c'i- G.  7S7.    The  ^<uit  in 

grounds  than  one  for  this  decision,  but  so  far  as  it  sought  lor  an  account  up  to 

the  case  is  always  ngiu-dtd  as  an  au-  the  time  of  dissolut  on  w;t3  sustained. 

118::; 


«-r)r>7  ACTIONS    BETWEEN    PARTNERS,    ETC.  [dOOK  III. 

he  could  not  agree  to  a  doctrine  so  dangerous  as  that  a  mere  asser- 
tion of  a  chaim,  unaccompanied  by  any  act  to  give  efi'ect  to 
*908     it,  *can    avail  to   keep  alive  a  riglit  which  would  otherwise 
be  precluded,  {o) 

In  the  cases  already  referred  to  it  will  be  observed  that  there  w^as 
Effect  of  evi-  no  positive  evidence  that  the  plaintiff  had  ever  aban- 
donment!'^'''" doned  his  rights  (p);  and  in  Clegg  v.  Edmonson  there 
was  evidence  to  show  that  no  abandonment  had  ever  been  contem- 
plated. It  need,  however,  scarcely  to  be  observed  that  positive 
evidence  of  abandonment,  in  addition  to  the  negative  evidence  de- 
rived from  mere  lapse  of  time,  during  which  nothing  has  been 
done  by  the  plaintiff,  greatly  improves  the  position  of  his  oppo- 
nent. 

There  are  several  cases  illustrating  this.     In  Jekyl  v.  Gilbert  (z/), 

two  artificers  agreed  to  do  work  for  their  joint  benelit; 

Jekyl  v.  Gilbert.   ^^^^^  ^^^^  ^^^^^  ^^^  ^^^^^^  ^^^^  pcrson  for  wliom    it  was 

done  refused  to  pay;  the  defendant  requested  the  pUiintiff  to  join 
in  legal  proceedings  to  compel  payment,  but  the  plaintiff  declined. 
Thereupon  the  defendant  brought  an  action  for  payment  of  the 
work  done  by  him,  and  obtained  a  verdict.  The  plaintiff  then 
claimed  half  the  amount  recovered,  but  the  Court  held  that  he  was 
not  entitled  to  any  share  of  it. 

So  if  a  part-owner  of  a  ship  disapproves  of  a  proposed  voyage, 
and  arrests  the  ship  until  the  other  part-owners  give  him  security 
for  his  share,  he  is  not  entitled  to  any  portion  of  the  profits  arising 
from  such  voyage,  {r) 

Ao-ain,  where  two  persons  agreed  to  take  land  on  lease  for  a  build- 
ing Speculation,  and  one  of  them  afterwards  opposed  the  prosecu- 
tion of  the  speculation  and  died  without  ever  having  done  anything 
to  further  it,  it  was  held  that  the  equitable  estate  and  the  legal 

(o)  This  general  proposition  must  of  (p)  In  Prendergast  v.  Tui-ton,  perhaps 

course  be  taken  with  reference  to  the  there  was,  and  it  is  on  the  ground  that 

case  before  the  Court.    It  cannot  be  laid  there  was,  that  Lord  Chelmsford  distm- 

down  as  universaUy  true  that  protests  guished  that  case  from  Hart  v.  Clarke, 

are  useless     They    exclude    inferences  which  will  be  noticed  hereafter.  See6H, 

which,  in  their  absence,  might  fairly  be  L.  C.  657-9.      See.  also,  Garden  GuUy, 

drawn  from  the  conduct  of  the  party  etc.  Co.  v.  McLister,  1  App.  Ca.  p.  57. 

protesting,  and  are  conclusive  to  show  ((?)   McNaghten's    Select    Cases     in 

that  no  abandonment  of  right  was  m-  Chancery,  29. 

tended.       See  in  Hart  v.  Clai-ke,  infra,  (r)  Davis  v.  Johnston,  4  Sun.  539. 
p.  911. 

1184 


ClIAI'.   X.]  ACTIONS    BET^VEEN    PARTNER?,    ETC.  ^DlO 

estate  were  in  tlie  same  person,  viz.,  the  "^snrvivor,  and  that     *V00 
he  was  not  a  trnstee  as  to  any  portion  of  the  land  for  the 
executors  of  the  deceased,  (i^) 

McLure  v.  Ripley  (t)  nuiy  also  he  referred  to  as  illustratin<^  the 
same  princi])le.  There  the  plaintiff  and  the  defendant  ji^.jj^. 
entered  into  an  agreement  for  the  joint  purchase  of  R'i'i<-">'- 
goods  to  be  sent  to  China  for  sale,  and  for  the  investment  of  tiie  pro- 
ceeds in  the  purchase  of  tea  on  the  joint  account.  The  money  nec- 
essary I'or  the  purcliase  of  the  goods  Avas  t(j  1)C  snj»])!ied  by  the 
plaintiff  and  by  the  dercndatit  jointly.  It  wa>.  li.iwever,  agreed 
that  the  defendant  should  in  the  first  instance  give  bills  lor  the  whole 
amount  of  the  purchase-money,  and  that  when  the  bills  fell  due  the 
])laintilf  sh(»uld  pi-ovide  his  share  of  their  amount  for  the  ])nrpose 
of  enai>ling  the  defendant  to  pay  them.  In  ])ursnance  of  this  agree- 
ment goods  were  bought  and  sent  to  China,  and  bills  were  given  by 
the  defendant.  Before  any  of  the  bills  became  payable  it  appeared 
likely  tliat  the  adventure  would  result  in  a  loss,  and  this  was  known 
to  both  parties.  Shortly  before  the  time  when  the  first  of  the  bills 
became  dne,  the  defendant  applied  to  the  plaintiff  for  his  share  of 
the  amount  of  the  bill.  The  plaintiff  was  not  prepared  to  supply 
it,  and  the  defendant  therenjjon  gave  the  plaintiff  the  option  of 
withdrawing  from  the  speculation  altogether.  This  offer  was  ac- 
cepted, and  the  plaintiff  formally  resigned  all  share  in  the  adven- 
ture. Shortlv  afterwards  a  newaijreement  was  come  to  for  the  pnr- 
chase  by  the  plaintiff  of  part  of  the  return  cargo,  in  which,  by  the 
preceding  arrangement,  the  defendant  alone  had  become  interested. 
The  cargo  arrived,  and  it  was  then  found  that  the  original  specula- 
tion residted  in  considei'able  profit.  The  plaintiff  sought  to  avoid 
his  agreement  to  withdraw,  and  his  subsequent  agreement  for  juir- 
chase,  on  the  ground  that  after  he  had  been  applied  to  for  money, 
and  before  he  agreed  to  withdraw,  the  defendant  had  received  two 
letters  from  his  correspondents  in  China,  which  he  had  concca'ed 
from  the  ])laintiff.  These  two  letters,  however,  contained  nothing 
calculated  to  lead  to  the  supposition  that  the  adventure  would  be 
more  profitable  than  was  previously  imagined,  and  it  was  clearly 
shown  that  the  defendant  had  not  been  guilty  of  aiiy  misrep- 
resentation. It  was  accordingly  held  that  the  plaintilf  *had  -'010 
no  right  to  be  relieved  from  his  contract  merely  because  those 
letters  had  not  been  communicated  to   him.     In  delivering  judg 

(s)  RoiUy  V.  Walsh,  11  Ir.  Eq.  22.  (/)  2  Mac.  ct  G.  27.'). 

^'  1185 


'^Oll  EFFECT  OF  LACHES.  [bOOK  III, 

iiient,  the  Lord  Chancellor  proceeded  upon  the  grounds  that  ultliough 
„.-.,  V.  ,^-  at  first  both  parties  were  entitled  to  all  the  information 

Withholding  r 

iiifoimutiuu.  relating  to  their  joint  adventure,  the  plaintiff,  by  not 
advancing  his  share  of  the  funds  when  required,  ceased  any  longer 
to  have  the  rights  of  a  partner,  and  that,  after  having  agreed  to  era- 
bark  in  the  speculation  for  better  and  for  worse,  the  plaintiff  had 
no  right  whatever  to  say  to  the  defendant,  "Give  me  all  your  infor- 
mation, and  I  will  decide  whether  I  will  be  a  partner  or  not." 
It  is  now  necessary  to  advert  to  one  or  two  cases  apparently  at 
.      , .  ,    variance    with    the  foreoroinsr,   and    in   which    persons 

Cases  in  which  »        to'  i  ^ 

laches  has  nut    clainiiiia;  the  rio-hts  of  partners  have  succeeded  in  obtain- 

been  a  bar  to  &  ri  r 

relief.  jjjg  ^)jg  assistance  of  a  court  of  equity,  although  their 

demands  have  been  stale,  and  although  the  success  of  the  joint  ad- 
venture has  been  due  to  the  exertions  of  those  against  whom  those 
demands  were  made. 

The  case  of  Lake  v.  Craddock  {ti)  is  sometimes  referred  to  as  one 
Lake  II  ^^  ^'^^  class  now  in  question.     "But  this  case,  in  truth, 

Craddock.  Only  decided  that  if  one  of  several  partners  chooses  to 
claim  the  benefit  of  partnership  dealings,  after  having  for  sometime 
ceased  to  take  any  part  in  the  affairs  of  the  partnership,  he  must 
contribute  his  share  of  the  outlays  made  by  the  other  partners,  with 
interest.  It  was  not  decided  in  Lake  v.  Craddock  that  a  partner 
could,  on  the  above  terms,  claim  the  benefit  of  what  had  been  done 
by  the  others;  and  although  the  decree  gave  a  partner  who  had  long 
abandoned  the  concern  the  option  of  either  claiming  a  share  on 
proper  terms,  or  of  being  excluded  altogether,  the  other  partners  do 
not  appear  to  have  raised  any  objection  to  this  option  being  given. 

The   cases  which  are  most  at  variance  with  those  referred  to  in 
the  preceding  pages,  are  the  recent  cases  of  Hart  v.  Clarke  and 

Clements  v.  Hall. 
911*         *In  Hart  v.  Clarke  (x)  the  facts  wci-e  shortly  as  follows, — 
a  mining  company  was  formed  on  the  cost-book  principle, 

(m)  3  P.  W.  158.     The  bill  in  effect  the  terms  imposed, 
was  filed  by  the  plaintiff  against  four  (x)  Clarke  v.  Hart,  6  H.  L.  C.  683.  af- 

persons,  his  co-partners  for  an  account.  firming-  Harte  i\  Clarke,  6  DeG.   M.    <fc 

One  of  the  defendants  had  long  ceased  G.  232,  and  reversing  S.   C.    19  Beav. 

to  take  any  part  in  the  partnership  af-  349.     See,  also.  Garden  Gully,  etc.    Co. 

fairs.     An  account  was  decreed,   and  v.  McLister,  1  App.  Ca.  39,  also  a  case 

liberty  was  given  to  this  defendant  to  of  forfeiture.     Shares  in  cost- book  com- 

come  in  on  teniis,  or  to  be  excluded.  panies  may  now  be  forfeited,   see  32  &: 

He  appealed,  being  discontented  with  33  Vict,  c,  19  §  16,  etc, 

118G 


OIIAP.  X.]  ACTIONS    BETWEKN    I'AKTNER?,    ETC.  *012 

and  there  was  no  express  ajjreemcnt  antlutrizinir  the 

<.      -  .  ,.     ,  1  ,.        , ,  rr.,         "art  V.  Clarke. 

torieiture  ot  shares  on  the  non-payment  ot  calls,  Ihe 
plaintiff  and  the  defendants  were  the  lessees  of  the  mine  and  the 
only  shareholders  therein.  Money  heintij  re(|uired  for  carryln:^  on 
the  mine,  and  the  plaintiff  not  fnniishin;^  his  proportion  of  the 
sum  required,  was,  on  more  thati  one  occasion,  informed  that  on 
continued  non-payment  his  shares  would  he  forfeited,  and  ulti- 
mately they  were  declared  forfeited.  The  plaintiff,  who  had  all 
along  denied  the  power  of  his  co- ad  venturers  to  forfeit  his  shares, 
and  had  suggested  modes  of  obtaining  money  which  they  had  not 
approved,  gave  them  notice  that,  in  the  event  of  the  mine  proving 
successful,  he  should  expect  his  share  of  the  profits,  and  should,  if 
necessary,  take  legal  proceeding  to  enforce  his  claim.  A  year  and 
a  half  then  elapsed,  and  at  the  end  of  that  time  he  asserted  his 
claim,  and  the  defendants  refusing  to  recognize  it,  a  hill  was  filed 
for  an  account.  The  Master  of  the  Rolls  held  it  to  he  clear  that  nu 
number  of  partners  could  exclude  another  partner  and  forfeit  his 
share,  but  that  the  plaintiff  was  not  entitled  to  be  considered  as  still 
a  partner;  (1),  because  the  notice  to  forfeit  his  share  might  le  re- 
garded as  a  notice  to  dissolve  the  partnership;  and  (2),  because  fur 
nearl}^  two  years,  he  had  taken  no  step  whatever  to  assert  his  rights 
but  had  allowed  other  people  to  work  the  mine,  and  had  onl}'  come 
forward  when  he  found  it  had  proved  a  profitable  speculation.  On 
appeal  it  was  also  held  that  the  supposed  right  to  forfeit  had  no  ex- 
istence; but  it  was  further  held  (1),  that  the  notice  of  forfeitni-e  could 
not  operate  as  a  dissolution,  inasmuch  as  that  was  not  the  object  with 
which  the  notice  had  been  given;  and  (2),  that  under  the  peculiar  cir- 
cumstances of  the  case,  the  plaintiff  could  not  be  held  to  have  shown 
any  intention  to  abandon  the  undertaking,  and  that  the  nature  of 
mining  speculations  was  such  as  to  render  it  incquittible  to  lay 
*down  as  a  general  rule  that  no  adventurer  should  be  entitled  *912 
to  relief  in  equity  when  the  adventure  becomes  productive, 
unless  he  has  paid  up  his  calls  whilst  it  remained  unproductive. 

The  ground  of  the  decision  in  the  above  case,  and  that  which  dis- 
tinguishes it  from  Senhouse  v.  Christian  and  other  cases  Ground  of  the 

11      1     1   i       1  •       1  •         •         1  1  1    •       •.»•  •      TT  di'cisiim  in  tlie 

alluded  to  above,  is  this,  viz.,  that  the  plaintm  in  Hart  v.   last  case. 
Clarke  had,  as  one  of  the  lessees  of  the  mine,  a  legal  interest  therein, 
which  nothing  had  displaced.     The  Court,  therefore,  was  in  this 
position:    it  was  compelled  either  to  make  a  decree  in  favor  of  the 
plaintiff,  or  to  declare  him  a  trustee  of  his  bhare  in  the  mine  for  the 

1187 


*()13  EFFECT  OF  LACHES.  [bOOK  III. 

(lefendsmts;  and  there  not  being  sufficient  grounds  for  justifying  the 
hatter  alternative,  the  former  was  necessarify  adopted.  Upon  no 
other  ground  can  the  case,  it  is  submitted,  be  distinguished  from 
Clegg  V.  Edraondson  and  tlie  other  cas:s  alhided  to  above;  for,  al- 
though reliance  was  placed  in  the  judgment  in  Hart  v.  Clarke,  on 
the  distinct  notice  given  by  the  plaintiff  that  he  did  not  acquiesce 
in  the  defendant's  conduct,  and  should  insist  on  his  rights,  it  was 
decided  in  Clegg  v.  Edmonson  that  a  protest  did  not  enlarge  the 
time  within  which  redress  must  be  sought  in  a  court  of  equity,  {y) 
Clements  i'.  Hall  (0)  is  another  case  in  which,  notwithstanding 
Clements  V  the  lapsc  of  a  Considerable  time,  it  was  held  that  relief 
^^^^^-  ought  to  be  given  to  a  person  claiming  an  interest  in  a 

mine;  but  the  facts  in  that  case  were  very  peculiar,  and  four  judges 
were  equally  divided,  Lord  Cranworth  and  Lord  Justice  Turner 
holding  that  the  plaintiff  was  entitled  to  relief,  whilst  Lord  Justice 
Knight,  Bruce  and  Lord  Romilly  were  of  a  contrary  opinion.  The 
facts  were  in  substance  as  follows:  A.  and  B.  were  lessees  of  a  mine 
which  they  worked  as  partners.  The  lease  expired,  but  the  lessees 
continued  in  possession  as  tenants  from  year  to  year,  and  worked  the 
mine  as  before.  In  1847  A.  died,  leaving  C.  his  executor,  and  be- 
queathing an  interest  in  the  mine  to  D.  B.,  after  the  death  of  A. 
worked  the  mine  alone,  claiming  it  as  his  own  entirely,  and  refusing 

to  give  any  account  to  C,  who  however,  constantly  pressed 
*913     for  one.     In  1850  B.  negotiated  for  and  *obtained  from  tlie 

landlord  a  new  lease,  but  on  more  onerous  terms  than  before. 
Of  this  C.  had  no  notice.  After  the  new  lease,  B.,  who  since  the 
death  of  A.  had  only  kept  the  mine  going,  began  to  work  it  in  earnest 
and  at  a  profit;  and  in  1851  D.  filed  a  bill  against  B.  and  C.  to  es- 
tablish his  interest  in  the  mine.  C.  admitted  D.'s  title,  but  B.  put 
in  no  answer,  and  the  suit  was  not  prosecuted.  In  1853  B.  died  and 
C.  became  his  representative.  In  1854  the  plaintiff',  who  was  the 
assignee  of  D.'s  interest,  filed  a  bill  in  the  nature  of  a  supplemental 
bill  to  D.'s  former  bill,  and  sought  to  have  D.'s  interest  in  the  mine 
secured  for  his,  the  plaintiff's  benefit.  C,  who  as  the  representative 
of  A.,  had  admitted  D.'s  right  in  his  suit,  now,  as  representative  of 
B.,  opposed  the  plaintiff's  claim,  and  insisted  on  lapse  of  time  as  a 
defense  to  the  suit.  But  it  was  held  (1),  that  on  A.'s  death,  his  inter- 
est in  the  mine  did  not  determine;  (2),  that  his  estate  was  entitled 
to  share  the  benefit  of  the  renewed  lease;  (3),  that  A.'s  representa- 

(y)  Ante,  p.  907.  {z)  2  DeG.  &  J.  173,  and  24  Beav.  333. 

1188 


CIIAI'.  X.]  ACTIONS    BETWEEN    I'ARTNEIiS,    ETC.  *914 

tive  was  not  precluded  in  1853  from  assert! ni^  this  right  against  B., 
inasmuch  as  B.  had  kept  A.'s  representative  in  ignorance  of  the  real 
Btatc  of  the  concern ;  and  (4),  that  there  liad  been  no  laches  on  the 
part  of  the  plaintift'or  of  D.,  through  whom  he  claimed,  inasmuch  as, 
since  1851,  there  had  been  a  bill  on  the  lile  to  secure  their  interest. 
Lastly,  on  the  subject  of  laches  it  may  be  observed  that,  as  posi- 
tive evidence  of  abandonment  materially  strengthens  ^„  ,  , 

''  o  Efiect  of  rpcog- 

the  case  of  those  resisting  a  stale  demand,  so,  on  the  ni'i"»of  •»"«■ 
other  hand,  positive  evidence  of  recognition  affords  an  answer  to  a 
defense  gi-ounded  on  laches  and  lapse  of  time.  Thus,  where  a  share- 
holder in  a  company  became  bankrupt,  but  his  shares  were  carried 
in  the  books  of  the  company  to  a  separate  account,  and  he  was 
regularl}'  credited  with  the  dividends  which  became  payable  in  re- 
spect of  those  shares,  his  assignees  were  held  entitled  to  the  shares 
and  accumulated  dividends,  although  twenty  years  had  elapsed  since 
any  claim  had  been  made  to  them  {a). 

Notwithstanding  Hart  v.  Clarke,  and  Clements  v.  Hall,  it  is  sub- 
mitted that  the   doctrine  laid  down  and  acted 
upon  in  *Norway  v.  Rowe,  Senhouse  v.  Christ-     *914:  ^.es"'^'^'^'^ 
tian,  Prendergast  v.  Turton,  and  Clegg  v.  Ed- 
mondson  may  still  be  safely  relied  on  in  all  cases  except  those  in 
which  the  court  can  be  driven,  as  it  was  in   Hart  v.  Clarke,  to  the 
alternative  of  holding  either  that  the  j)laintift'  is  entitled  to  relief 
or  that  he  has  abandoned  and  lost  his  former  hgal  status  [b). 

Laches,  as  a  defense  to  an  action,  cannot  be  taken  advantage  of  bv 
demurrer,  if  it  can  only  be  made  out  inferentially  from   Pcmurrc-r  on 
the  statements  in  the  claim  (c).  laciiLs.' 


SECTION  IV.— ACTIONS  FOR  SPECIFIC  PERFORMANCE. 

If  two  persons  have  agreed  to  enter  into  partnership,  and  one  of 
them  refuses  to  abide  by  the  agreement,  the  remedy  for     v,cm-rn\  mio 
the  other  is  an  action  ibr  damages,  and  not,  exce})ting   pcri"niiX'eof 
in  the  cases  to  be  presently  noticed,  for  specific  per-   "punncrehip*!''^ 

(a)  Penny  c.  Pickwick,  16  Beav.  246.  something'  more  than  mere  lathes  is  ne" 

See,    too,    the    recognition  of  title    in  cessary  to  deprive  a  plaintitf  of  relief. 

Clements  v.  Hall,  ante,  p.  912.  (c)  See  Doloraine  r.  Browne,  3  Bro.  C. 

(6)  See,  also.  Garden  Gully,  A'c.  Co.  0.6:53;  Mitf.  PI.  212;  Turner  r.  Borlase, 

V.  McLister,  1  App.  Ca.  39,  which  shows  11  Sim.  17. 
that  in  such  a  case  as  Hart  v.  Clarke, 


*915  SPECIFIC    rERFOIlMANCE.  [lOOK  HI. 

fonnance.  To  compel  an  uiuvilling  person  to  become  a  partner  with 
another  would  not  be  conducive  to  the  welfare  of  the  latter  any  more 
than  to  compel  a  man  to  marry  a  woman  he  did  not  like  would  be 
for  the  beuelit  of  the  lady.  Moreover,  to  decree  specific  perfor- 
mance of  an  agreement  for  a  partnership  at  will  would  be  nugatory, 
inasmuch  as  it  might  be  dissolved  the  moment  after  the  decree  was 
made;  and  to  decree  specific  performance  of  an  agreement  for  a 
partnership  for  a  term  of  years,  would  involve  the  court  in  the  super- 
intendence of  the  partnership  throughout  the  whole  continuance  of 
the  term.  As  a  rule,  therefore,  courts  will  not  decree  specific  per- 
formance of  an  agreement  for  a  partnership  {d)\     Kor  will  specific 

])erformance  be  decreed  of  an  agreement  to  become  a  partner 
*915     and  bring  in  a  *certain  amount  of  capital,  or  in  default  to 

lend  a  sum  of  money  to  the  plaintiff  {e). 
However,  if  the  parties  have  agreed  to  execute  some  formal  in- 
(^a«es  in  which  strumeut  wliich  would  have  the  effect  of  conferring 
Lmlde.'^^  rights  which  do  not  exist  so  long  as  the  agreement  is 
not  carried  out,  in  such  a  case,  and  for  the  purpose  of  putting  the 
],arties  into  the  position  agreed  upon,  the  execution  of  that  formal 
instrument  may  be  decreed,  although  the  partnership  thereby 
formed  might  be  immediately  dissolved.  (/)'     The  principle  upon 

id)    Scott  V.   Eayment,    7  Eq.   112;  premises  on  which  the  mill  was  situ- 

Hercy  v.  Birch,  9  Ves.  357  ;  Sheffield  ated ;  plaiiitijff  and  defendant  then  to 

Gas,  etc.,  Co.  r.  Harrison,  17  Beav.  294;  form  a  partnership  to  work  the  mill  for 

Downs  V.  Collins,  6  Ha.  418.     See,  also,  one  year,  at  the  end  of  which  time,  if 

Zaxwell  V.  The  Port  Tennant  Co.  24  plaintiff  chose  to  retire,  defendant  was 

Beav.  495.  and  Yivers  v.  Tuck,  1  Moore,  to  pay  him  for  the  premises  a  fixed  sum; 

P.  C.  N.  S.  516,  where,  however,  there  but  if  plaintiff  did  not  choose  to  retire, 

was  fraud.  the   partnership    was   to   continue   five 

'See  Buck  v.  Smith,  29  Mich.  166;  years:  Held,  not  a  contract  enforceable 

Meason  v.  Kaine,  63  Pa.  St.  335;  Whit-  specifically.     Reid  v.  Vidal,  5  Rich.  Eq. 

worth  V.  HaiTis,  40  Miss.  483.  289. 

An  agreement  to  enter  into  a  partner-  {e)  Sichel  v.  Mosenthal,  30  Beav.  371. 
ship,  and  as  a  member  of  a  firm  to  use  (/)Buxton  v.  Lister,  3  Atk.  385,  and 
imd  exercise  personal  skill  and  judg-  see  1  Swanst.  513,  note,  and  Stocker  v. 
ment  in  the  control  and  management  Wedderbum,  3  K.  &  J.  403. 
for  the  firm  of  the  partnership  business,  '  Thus,  where  H.  and  W.  fonned  a  co- 
is  not  enforceable  specifically.  Buck  v.  partnership  to  erect  college  buildings 
Smith,  supra.  and  to  conduct  an  institution  of  leam- 
Defendant  agreed  in  writing  to  repair  ing,  H.  stipulating  to  use  his  influence 
plaintitf '3  steam  saw-mill,  buildings,  to  secure  donations  to  the  institution, 
fences,  etc.,  and  plaintiff  to  sell  to  de-  abandoning  a  similar  enterprise  to  en- 
f  mdant  as  soon  as  the  repairs  were  fin-  ter  into  this  partnership,  and  givmg  up 
ished  one  undivided  moiety  of  the  a  pastoral  charge  at  a  pecuniary  sacri- 
1190 


CIIAl'.  X  J 


ACTIONS    BETWEEN-    PARTNERS,    ETC. 


*910 


Avlilch  the  Court  proceeds  in  a  case  of  tliid  description,  is  the  same 
as  tliat  which  induces  it  to  decree  execution  of  a  lease  under  seal, 
notwithstanding  the  term  for  which  the  lease  was  to  continue  has 
already  cxi)ired.  (g) 

In  Enixland  v.  Curling  (A),  the  plaintiff  and  two  of  the  defend- 
ants agreed  to  become  partners  as  ship  agents,  for  seven,  fourteen, 
or  twent3'-one  years,  and  they  signed  with  their  initials  E„^,,.,„a„. 
an  agreement  to  that  effect.  A  deed  was  prepared  to  ^'"'■ii"g. 
carry  out  the  agreement;  the  deed,  however,  was  never  executed, 
and  it  differed  somewhat  from  the  agreement.  The  parties  carried 
on  business  as  partners  under  the  agreement  for  eleven  years,  and 
then  they  began  to  quarrel.  The  defendant  Curling,  who  appears  to 
have  been  in  the  wrong  from  the  beginning,  gave  notice  to  dissolve 
in  three  months;  he  retired  from  the  partnership,  and  entered  into 
partnership  with  other  persons,  and  carried  on  business  with  them  on 
the  premises  and  in  the  name  of  the  old  firm.  The  new  firm  opened 
the. letters  addressed  to  the  old  one,  and  gave  iu)tice  of  its  dissolu- 
tion to  its  correspondents.  Tlie  plaintiff  then  liled  a  bill  for  specific 
performance  and  an  injunction,  and  he  obtained  a  decree.  (/) 

*The  only  other  class  of  cases  in  which  anything  like  spe-     *916 
cific  performance  of  an  agi-eement  for  a  partnership  will  be      . 


fice,  and  W.  agreeing  to  convey  to  H. 
certain  parcels  of  land  upon  which  the 
colle{?e  buildings  were  to  be  erected, 
specific  perfoi-mance  of  the  contract  to 
convey  was  directed.  Whitworth  v. 
Harris,  40  Miss.  483. 

In  Birchett  v.  Boiling,  5  Miinf.  442, 
an  agreement  to  build  a  tavern  in  part- 
nership was  decreed  to  be  specifically 
performed  at  the  instance  of  a  partner 
who  fui-nished  the  ground  for  the  pur- 
pose, and  had  fully  perfonned  the  con- 
tract on  his  part,  notwithstanding  many 
of  the  partners  were  unwillmg  to  carry 
it  into  ellect,  because  in  their  opinion 
a  change  of  circumstances  had  rendered 
the  scheme  unprofitable. 

ig)  See  Wilkinson  r.  Torkington,  2 
Y.  &  C.  Ex.  726,  and  the  cases  there 
cited. 

{h)  8  Beav.  129.  See  the  observa- 
tions of  Lord  Romilly  on  this  case,  in 


30  Beav.  376.  ' 

(i)  The  following  was  the  minute  of 
the  decree: — "The  Court  doth  declare 
that  the  agreement  for  a  co-partnership, 
dated,  etc.,  is  a  binding  agreement  be- 
tween the  parties  thereto,  and  ought  to 
be  specifically  performed  and  earned 
into  execution,  and  doth  order  and  de- 
cree the  same  accordingly.  Refer  it  to 
the  Master  to  inquire  whether  any  anil 
what  variations  have  been  made  in  the 
said  agreement  by  and  with  the  assent  of 
the  several  parties  thereto  since  the  date 
thereof.  Let  the  Master  settle  and  ap- 
prove of  a  proper  deed  of  co-partnership 
between  th-;  said  parties  in  pursuance 
of  the  said  agreement,  having  regard 
to  any  variations  which  he  may  find  to 
have  been  made  in  the  said  agreement 
as  hereinbefore  diivct<?d,  and  let  the 
parties  execute  it.  Continue  the  injunc- 
tion against  the  defendant  Curling." 

1101 


-5^917  SPECIFIC    PERFOKMANCE.  [eOUK  III. 

decreed,  is  wliere  a  person  who  has  agreed  with  another  to  share 
Specific  per-  tlie  protits  of  some  joint  adventure,  seelvs  to  obtain 
\v™re"anac-  that  share  alter  the  adventure  has  come  to  an  end. 
wanted"  ^  ^  Although  the  decree  giving  him  the  relief  he  asks  may- 
be prefaced  by  adeclaration  that  the  agreement  relied  upon  ought  to 
be  specifically  performed,  this  has  not  the  elfect  of  creating  a  part- 
nersliip  to  be  carried  on  by  tiie  litigants,  but  merely  serves  as  a 
foundation  for  the  decree  for  an  account,  which  is  the  substantial 
part  of  what  is  sought  and  given.  An  instance  of  this  class  of 
Daiev  ^^^^^   ^^  afibrded  by  Dale  u  Hamilton.  (A;)     There,  in 

Hamilton.  substaucc,  three  pcrsoiis  had  agreed  to  purchase  land; 

to  build  on  it  and  improve  it;  and  then  to  sell  it  for  their  common 
benefit.  Land  was  accordingly  obtained,  built  upon  and  improved, 
and  subsequently  the  right  of  one  of  the  three  persons  to  any  share 
in  the  adventure  was  denied  by  the  other  two.  He  thereupon  filed  a 
bill  for  a  sale  of  the  land,  for  an  account  of  the  joint  speculation, 
and  for  a  proper  distribution  of  the  monies  arising  from  the  sale; 
and  the  Court  held  him  entitled  to  this  relief. 

Another  instance  of  the  same  kind  is  aiforded  by   Webster  v. 
Brav.  (I)     In  that  case  the  plaintiff  and  the  defendant 

Webster  I'.  J     \  /  i 

^^^y-  had  been  jointly  retained  as   solicitors  to  a  company. 

They  were  not  in  partnership  as  solicitors  generally,  but  the  plain- 
tiff insisted  that  they  were  partners  as  regarded  the  business  done 
for  the  company,  and  that  the  jmyments  made  by  the  company  to 
each  ought  to  be  shared  by  both.  The  defendant  insisted  that 
there  was  no  partnership,  and  that  eacli  was  to  be  paid  for  the  work 
done  by  himself,  and  to  retain  for  his  own  benefit  all  payments  in 
respect  of  such  work.     The  plaintiff  having  resigned,  filed  a  bill 

for  an  account,  and  the  Court  made  a  decree  in  his  favor, 
*9f7     declaring  that  the  plaintiff  and  the  -'Mefendant  were  jointly 

and  equally  interested  in  the  profits  and  loss  of  the  business 
transacted  by  them,  or  either  of  them,  as  solicitors  to  the  com- 
pany, (m) 

Relief  in  the  shape  of  specific  performance  may  be  required  for 
,     other  purposes  besides  carrying  into  execution  agree- 

Otlier  cases  of  I^       i  "^       '"^  .  \" 

specific  per-        meiits  to  fomi  partnerships.     The  assistance  of  a  Court 

forniaiice  be-  i  ' 

uveen partners,   -g  (.,ffg,j  requisite  to  couipcl  thosc  engaged   in  a  going 

ik)  5  Ha.  369,  and  2  Ph.  266.  98,  and  7  DeG.  M.  &  G.  239,  is  a  similar 

(I)  7  Ha.  159.  case. 

(>«)  Robinson  r.  Anderson,  20  Beav. 

1192 


CHAP.  X.] 


SPECai';    I'KKFUliMAXCE. 


'917 


concern,  to  act  conformably  to  the  articles  of  partiicroliip  ;'  and 
also  to  compel  those  who  have  dis-olvcd  partnership,  to  observe 
the  stipulations  into  which  they  have  entered.  The  principles  on 
which  the  Courts  act  in  <^rantin":  or  withholdinii'  assistance  when 
sought  for  the  former  purpose,  will  be  considered  hereafter  ;  and 
with  respect  to  the  specific  performance,  after  a  dissolution  of  part- 
nership, of  agreements  entered  into  by  the  partners  ])reviously  to, 
or  at  the  time  of  dissolution,  it  need  only  be  observed  that  relief 
will  be  granted  or  refused  upon  the  ])rinL'ij)le.s  by  whicli  the  Court 
is  ordinarily  guided  in  questions  of  bjjecilic  ])erformance,  and  that 
nothing  turns  on  the  circumstance  of  the  liti^rants  haviui;  been 
partners.  It  would,  therefore,  be  foreign  to  the  objects  of  the  pres- 
ent treatise  to  prosecute  this  subject  further;  but  for  the  purposes 
of  reference,  it  may  be  useful  to  mention  that  the  Court  has  en- 
forced the  following  agreements  entered  into  upon  or  with  a  view 
to  a  dissolution;  namely — 

Agreements  not  to  carry  on  business  within  a  certain  distance  or 
for  a  certain  space  of  time  (ti); 

Agreements  as  to  the  custody  of  partnership  books  and  the  fur- 
nishing of  copies  thereof  (o); 


'  A  court  of  equity  has  power,  at  the 
suit  of  one  partner,  to  compel  another 
to  contribute  a  sum  stipulated  as  capi- 
tal, or  to  restore  it  to  the  common  fund,  if 
he  have  withdrawn  it  before  the  debts  are 
paid  ;  and  when  a  special  partner,  un- 
der a  limited  partnership,  does  not  pay 
in  the  amount  of  his  capital  specified  in 
the  certificate,  and  the  firm,  having  be- 
come insolvent,  assigns  their  property 
for  the  benefit  of  creditors,  the  trustee 
may  compel  the  delinquent  partner  to 
pay  in  the  deficiency  of  his  capital. 
Robinson  v.  Davidson,  3  E.  D.  Smith, 
221. 

The  o\vner  of  a  zinc  mine  a<jreed 
with  certain  other  persons  to  funiish 
2000  tons  of  ore  each  year  for  three 
year?.,  on  being  paid  $10  per  ton  there- 
for, the  other  persons  agreeing  to  fur- 
nish suitable  buildings  for  its  convei-siou 
into  paints,  and  to  divide  the  profits 
■with  the  mine  owner  after  a  cer- 
tain   Ume.     Under  this  agreement  the 


mine  owner  funiished  746  tons  of 
ore,  received  for  it  $"i,860,  leaving 
$1,600  still  due  when  the  other  parties 
refused  to  receive  any  more  or  to  appro- 
priate the  buildings  to  the  manufacture, 
alleging  that  the  business  could  only 
prove  ruinous  to  all  concerned.  The 
time  specified  for  furnishing  the  ore  had 
expired  ;  the  business  was  proved  to  be 
hazardous,  and  the  buildings  and  ma- 
chinery unfit  for  the  mauufactui-e  : 
Held,  specific  performance  would  not 
be  enforced,  because  an  adequate  rem- 
edy at  law  existed  for  the  breach. 
Manning  r.  Wadsworth,  4  Md.  GO. 

(n)  Whittaker  r.  Howe,  3  Boav.  383; 
Tunier  v.  Major,  3  Gitf.  442;  and  see 
Coates  V.  Coates,  6  Madd.  287.  and 
Williams  v.  Williams.  1  ^Vils.  Cli.  473, 
note. 

{(>)  Lingen  r.  Simpson,  1  Sim.  &  Stu. 
GOO,  and  see  Whittaker  v.  Howe,  3 
Beav.  383. 

1193 


^^918  ACTIONS    BETWEEN    TAllTNERS,    ETC.  [bOOK  III. 

Acrreeiiients    tliiit    a    tliird   party,    and   he   only,    shall   get  in 
debts  (j9); 

Agreements  that  the  value  of  the  share  of  an  outgoing  or  a  de- 
ceased partner,  shall  be  ascertained  in  a  specified  way  and  takeu 

accordingly  (5^); 
*918         Agreements  that  an  outgoing  partner  shall  offer  his  share 
•to  his  co-partners,  before  selling  it  to  other  pei'sons  (r); 

Agreements  to  grant  an   annuity  to  a  retiring  partner  and  his 
widow  (s)', 

Agreements  not  to  divulge  or  make  use  of  a  trade  secret,  (t) 

An  agreement  to  form  a  company  is  one  of  the  specific  perform- 
,,     .„  ance  of  which  can  hardly  ever  be  decreed.     Such   an 

Bpecinc  per-  -^ 

a'reementsto  agreement  may  be  perfectly  valid  and  binding,  hat, 
form  company,  ^j^jg  jg  ^^^  sufiicient  to  entitle  one  of  the  parties  to  it 
to  a  decree  for  specific  performance  by  the  other;  for  this  purpose 
the  agreement  must  not  only  be  valid,  but  mast  also  be  one  which 
a  Court  can  compel  performance  of  in  all  essential  points;  if  this 
is  practically  impossible,  an  action  for  damages,  and  not  for  specific 
Stacker V  performance,  is    the   proper   remedy.     In    Stoeker   v. 

wedderburn.  Wcdderburn  (i^),  the  plaintiff  had  obtained  a  patent, 
and  it  was  agreed  between  him  and  the  defendants  that  a  company 
should  be  formed  by  them  for  the  purpose  of  working  the  patent; 
that  the  plaintiff"  should  assign  the  patent  to  the  company,  give  his 
whole  services  to  it  for  two  years,  do  his  best  to  improve  his  inven- 
tion, and  give  the  company  the  full  benefit  of  all  improvements. 
Owino-  to  a  doubt  respecting  the  validity  of  the  patent,  the  defend- 
ant refused  to  abide  by  the  agreement,  and  thereupon  the  plaintiff' 
filed  a  bill  for  specific  performance,  praying,  amongst  other  things, 

{j})  Davis  V.  Amer,  3  Drew.  64;  Tur-  the   agreement  sought  to  be  enforced 

ner  v.  Major,  3  Giff.  442.  "was  too  vague  in  its  terms.       See,  as  to 

(g)  Morris  v.  Kearsley,  2  Y.  &  C.  Ex.  agreements  for  a  valuation,  ante,  p.  850. 

139;  Essex  v.  Essex,  20  Beav.  442;  King  (r)  Homfray  v.  Fothergill,  1  Eq.  567. 

r.  Chuck,  17  Beav.  325;  and  see  Feath-  [s]  Aubin  v.  Holt,  2  K.  &  J.  66;  Page 

erstonhaugh  v.  Turner,   25  Beav.   382,  v.  Cox,    10  Ha.    163;  and  Bonville  v. 

and  Gibson  v.  Goldsmid,  5  DeG.  M.  &  Bon^-ille,  6  Jur.  N.  S.  414,  M.  R.,  where 

G.   757,  reversing  S.  C.  18  Beav.  584.  the  agreement  sued  upon  was  decided 

Compare  Downs  v.  Collins,  6  Ha.  418,  not  to  bear  the  construction  contended 

where  to  have  enforced  the  agreement  for  by  the  plaintiff, 

would  have  been  to  decree  specific  per-  (0  Morison  v.  Moat,  9  Ha.  241. 

fonnance  of  a  contract  for  a  partnership;  {?()  3  K.  &  J.  393.      See,  too,  Max- 

and  Cooper  v.  Hood,  7  W.  R.  83,  where  well  v.  Port  Tennant  Co.  24  Beav.  495, 

a  decree  was  refused  on  the  ground  that  where,  however,  there  was  fraud. 

1194 


CHAP.  X.]  ACTIONS  ijetwi:i:n'  pautneus,  etc.  *920 

tluit  the  defendants  nii_<^ht  be  decreed  to  take  such  steps  as  might  be 
necessary  for  the  registration  and  incorporaticjn  of  the  com- 
pany. To  this  *bill  the  defendants  demurred,  and  the  demurrer  ''919 
was  aUowed  with  costs,  on  the  ground  that  the  agreement  was 
one  and  entire,  and  that  if  a  decree  were  made  in  the  phiintiff's 
favor,  the  Court  could  neither  compel  him  to  perform  his  })art  nor 
restore  the  defendants  to  their  original  position  in  case  he  did  not. 

"Where  two  companies,  having  power  to  amalgamate,  have  entered 
into  a  binding  agreement  so  to  do,  specific  performance  gpecificper- 
of  the  agreement  will  be  decreed,  if  its  terms  are  such  agrwmenuo 
that  a  decree  for  specific  performance  can  practically  be  """iB"i'»"te. 
enforced.     In  the  Anglo-Australian  Assurance  Company  v.  British 
Provident  Insurance  Society  {x),   an   agreement  by  the  defendant 
coinpany  to  take  the  assets  and  liabilities  of  the  plaintiff'  company, 
and  to  indemnify  it  against  its  liabilities,  was  specifically  enforced. 

The  question  whether  a  court  will  decree  the  specific  perform- 
ance of  an  agreement  to   allot  and  accept  shares  in  a  ppppjficpcr. 
company,  has  given  rise  to  some  difference  of  opinion.  ftg™"n\"ntsto 
An  ordinary  contract  for  the  sale  of  shares  is  one  which  ^"''^  shares, 
the  Court  will  decree  to  be  specifically  performed  (y)  ;  and  it  is 
immaterial  whether  the  vendor  has  or  has  not  other  shares  which 
he  does  not  sell,  or,  in  other  words,  whether  he  and  the  purchaser 
will  or  will   not  become  co-shareholders.     But  a   contnict  for  the 
sale  of  shares  by  one  individual  to  another,  is  distinguishable  in 
many  respects  from  a  contract  for  the  allotment  and  acceptance  of 
shares  in  a  company  to  be  formed,  and  authority  is  not  wanting  to 
show  that  specific  performance  of  a  contract  of  this  last  descrij)tion 
will  not  be  decreed,  (s)     There  is,   however,  at  least,  equal 
authority  the  other  way  («),  and  on  principle,  it  is  ^conceived     '^1)20 
that,  assuming  the  existence  of  a  valid  agreement  to  take 

(.r)  4  Gitf.  521,  and  on  appeal,   4  D.  Nav.  Co.  v.  Bri<:gs,  4  DeG.  F.  &  J.  191. 

G.  F.  &  J.  341.  Although  in  both  of  these  cases  a  de- 

(//)  A  life,  p.  720.  cree  was  refused,   in   the   first  on  the 

{z)  SlietReld  Gas,  ttc.  Co.  r.  Harrison,  ground  of  fraud,  and  in  the  second  on 

17   Beav.   294;  Bluck  v.   Mallalue,   27  the  ground  that  there  was  no  conchided 

Beav.  398;  Columbine  v.   Chichester,  2  agreement,  yet  the  jutlgm  Mils  delivered 

Ph.  27,     In  this  last  case  there  were  in    them   show    that    there  is  no  i-ule 

circumstances  to  show  that  specific  per-  against  decreeing  specific   performance 

fonnancfc  was  impossible.  of  such  agreements  as  are   alluded  to 

(a)  See  New  Brunswick  and  Canada  above.     See,  also,  Ferguson  r.  Wilson, 

Rail.  Co.  r.  Muggeridge,  4  Drew.  686,  2  Ch.  77. 
and  1  Dr.  &  Sm.  363;   Oriental  Steam 

1195 


••*021  SPECIFIC    PEHFOR'IANCE.  [bOOK  III. 

shares,  there  is  no  adequate  reason  why  such  an  agreement  should  not 
1)6  decreed  to  be  speclficall}'  performed.  It  is  true  that  the  applicant 
foi-  sliares  mi-rht  sell  and  transfer  his  shares  as  soon  as  the  decree  was 
made,  but  the  decree  would  nevertheless  not  be  inoperative.  If  the 
applicant  were  the  plaintiff,  he  could  not  be  got  rid  of;  whilst  if  he 
were  the  defendant,  he  could  only  retire  from  the  company  by  trans- 
ferring his  shares  to  somebody  else.  The  reason  therefore  which 
induces  the  Court  to  decline  to  decree  specific  performance  of  an 
agreement  for  an  ordinary  partnership  at  will,  is  scarcely  applica- 
ble to  such  an  agreement  as  that  now  under  consideration.  More- 
over, nothing  is  more  common  than  for  the  promoters  of  a  company 
to  agree  to  sell  property  to  the  company  in  consideration  of  a  cer- 
tain number  of  paid-up  shares,  and  it  is  certainly  difticult  to  see 
why  such  a  contract  should  not  be  enforced;  indeed,  there  is  good 
authority  for  saying  that  a  decree  for  its  specific  performance  may 
be  obtained,  (J)  Again,  persons  who  have  agreed  to  take  shares  in 
a  company  are  every  day  made  contributories  for  the  purpose  of 
winding  up;  and  they  are  so  upon  the  ground  that,  although  they 
are  not  actually  shareholders,  they  have  entered  into  an  agreement 
to  take  shares  which  is  binding  upon  them.  Many  of  these  cases 
are  only  intelligible  upon  the  assumption  that  a  contract  for  the  allot- 
ment and  acceptance  of  shares  is  one  which  a  court  ought  to  enforce. 
In  order,  however,  that  specific  performance  of  an  agreement  to 
Defenses  to  take  or  deliver  shares  in  a  company  may  be  decreed,  it 
performlnc" o*f  is  ncccssary  that  tlie  agreement  should  be  concluded 
tekfshlres*^      and  binding  (c),    and   be  untainted   by  fraud  {d)   or 

unfairness  {e\  and  be  capable  of  being  performed  by  the 
*921     defendant  (/),  and  not  *involve  any  breach  of  trust  {g),  or 

performance  by  either  party  of  obligations,  the  pei-formance 
of  which  a  court  cannot  practically  enforce.  (A) 

(6)  See  Fyfe  v.  Swabey,  16  Jur.  49,  em  Rail.  Co.  7  Eq.  116. 

]y[_  -^^  (/)  Ferguson   v.  Wilson,   2   Ch.    77; 

(c)  Wliict    it  was    not   in    Oriental  Columbine  v.  Chichester,  2  Ph.  27.     As 

Steam  Nav.  Co.  v.  Briggs,  4  DeG.  F.  &  to  the  impossibility  of  obtaining  regis- 

j^  \(^\_  tration  of  transfers,   ante,  pp.  720,  727. 

{d)  Which  was  not  the  case  in  New  {g)  Fry  on  Spec.  Perf.  p.  113,  and  see 

Brunswick  and  Canada    Rail.   Co.    v.  Flanagan  v.  Great  Western  Rail.  Co.  7 

Muggeridge,  4  Drew.  686  and  1  Drew.  &  Eq.  116. 

Sm.  363;  or  in  Maxwell  v.  Port  Tennant  {h)  Flanagan  v.  Great  Western  Rail. 

Co.  24  Beav.  495.  Co.   7  Eq.  116;  Stocker  v.  Wcdderburn, 

{e)    As  to    agreements    between  co-  0  K.  &  J.  393,  ante,  p.  918, 
directors,  see  Flanagan  v  Great  West- 

1196 


CHAP,  X.]  ACTIONS    BKTWKKN    PAUTXEKS,    ETC.  ■^'922 

As  regards  impossibility  of  performance,  it  is  to  be  observed  tliat 
an  agreement  b}'  A.  that  B.  sliall  do  soinetliing,  can  onl}^  bo  de- 
creed to  be  specifically  performed  if  the  agreement,  altliongh  in  form 
by  A.,  is  in  truth  an  agreement  by  B.  himself,  or  if  B.  is  bound  to 
do  that  which  it  has  been  agreed  he  shall  do.  If  B.  is  not  l)0und 
by  the  agreement  or  otherwise,  to  do  what  A.  lias  agreed  he,  B., 
shall  do,  no  decree  for  specific  performance  can  be  made  against 
either   A.   or  B.     These  observations  apply  to  as^ree-  Agreement 

,      ,  1  n  1    '^'"^  promoters 

ments  ma<lc  l)y  promoters  and  others,  to  be  performed  and  directors, 
by  a  company;  if  the  company  is  not  bound  by  the  agreement,  a 
decree  cannot  be  made  either  against  the  company  or  against  the 
individuals  wIk^  entered  into  the  agreement.  (/)  So  if  directors 
agree  to  allot  sliares,  and  the  agreement  is  in  point  of  law  the 
agreement  of  the  company,  the  dii-ectors  individually  can  neither  be 
compelled  to  jiei'form  it  nor  to  conij)ensate  tiie  ])laintilf  for  its 
non-pertbrinanee.  [k) 

As  a  general  rule,  a  person  who  is  not  a  party  to  an  agreement 
is  not  entitled  to  sue  for  its  specific  performance  :  and   Mixui  f-a^cs  of 
where  a  person  has  been  induced  to  take  shares  on  the  and  frau.i. 
faith  of  an  agreement  by  others  that  they  will  do  the  same,  but 
which  agreement  was  not  made  with  him,  his  right  against  them 
must  be  based  on  th.eir  misrepresentation  made  to  him,  and  not  on 
their  agreement  between  themselves,  with  which  he  had  nothing  to 
do.     An  instructive  case  on  this  head  is  Bell  v.  Lord   „  „ 
Mexborough.  (1)     There  an  unsuccessful  attempt  was  ^exborough. 
made  by  the  subscribers  to  an  abortive  railway  company  to  compel 
two  members  of  the  provisional   committee  to  perform  an  a:::ree- 
ment  to  take  shares,  alleged   to  have   been   entered  into  between 
them  and  the  managing  committee,  and  to  pay  np  the  deposits  on 
the  shares  so  agreed  to   be  taken.      The  bill  alleged  that  the  two 
members    in    question    had,   by    appearing    as    provisional 
*committee  men,  induced  the  plaintiff  to  take  shares  ;    that     '^•022 
the  same  two  members  had  accepted  shares  in  the  com])any 
from  the  managing    committee,   but    had  never  paid  the  dej>ositf. 
upon  them,  and  that  the  managing  committee  refused  to  take  pro- 
ceedings to  compel  payment  of  such  deposits.      The  bill  also  com- 
plained of  several  acts  of  misconduct  on  the  part  of  the  managini>' 
committee,  and  stated  that  unless  all  the  deposits  on  the  shares 

(0  Ellis  r.  Colman,  25  Beav.  662.  (I)  10  Jur.  893,  and  12  Jur.  6-1  on  ap- 

{k)  Fergason  r.  Wilson,  2  Ch.  77.  peal;  also,  in  5  Ra.  Ca.  140. 

1107 


*923  ACTIONS    FOR    MISREPR!;SEXTATIOX    AND    FRAUD.       [bOOK  III. 

taken  were  paid  up,  the  company  would  be  insolvent,  and  the  plain- 
tiffs would  be  liable  to  be  sued  by  its  creditors.  The  bill  then 
prayed  for  an  account  of  the  dealings  and  transactions  of  the  com- 
pany and  an  account  of  its  assets,  including  the  amounts  due  from 
the  two  members  in  respect  of  the  sliares  they  had  agreed  to  take, 
and  for  the  application  of  the  assets  in  discharge  of  the  liabilities  of 
the  company,  A  demurrer  to  this  bill  by  the  two  members  com- 
plained of,  was  allowed,  on  the  ground  that  the  plaintiffs  had  not 
made  out  any  case  for  relief  against  them,  and  that  the  plaintiff's 
remedy  was  against  the  committee  of  management  only.  The 
plaintiffs  were,  in  fact,  endeavoring  to  enforce  a  contract  not  made 
with  themselves,  and  they  did  not  seek  on  the  ground  of  misrepre- 
sentation, any  relief  to  which  they  would  not  have  been  entitled  had 
no  such  misrepresentation  been  made.  It  moreover  appeared,  from 
the  plaintiff's  own  showing,  that  the  demurring  defendants  had 
never  signed  the  subscribers'  agreement  or  Parliamentary  contract, 
or  done  more  than  express  their  willingness  to  take  such  sliares  as 
might  be  allotted  to  them. 

Although  a  court  will  decree  specific  performance  of  an  agree- 
Tncompiefe        mcut  to  scU  sliarcs,  it  wiU  not  interfere   to  compel  the 

griituitous  1      .  ,.  .  1     .  Ill 

transfers.  Completion  ot   a  gratuitous  and   intended,    but  unper- 

fected  transaction.  Thus,  if  a  person  voluntarily  settles  shares  on 
others,  but  does  not  transfer  them,  or  actually  constitute  himself  a 
trustee  of  them,  the  persons  intended  to  be  benefited  by  the  settle- 
ment do  not  acquire  any  equitable  title  to  the  shares  enforceable 
against  the  settler  or  his  representatives,  (m) 


923*     *SECTION  V  —ACTIONS  FOR  MISREPRESENTATION  AND  FRAUD. 

1.  General   Observations. 

The  proper  remedy  for  a  person  who  has  been  induced  by  fraud 
to  become  a  partner  with  another,  or  to  take  shares  in  a  company 
depends,  in  the  first  place  on  who  the  person  is  who  committed  the 
fraud.  Speaking  generally  and  subject  to  certain  qualifications 
which  will  be  noticed  hereafter,  if  the  fraud  complained  of  has  been 
committed  by  the  other  partner  or  the  companj^,   the  person  de- 

(w)  MHlroy  v.  Lord,  8  Jur.  N.  S.  806,  L.  J. 

1198 


cnAi'.  X. 


ACTIONS    J5KT\VI:EN    I'AUTNKUS,    KTC. 


*924 


frauded  lias  tlie  option  of  aflinniiii;^  or  of  r('scin(liii<,'  tlie  contract 
into  which  lie  has  been  induced  to  enter;  and  whether  he  afHrnis  it 
or  disaffirms  it  he  iscntitle.l  to  daina«;-es  for  any  lo.^swhicli  lie  may 
have  sustained  hy  reason  of  the  fraud,  (ji)  Jhit  if  the  frau<l  has 
been  committed  hy  some  third  ])crson  and  is  not  in  ])oint  of  law 
imputable  to  the  other  ])artner  ur  the  eomj)any,  then  thej)ei-son  de- 
frauded has  no  such  option:  he  cannot  rescind  the  contract:  he  can 
only  sue  those  who  defrauded  him  for  damages.'  But  it  will  be 
observed  from  this  general  statement  that  in  cases  of  this  class 
there  is  always  a  preliminar}'  question  to  be  considered,  and 
which,  if  negatived,  leaves  the  complainant  without  any  redress  at 
all:  that  question  is,  Has  he  in  fact  been  induced  by  fraud  to  enter 
into  the  contract  of  which  he  complains?  On  this  preliminary 
question  a  few  observations  may  be  useful. 

No  attempt  is  ever  made  to  give  any  precisedefinitionof  fraud,  or 
to  restrict  by  words  the  circumstances  which  may  be  re-  ^  xjntruth 
garded  as  amounting  to  it  in  point  of  law.     Kew  cases  necessary. 
of  fraud  must  always  be  met  by  new  decisions,  (o)     But  by  the  law 
of  this  country  a  sharp  line  is  drawn  between  a  breach  of  aj^romi^e 
or  the  disappointment  of  hopes  raised  by  the  exj^ression    of  inten- 
tions or  expectations,  on  the  one  hand,  and  an  untrue  statement  on 
the  other  (j??);  and  s];caking  generally  there  is  no  fraud  suf- 
ficient to  support  an  action  for  damages  *or   to   set  aside  a     *024 


(»)  Small  I'.  Attwood,  You.  507; 
Pulsford  V.  Richards,  17  Beav.  87; 
Cruikshank  v.  McVicar,  8  Beav.  106. 
Ami  see  Beck  r.  Kantorowicz,  3  K.  & 
J.  2:i0,  and  cases  of  that  chiss. 

'  When  one  of  a  number  of  persons 
who,  each  with  the  others,  agrees  to 
contribute  money  and  form  a  partner- 
ship for  a  specified  purpose,  represents 
to  another  the  existence  of  facts  on 
which  the  latter  relies,  but  which  do 
not  exist,  the  other  parties  are  not 
bound  by  sucli  n'presentations,  and  the 
contract  is  not  thereby  invalidated,  as 
between  the  party  deceived  and  the  oth- 
ers. Kimmins  r.  Wilson,  8  W.  Va. 
584.  See,  also,  Geddes's  Appeal,  80  Pa. 
St.  442. 

If,  in  the  course  of  negotiations  be- 
tween  two  partners,    pending  an  offer 


by  one  to  sell  out  his  interest  to  the 
other,  a  third  partner,  having  better  op- 
portunities than  either  of  them  to  form 
a  correct  opmion  of  the  value  of  the  in- 
terest in  questions,  voluntarily  expresses 
a  pretended  opinion  misrepresenting  his 
real  belief,  both  of  the  others  believing 
him  sincere  when  he  is  not,  neither  of 
these  will  be  responsible  for  his  want 
of  candor,  and  however  much  his  pre- 
tended opinions  (acquiesced  in  by  both) 
may  influence  either  in  the  final  transac- 
tion, the  sale  will  not,  on  that  account 
be  set  aside.  Dortie  v.  Duzas,  bo  (J a. 
484. 

(o)  2  Sch.  &  Lef.  266. 

(;))  See  Jordan  r.  Money,  5  H.  L.  C. 
185;  Harris  v.  Nickerson,  L.  R.  8  Q.  IJ. 
286. 

1199 


'^•925  ACTIONS    FOR    MISUEPRESENTATION    AND    FRAUD.       [bOOK  III 

contract  in  tlie  absence  of  some  untrue  statement  or  of  some  con- 
cealment which  makes  what  is  stated  substantially  untrue,  {q) 

2.  Untruth  In  the  next  place  the  untrue  statement  must  relate 

must  be  mate-  .'  i     i  i  i  i 

rial  nnd  have     to  somc  material  matter,  and    have   been  made  to  the 

been  relied  .1.  ■,  n.i  it 

upon.  complamant  directly,  or  indirectly  as  one  oi  the  public 

(?•),  and  have  been  in  fact  relied  upon  by  him.  (.s-) 

Whether  the  untrue  statement  must  have   been  untrue    to    the 

3.  Whether  the  knowledge  of  the  person  makinoj  it  is  a  point  still 
haveiiw'n  '^       scarcclv  Settled.     If,  indeed,  he  had  no  honest  belief  in 

known  to  be  so    .,,"111..  n   •.  ,.       i.i      •       •  *.      •    i 

at  the  time.  its  trutli  liis  iguoraucc  ot  its  untrutli  IS  immaterial. 
But  if  he  honestly  believed  it  to  be  true,  courts  of  law  and  courts 
of  equity  have  apparently  taken  different  views;  for  whilst  courts  of 
law  have  held  that  an  action  for  damages  M'ill  not  lie  in  such  cases, 
courts  of  equity  have  held  the  person  making  the  statement 
answerable  for  the  consequences  of  its  untruth,  provided  he  made 
it  in  order  that  it  might  be  acted  upon,  and  it  has  been  acted  upon 
as  he  intended  it  should  be,  (t) 

Assuming  that  on  the  principles  above  explained,  a  person  has  a 
r  •  ,  w     right  to  rescind  a  contract  on  the  ground  of  fraud,  he 

Loss  of  right  to        o  ^  '      _ 

rescind.  may  losc  that  right  in  ouc  of  two  ways,  viz.,  1,  by  his 

own  laches;  and  2,  by  disabling  himself  from  restoring  what  lie 
may  himself  have  received. 

A  person  entitled  to  rescind  a  contract  for  fraud  loses  his  right 
if  he    does  not  repudiate  the  contract  within  a  reasonable  time 

after  the  discovery  of  the  fraud  {u);  and  a  fortiori,  if  after 
*925     *siich  discovery  he  does  anything  to  affirm  the  contract,  or 

anything  which  is  inconsistent  with  his  right  to  rescind  it; 

(q)  See  as  to  concealment,  New  Som-  Eubber  Co.    10  Ch.  515,  it  was  held  that 

brero  Phosphate  Co.  v.  Eriang'er,  5  Ch.  a  contract  might  be  rescinded  for  fraud 

D.  73;  Peek  v.  Gumey,  L.  R.   6  H.  L.  subsequent  to  its  date,  but  rendering  its 

377,  and  13  Eq.   79;    Central  Rail,    of  performance  impossible. 

Venzuelat'.  Kisch,  L.  R.  2   H.   L.   99;  {t)  See  Slim  i?.  Croucher,    1  DeG.   F. 

Oakes  t\  Turquand,  ib.  o2-j;  New  Bruns-  &  J.  518. 

wick,  &c..  Rail.  Co.  v.   Muggeridge,    1  (»)  See,    on    this  subject  generally, 

Dr.  &  Sm.  381.   See,  also,  Gover's  case,  Clough  v.  L.  &  N.  W.  Rail.  Co.   L.   R. 

1  Ch.  D.  182.  7  Ex.  35,  and  as  instances  of  repudia- 

(r)  Thxt  this  is  sufficient  see  Clarke  v.  tion  being  too  late,  see  Denton  v.  Mac- 

Dickson,  6  C.  B.  N.  S.  453.  neil,  2  Eq.  352;   Ashley's  case,  9  Eq. 

{.<?)  Illustrations  of  this  will  be  given  2G3;  Scholey  ».  Central  Rail.  Co.  of  Vene- 

hereafter.     See  Pulsford  r.  Richards,  17  zuela,    ib.   266    note.     Compare   Mac- 

Beav.  87,  and  others  of  that  class.     In  niell's  case,  10  Eq.    503.     Campbell  r. 

the  remarkable  case  of  the  Panama  and  Flemings,  1  A.  &  E.  40. 
South  Pacific  Telegraph  Co.   v.   India 

1200 


issiun 

(7/  lot'J. 


CHAP.  X.]        ACTIONS    FOK    MISREPKESENTATION    AND    FRAUD.  *925 

e.g.,  if,  in  the  case  of  shares  fraudnlently  sold  to  liiin,  lie  attempts 
to  resell  them  («),  or  continues  to  act  as  a  shareholder,  (ij) 

Further,  a  person  induced  by  fraud  to  enter  into  a  contract  can- 
not rescind  it  unless  he  is  himself  able  to  rescind  it  ^^,^^,.^ 
hi  toto,  and  to  restore  the  other  party  to  his  former 
position,  or  unless  his  inability  so  to  do  is  attributable  to  that 
jmrty.  (2)  But  if  the  the  contract  is  severable,  inability  to  rescind 
it  as  to  part  is  not  fatal  to  the  right  to  rescind  it  as  to  another 
part,  {a) 

In  the  simple  case  where  two  parties  only  are  concerned,  viz.,  the 
partner  defrauded  and  the  partner  defrauding,  the  right  casesof  fraud 
of  the  former  to  rescind  the  contract  of  partnership,  ^'.l^'^parry "Jr' 
cannot  for  a  moment  be  doubted.'  But  where  third  t^'"'^''"--*- 
persons  are  concerned  to  whom  no  fraud  is  legally  or  morally  im- 
putable, considerable  difficulty  is  experienced  in  giving  effect  to 
this  right  of  the  party  defrauded,  and  to  the  cnflicting  rights  of 
those  who  have  acted  on  the  faith  of  his  being  a  partner,  and  who 
insist,  therefore,  that  as  between  him  and  them  he  cannot  be  heard 
to  say  that  he  is  not  one.  (/^)'  This  difficulty  is  particularly  felt 
when  a  creditor  of  a  company  seeks  to  levy  execution  against  a 
person  who  is  a  shareholder  therein,  but  who  has  been  induced  to 
become  so  by  fraud;  and  when  the  ^question  arises  whether  such 
shareholder  ought  to  be  put  on  the  list  of  contributories  on  the 
winding  up  of  the  company.  As  regards  the  creditors,  however, 
it  is  clear  that  their  rights  in  no  way  depend  upon  whether  a  de 
facto  shareholder  has  been  induced  to  become  a  shareholder  by 
fraud,  or  not  (c);  and  those  liglits  involve  the  necessity  of  putting 

(.r)  Briggrs'  1  Eq.  483.  en'   another,     lias  has  no  effect  upon 

(//)  Sharpleyr.  Louth  and  East  Coast  their  obligations  to  third  persons  who 

Rail.  Co.  2  Ch.  D.  GG3.  are  not  privy  to  it.     Seawell  i\  Payne, 

{z)  See  Phosphate  Sewage  Co.  v.  5  La.  Ann.  255. 
Hai-tmont,  5  Ch.  D.  394;  Laing  v.  The  liability  of  a  dormant  partner. 
Campbell,  36  Beav.  3;  Clarke  v.  Dick-  however,  may,  it  is  held,  be  avoided  by 
son,  E.  B.  &  E.  148;  Maturin  v.  Tredin-  proof  of  fraad  in  forming  the  partner- 
nick,  2  N.  R.  514,  and  4  ib.  15,  noticed  ship,  if  no  part  of  the  funds  have 
more  fully  hereafter.  been  received  by  such  donnant  partner. 

{a)  See  last  note.  IkLason  r.  Connell,  1  Whart.  381. 

1  See  i)ost,  p.  927,  and  note.  {<-•)  Henderson  v.  The  Royal   British 
(b)  Ex  parte  Broome,  1  Rose  69;  Jef-  Bank,  7  E.    &  B.  356;  Daniel  v.  The 

freysr.  Smith,3Russ.  158;  Macbrider.      Royal  British   Bank,  1  H.  &   N.   681; 
Lindsay,  9  Ha.  574.  Powis  r.  Harding,  1  C.  B.  N.  S.  533  ; 

2  A  deception  practiced  by  one  partner      Howard  v.  Shaw,  9  Ir,  Law  Rep.  335. 

w  1201 


■5^920  ACTIONS    BETWEEN    PARTNERS,    ETC.  [bOOK  III. 

gnch  a  slmrehokler  on  the  list  of  contributories  as  will  be  seen  here- 
after when  that  subject  is  examined,  (d) 
■^920  *Havino^  made  these  preliminary  observations  as  to  the 
rio-hts  of  persons  who  have  been  induced  to  enter  into  con- 
tracts by  fraud  to  rescind  contracts  for  fraud  generally,  it  is  pro- 
];osed  to  allude  shortly  to  actions  for  daniaijjes,  and  then  to  exam- 
ine the  cases  which  bear  more  particularly  on  the  right  to  rescind 
— first,  contracts  between  ordinary  partners  and  their  representa- 
tives; secondly,  contracts  to  take  shares  in  companies. 


2.  Actions  for  damages. 

"Where  a  person  has  been  induced  by  the  false  and  fraudulent 
Actions  for  representations  of  another  to  enter  into  partnership 
misrepresenta-    ^^  .^^^   ^^.^^^  ^^^  actlou  will   clcar'y  lie  at  the  suit  of  the 

first  person  against  the  Sfcond  for  the  recovery  of  damages  in  re- 
spect of  snch  fraud,  {e)  And  if  false  representations  are  made  by 
means  of  advertisements  issued  for  the  purpose  of  inducing  per- 
sons to  take  shares  in  a  company,  any  person  who  is  ensnared  by 
those  advertisements,  and  take  shares  on  the  faith  of  them,  may 
niaintain  an  action  against  those  persons  who  caused  them  to  be 
published,  knowing  them  to  be  false.  (/)'  In  order  to  maintain 
an  action  for  raisre])resentation,  it  is  not  necessary  that  there  should 
have  been  any  direct  communicition  between  the  defendant  and 
the  plaintiff,  {g) 

Actions  against  promoters  and  others  based  on  the  Companies 
act,  1867,  §38,  have  been  already  alluded  to  (A);  as  have  also  ac- 
tions against  promoters  and  others  for  the  recovery  of  money  ob- 
tained by  them  by  frauds  on  companies,  (z) 

{d)  See  infra,  book  iv.  ch.  3,  under  Denton  r.  The  Great  North.  Rail.  Co.  5 

the  head  Contributories.      See,    as  to  E.  &  B.  860;  Watson  v.  Charlemont,  12 

fraud  as  a  defense  to  an  action  for  calls,  Q.  B.  856. 

U^fra.  '  See  Goosey   on  Torts,  494,  495. 

(e)   See  the   cases  in  the  next  two  {g)  See  Clarke  v.  Dickson,  €  C.  B.  N. 

notes,  and  Dobell  v.  Stevens,  3  B.  &  C.  S.  453;  and  see   Bedford  v.  Bagshaw, 

623.  H.  &  N.  538. 

(/)  Davidson  v.   Tullock,    3  McQu.  {h)  Ante,  vol.  i.  pp.  115,  323. 

783;  CuUen  v.  Thompson,   4    ib.  424;  (i)  Ante,  \o\.  \.  \).  bSO  et  seq.,  and  p. 

Bale  V.  Cleland,  4  Fos.  &  Fin.  117;  Ger-  587  et  seq. 
hard  v.  Bates,  2  E.  &  B.  476;  and   see 

1202 


CHAP.  X.] 


EESCISSION    FOR    FKALD. 


*927 


^'3.  Actions  for  rescission  of  contract. 


^927 


(n)  Contracts  betireett  onJitinnj  p(tvt)iers  and  their  representatives. 

Where  a  person  is  invei::;lcd  by  the  false  representations  of  others 
to  become  a  partner  with  them,  the  Court  will  rescind  Rosoission  of 
the  contract  of  ])artnership  at  his  instance;  and  will  partnership. 
compel  those  who  inveigled  him  into  joining  them  to  repay  hiin 
whatever  he  may  have  paid  them,  with  interest,  and  to  indemnify 
him  against  all  claims  and  demands  to  which  he  may  have  become 
subject  by  reason  of  his  having  entered  into  partnership  with  them, 
he  on  the  other  hand  accounting  to  them  for  what  he  may  have  re- 
ceived since  his  entry  into  the  concern,  {ky 


{k)  See  Pillans  v.  Harkness,  CoUes 
Pari.  Ca.  442;  Ex  paiie  Broome,  1  Rose, 
71,  and  1  Coll.  MS,  note;  Hamil  r. 
Stokes,  Dan.  20,  and  4  Price,  161 ;  Stain- 
hank  V.  Fernley,  9  Sim.  556;  Jaiincoy  v. 
Knowles,  8  W.  R.  69.  Cliftbrd  v. 
Brooke,  13  Vcs.  131,  was  not  a  case  of 
this  class;  the  plaintiff  there  sought  to 
recover  money  which  he  had  paid,  not 
for  the  admissior  of  himself,  but  for  the 
admission  of  his  brother  into  partner- 
ship with  the  defendants.  The  plain- 
tiff's remedy  under  those  circumstances 
was  held  to  be  by  an  action  at  law.  An 
action  may  be  sustained  by  the  rescis- 
sion of  a  contract  of  pai-tnership,  on  the 
ground  of  fraud,  or  in  the  alternative 
for  its  dissolution.  Bagot  v.  Easton,  7 
Ch.  D.  1. 

'  Where  one  of  the  parties  to  an 
agreement  of  partnership  has  been  in- 
duced to  enter  into  it  l)y  the  false  and 
and  frauduhmt  representations  of  the 
other,  the  partnership  may  be  declared 
void,  and  the  articles  canceled.  Hynes 
V.  Stewart,  10  B.  Mon.  429;  Howell  v. 
Harvey,  5  Ark.  270;  Smith  v.  Everett, 
126  Mass.  304. 

When  declared  void  upon  tliat  ground, 
theinjui-ed  party,  except  as  regards  cred- 
itors of  the  firm,  should  not  be  regarded 
as  a  partner,  or  suljected  to  any  of  the 


loss  sustained  by  them,  and  Ls  entitled 
to  redress  against  the  perpetrator  of  thf 
fraud  to  the  extent  of  his  injury,  unless 
he  has  continued  the  partnership  aft'n- 
discovering  the  fraud.  Hynes  v.  Stew- 
art, sti2)ra. 

A  court  of  equity  has  jurisdiction  in 
such  case  to  restrain  the  fraudulent 
party  from  using  the  name  of  the  other 
as  a  partner;  and  having  obtained  juris- 
diction for  that  purpose,  may  administer 
complete  relief  in  the  same  suit  by  or- 
dering the  former  to  pay  the  sums  ad- 
vanced or  expanded  by  the  latter  on  ac- 
count of  the  partnership.  Smith  r.  Ev- 
erett, 126  Mass.  304. 

If  a  court  of  equity  finds  a  contract 
of  partnership  to  be  void  in  its  incep- 
tion, on  account  of  the  fraud  of  one 
partner  in  inducing  the  other  to  enter 
into  the  partnership,  it  may  award  as 
damages  that  the  fraudulent  partner 
shall  repay  to  the  other  all  sums  of 
money  the  latter  has  paid  into  the  finn  as 
his  portion  of  the  capital  stock;  pay  him 
a  reasonable  compensation  for  the  tim<' 
he  has  acted  as  co-partner,  and  indem- 
nify him  for  all  liability  arising  out  of 
the  business  in  which  they  have  been 
engaged.  Richards  r.  Todd,  127  Mass. 
167. 

The  defendant,  under  an  oral  agree- 
1203 


*928  ACTIONS    BETWEEN    PARTNERS,    ETC.  [bOOK  III. 

Tlie  case  of  Pillans  v.  Ilarkness  {I),  affords  a  good  example  of 
this.  In  the  spring  of  1709,  four  persons,  Pillans, 
Hark"fess.  Harkness,  Stewart,  and  Denn,  agreed  by  deed  to  be- 
come partners  in  the  fishing  trade,  and  to  share  the  profits  and 
losses  equally,  confining  their  fishing  to  the  west  coasts  of  North 
Britain.  It  was  subsequently  agreed  to  extend  the  fishing  opera- 
tions and  to  increase  the  capital,  and  another  deed  was  executed 
which,  it  appears,  stated  that  the  capital  originally  agreed  to  be 
subscribed  had  been  duly  paid  by  all  the  partners.  Ilarkness  was 
to  take  no  active  part  in  the  partnership  business,  but  Pillans  was 
to  have  the  exclusive  management  of  it  in  the  north,  at  a  salary, 
and  Stewart  and  Denn  were  to  have  the  exclusive  management  of 
it  in  London;  all  proper  accounts  were  to  be  kept  by  Stewart  and 
Denn ;  and  Harkness  was  to  have  free  access  to  the  accounts  of  the 

concern.  Ilarkness,  from  time  to  time,  paid  various  sums 
-928     towards  carrying  on  the  business  of  the  firm,  *but  it  does 

not  appear  that  anything  was  ever  divided  in  the  shape  of 
real  or  pretended  profits.  In  the  summer  of  1711,  Harkness  dis- 
covered that  Pillans,  Stewart,  and  Denn,  instead  of  being  engaged 
in  the  fishing  business  for  the  benefit  of  the  firm,  were  engaged  in 
]M-ivate  speculations  of  their  own  in  the  wine  trade.  He  also  dis- 
covered, that  Pillans  and  Stewart  had  not  contributed  their  shares 

ment  with  the  plaintiff,  which  was  void  as  to  the  utiHty  of  certain  machinery  to 
under  the  statute  of  frauds,  obtained  be  used  by  the  finii,  and  as  to  his  ability 
possession,  by  purchase,  of  certain  prop-  to  conduct  it  successfully  and  profitably, 
ei-ty  belonging  to  the  plaintiff,  as  part  The  remedy  is  at  law.  Maude  v. 
of  the  plamtiff 's  contribution  to  a  busi-  Rodes,  4  Dana,  144. 
ness,  which  such  agreement  provided  Where  one  partner  files  a  bill  against 
that' the  defendant  should  prosecute  for  his  several  partners  for  a  settlement  of 
their  common  benefit:  Held,  that  when  the  partnership  accounts  and  his  share 
the  defendant  refused  to  carry  out  the  of  the  profits,  a  fraud  perpetrated  by 
agreement,  but  used  the  property  so  him  on  one  of  the  defendants,  in  a  for- 
purchased  for  his  own  exclusive  profit,  mer  partnersliip  between  them  Individ- 
equity  might  compel  the  restoration  ually,  by  means  of  which  he  procured 
thereof  to  the  plaintiff  on  such  terms  as  the    funds    contributed    as  his    share 

should  be  just.     Redfield  v.  Widdleton,  of  the  capital  of  the  new  firm,  is  no 

1  Robt   79.  ground  for  annulling  or  rescinding  the 

A  court  of  equity,  in  a  suit  for  a  dis-  contract  of  partnership.     Ingraham  v. 

solution  of  a  partnership,  cannot  take  Foster,  31  Ala.  123. 

cognizance  of  a  claim  of  one   of  the  {I)   CoUes,   442    (called    Harkness  r. 

partners  complainant  against  the  part-  Steward,  and  Steward  v.  Harkness,  m 

ner  defendant,  for  damages  for  alleged  the  table  of  cases  to  the  Dublin  edit,  of 

fraud  of  such  defendant  partner,  con-  1789). 

sisting  of  alleged  false  representations 
1204 


CHAP.  X.]  KESCISSION    FOE    FKAUD.  *929 

of  the  capital  of  the  linn,  and  that  rilhms,  who  had  been  repre- 
sented as  a  person  acquainted  with,  and  skilled  in  Ushing,  was,  in 
truth,  wholly  ignorant  of  fishing,  and  of  everything  relating  to  the 
lishing  trade.  Ilarkness  alleged  that  he  confided  in  the  manage- 
ment of  Pillans  and  Stewart  without  suspicion  until  July,  1711, 
when  he  pressed  Stewart  to  let  him  see  the  partnership  accounts; 
that  after  many  frivolous  excuses  he  was  shown  many  line  books, 
neatly  bound,  which  he  was  told  were  the  partnership  books;  that 
not  beinof  versed  in  accounts  he  took  an  accountant  with  him  to 
examine  them;  but  that  to  his  surprise  the  books,  when  opened, 
were  found  to  consist  entirely  of  blank  paper,  without  a  word  or 
figure  written  in  them.  Ilarkness  thereupon,  finding  that  he  had 
been  fraudulently  drawn  in  and  im])0sed  upon  by  Pillans  and 
Stewart,  filed  a  bill  against  Pillans,  Stewart  and  Denn,  for  a  dis- 
covery of  their  transactions  under  the  ]tartnersliip,  and  for  the  re- 
covery of  his  money,  (m)  The  Chancellor  decreed  Stewart  and 
Pillans  to  account  for  all  moneys  paid  by  the  pl.aintilf  to  them  or 
either  of  them,  and  to  pay  what  should  appear  due  to  him  with 
interest,  the  plaintiff  to  be  absolutely  discharged  from  the  articles, 
agreements,  and  partnerships,  Stewart  and  Pillans  to  indemnify  him 
from  all  costs  and  damages  whatsoever  touching  the  articles,  or  any 
partnership  in  respect  thereof,  and  to  pay  the  costs  of  the  suit. 
This  decree  was  affirmed  on  appeal  to  the  House  of  Lords. 

*A  more  recent  case  of  the  same  description  is  Rawlins  v.     *92y 
Wickham  {n).     There  the  plaintiff  was  induced  by  the  mis- 
representations of  two  persons,  A.  and  B.,  to  enter  into  Although  the 
partnership  with  them  as  bankers,  and  he  and  they,  Eu'veascl-nnin- 

-  .  ii     •      1        •  r        i.'  ,         '        ed  tlie  truth. 

after  carrvino:  on  their  business  for  four  years,  trans-   ^    ,. 
ferred  it  to  other  parties.     Shortly  after  this  transfer,  wickham. 
the  plaintiff  for  the  first  time  became  aware  of  the  falsity  of  the 
statements  by  which  he  had  been  induced  to  l)ecome  a  partner.    He 
brought  an  action  against  A.  and  13.  lor  their  misrepresentations; 
pending  the  procedings  at  law,  A.  died,  but  the  action  was  continued 

(m)  The  defendants  relied  on  the  lapse  tiff,  and  that  such  partnership  had  been 
of  time  and  laches  and  acquiescence  on  entered  into.  The  evidence,  howevor, 
the  part  of  the  plaintiff;  and  particuhirly  failed  to  show  that  the  plaintiff  had  any 
on  the  fact  that  he  had  entered  into  an-  knowledge  of  this  alletred  otlicr  part- 
other  agreement  with  them  to  the  effect  ncrship.  or  that  he  wa.s  aware  of  what 
that  the  defendants  should  become  part-  had  been  g-oing:  on,  until  shortly  before 
ners  in  another  fishing  concern  and  he  fileil  his  bill, 
share  their  profits  in  that  with  the  plain-  (»}  1  Giff.  355,  and  3  De  G.  k  J.  304. 

1205 


*930  ACTIONS    BETWEEN    PARTNERS,    ETC.  [bOOK  III. 

a2;;aiiist  B.,  and  a  verdict  against  him  for  damages  was  obtained. 
After  tlie  verdict  B.  became  insolvent,  and  thereupon  the  phiintitf 
filed  a  bill  against  B.  and  the  executors  of  A.,  praying  that  the  part- 
nership into  which  he  had  entered  miglit  be  declared  void,  tliat  the 
partnership  articles  might  be  cancelled,  that  the  defendants  might 
be  decreed  to  repay  him  the  sum  paid  by  him  on  entering  into  the 
partnership,  with  interest,  and  to  execute  a  sufficient  indemnity 
against  the  outstanding  debts  and  liabilities  which  the  plaintiff  had 
or  might  become  subject  to  in  respect  of  the  dealings  and  transac- 
tions of  the  partnership,  and  for  an  account  of  such  debts  and  liabil- 
ities, and  of  the  monies  already  paid  by  the  plaintiff  on  account  of 
the  partnership  debts  and  for  repayment  of  such  monies  with  inter- 
est. A  decree  was  made  in  the  plaintiff's  favor,  and  an  appeal  by 
A.'s  executors  was  dismissed.  In  this  case  the  deceased  partner  had 
clearly  been  a  party  to  the  misrepresentation;  and  although  it  was 
proved  that  he  was  ignorant  of  the  real  truth,  and  had  not  stated 
that  to  be  true  whicli  he  knew  to  be  false,  still  it  was  held  that  he 
ought  not  to  have  stated  what  he  did  not  know  to  be  true,  and  that 
lie  was  answerable  for  the  falsity  of  his  own  assertions.  It  was  also 
held  that  the  plaintiff  was  entitled  to  assume  that  the  statemenis 
made  to  him  were  true  until  he  had  reason  to  suppose  that  they 
were  not;  and  that  it  was  no  answer  to  him  that  if  he  had  examined 
the  partnership  books  he  would  have  discovered  the  true  state  of 

affairs  (o). 
*930         *Besides  being  called  upon  to  rescind  agreements  for  the 

formation  of  a  partnership,  Courts  are  frequently  applied  to 
Rescission  of      by  partners,  or  those  claiming  under  them,  to  rescind 

contracts  made  ^        i.^     ^i  ^  •     i.-  j  •    ii 

on  a  dissolution  agreements  of  other  descriptions,  and  especially  agree- 

of  partnership.  ,  ,  p,  t        i     <.• 

ments  come  to  on  or  after  a  dissolution. 
Supposing  every  member  of  a  firm  to  be  stu  juris,  any  one  may 
retire  upon  any  terms  to  which  he  and  his  co-partners 
not  set  aside  if   j^^^y  clioosc  to  asscnt;  and  if  there  is  no  fraud  or  con- 

tliere  has  been  J  ' 

no  fraud.  ccalment  on  either  side,  all  will  be  bound  by  any  agree- 

ment into  which  he  and  they  may  enter,  although  it  may  ultimately 
turn  out  that  a  bad  bargain  has  been  made.' 

(o)  See,  also,  Jauncey  v.  Knowles,  8  rely  on  the  defendant's  statements. 

W.  R.  69,  where  there  was  also  means  ^A  settlement  of  partnership  accounts 

of  knowledge.      Compare  Jennings  v.  and  the  sale  by  one  partner  to  another 

Broughton,  17  Beav.  234,  and  5  De  G.  of  his  interest,  fairly  and  deliberately 

M.  &  G.  126,  where  the  plaintiff  did  not  made,  and  evidenced  by  their  written 

1206 


CIIAl'.   X.]  RESCISSION'    Foil    1-KALI).  *931 

For  example,  in  Kniglit  v.  Mnrjoriljaiiks  (p)  certain  persons  were 
i)artiier8  in  a  speculation  in  Australia.    The  speculation   , 

■^  .      '  ^  '  KniRht  V.  Mar- 

was  not  at  first  successful,  and  it  was  necessary  for  the  J"''''^'*"''^. 

partners  frequently  to  contribute  lari^e  sums  of  money  for  the  pur- 
pose of  carrying  it  on.  The  plaintitf,  who  was  one  of  tlie  partners, 
was  greatly  pressed  for  money,  and  was  uiuible  to  contribute  his  i»ro- 
portion  of  the  required  eai)ital.  A  sum  of  upwards  of  5000^.  was 
alleged  to  be  due  from  him  to  the  concern;  he  never  questioned  the 
accuracy  of  this  stateuieiit,  but  as=ented  to  its  correctness,  and  he 
never  examined  or  sought  to  examine  any  books  or  accounts;  and  in 
cjnsideration  of  the  sum  so  alleged  to  be  due,  and  of  250Z.  cash,  he 
assigned  all  his  interest  in  the  concern  to  his  co-partners,  and  released 
them  from  all  demands.  The  speculation  afterwards  proving  profit- 
able, he  sought  to  set  aside  this  transaction  on  the  ground  of  fraud  and 
inadequacy  of  consideration.  But  as  no  fraud  was  proved,  as  the 
])laintiff  knew  very  well  what  he  was  about,  as  he  was  content  that  no 
accounts  should  be  taken,  and  that  no  person  should  act  as  his  ad- 
viser, and  as,  although*  he  was  undoubtedly  in  distress,  and  his  co- 
partners knew  it,  yet  they  had  taken  no  unfair  advantage  of  that 
circumstance,  it  was  held  both  by  Lord  Langdale,  and  by  Lord  Cot- 
tenham  on  appeal,  that  the  transaction  was  binding  and  could  not 
be  impeached  (q). 

*Any  arrangement  which,  on  the  principle  here  adverted  *931 
to,  is  binding  on  the  partners  themselves,  will  also,  as  a  gen- 
eral rule,  be  binding  as  between  the  trustee  in  bankruptcy  or  exe- 
cutors of  the  retiring  partners  on  the  one  hand,  and  the  continuing 
partners  and  their  trustees  or  executors  on  the  other,  (r)  But  as 
regards  trustees  in  bankruptcy,  it  must  not  be  forgotten  that  they 
can  set   aside   arrangements   entered    into    in  fraud   of  creditors, 

agreement,  signed  and  sealed,  will  not  ler's  interest  as  being  of  less  value  than 

bft  set  aside  for  slight  and  trivial  rea-  it  was,  a  ground  for  relief.      Gedde's 

sons.     Gage  v.  Parmelee,  87  111.  .129.  Appeal,  80  Pa.  St.  442. 

Where  partners  in  an  iron  furnace,  (/>)  11  Beav.  822,  and  2  Mac.  &G.  10. 

through  a  third  person,  bought  the  in-  f7)So\  also.  Ex  parte  Peake,  1  ]\radd. 

terest  of  a  fellow,  concealing  that  the  34G;  Ram.sbottoin  v.  Parker,  GMadd.  5; 

purchase  was  for  them:     Held,   that  M'Lure  v.   Ripley,   2  Mac.  &  G.  274; 

this  was  not  per  se  fraudulent:  nor  was  Cockle  v.  Whituig,  Taml.  55. 

his  allegation  in  a  bill  in  equity  brought  (r)  Ex  jiarte  Peake,    1   Madd.   346; 

six  years  afterwards,  that  a  fellow,   at  Ramsbottom  r.   Parker,   6    Madd.    5; 

the  time  of  the  sale,  represented  the  sel-  Luckie  v.  Fc  -syth,  3  Jo.  &  Lat.  ;588. 

1:^07 


*932  ACTIONS    BETWEEN    PAKTNERS,    ETC.  [bOOK  III. 

altliousjli  sucli  arranf^ements  may  be  binding  as  between  the  parties 
to  them  and  their  respective  executors,  {s) 

Notwithstanding  the  inability  of  a  retiring  partner,  and  of  those 
Agreements       claiming  Under  him,  to  avoid  an  agreement  fairly  come 

made  on  a  dis-  ,   .  i   i   •  .1  i   i-    'i.!  1 

solution  and      to  between  him  and  his  co-partners,  tlie  good  laitli  ana 

based  on  false  11.  i-i  ^  -i.i. 

accounts.  open  dealing  whicii  one  partner  lias  a  right  to  expect 

from  another  never  require  to  be  more  scrupulously  observed  than 
when  one  of  them  is  retiring  upon  terms  agreed  to  upon  the 
strength  of  representations  as  to  the  state  of  the  partnership  ac- 
counts; and  an  agreement  entered  into  on  a  dissolution  will  be  set 
aside  if  it  can  be  shown  to  have  been  based  upon  error  or  to  have 
been  tainted  by  fraud,  whether  in  the  shape  of  positive  misrepre- 
sentation or  of  concealment  of  the  truth.  Thus,  in  Chandler  v. 
Chandlers  Dorsctt  (^),  the  plaintiff  and  the  defendant  dissolved 
Dorsett.  partnership;  an   account  was  drawn  up  by  the  defend- 

ant, who  made  it  appear  that  there  was  a  balance  against  the  plain- 
tiff. The  jjlaintiff  gave  his  note  for  the  amount  of  this  balance, 
and  afterwards  having  discovered  mistakes  in  the  account,  filed  a 
bill  for  a  new  account.  The  defendant  pleaded  an  account  stated: 
but  the  Court  decreed  that  the  defendant  should  come  to  a  new  ac- 
count, and  that  what  should  appear  to  be  due  on  taking  it  should 
spittair  ^®  P^^*^    with   interest.      So,    in   Spittal  t'.  Smith  (ii), 

Smith.  where  the  plaintiff  was  entitled  to  a  share  of  the  pro- 

duce of  a  whaling  voyage,  and   the  defendant  paid  him  a  sum  of 

money  as  his  share,  for  which  the  plaintiff  gave  a  receipt; 
*932     it  was   held  that   as  there  had  been  concealment  on  *tlie 

part  of  the  defendant,  the  ])laintiff  was  entitled  to  an 
inqiiii-y  as  to  whether  certain  deductions  which  had  been  made 
were  proper. 

As  has  been  more  than  once  observed  in  the  course  of  the  pres- 
Arrangcments  eut  treatise,  the  principles  illustrated  by  the  foregoing 
peUed  partner,  decisions  apply  most  strongly  to  the  case  of  a  partner 
who  is  expelled  by  the  others.  Powers  of  expulsion  are  always 
construed  strictly,  and  unless  they  are  exercised  with  perfect  good 
faith,  the  expulsion  wnll  be  declared  void,  and  the  partner  wrong- 
fully expelled  will  be  restored  to  his  position,  and  will  not  be  held 

(s)  See  Anderson  r.  Maltby,  2  Ves.  J.  5  C.  P.  478. 

255;  Billiter  v.  Young,  6  E.  &  B.  40;  {t)  Finch.  431.      See,  too,  Maddeforcl 

Warden  v.  Jones,   28  Beav.  497;  Heil-  v.  Austwick,  1  Sim.  89. 

but  V.  Nevill,  L.  R.  4  C.  P.  334,  aifirmed  (kJ  Taml.  45. 

1208 


CHAP.  X.]  RESCISSION    FOR   FKAUD.  *033 

bound  l>j  accounts  which  may  have  been  sii^iieJ   by  hiui    in    i^i^n.j- 
rance  of  material  facts,  (a?) 

Hitiierto  the  arrangement  entered  into,  and  afterwards  callel  in 
question,  has   been   supposed  to  have   been  made  be-   AKreenu-nts 

T.  '  if  ^  niiKii-  with  the 

tween  the  partners  themselves.  But  more  difficulty  ,7f';[%,'.'J^^|.j'' 
arises  where  an  arrangement  is  entered  into  between  pariiitr. 
the  re)>resentatives  of  a  deceased  partner  on  the  one  hand,  and  the 
continuing  partners  on  the  other.  Two  cases  have  here  to  be  con- 
sidered, according  as  the  representative  of  the  deceased  is  or  is  nut 
himself  a  partner  in  the  firm.   ' 

If  an  executor  of  a  deceased  partner  is  not  a  memljer  of  the 
firm,  it  is  competent  for  him  and  the  surviving  part-  inhere  the 
ners   to    agree    that  the  share  of  the  deceased  shall  be   [fnou"msdf 
ascertained  in  a  particular  way,  or  be  taken  at  a  certain  spanner. 
value.     And  although  it  has  been  said   that  the  creditors,  or  other 
persons  interested  in  the  estate  of  the  deceased,  may  impeach  such 
an  agreement  by    instituting   proceedings    against    the   surviving 
partners  and  the  executors  of  the  deceased  (y),  still   agreements  of 
the  kind  in  question  cannot  be  successfully  im])eached,  unless  there 
has  been  some  fraud  or  collusion    between  them  and  the  executors. 
In  Davies?;.  Davies  (z)  Lord  Langdale  observed: — 

"It  has  been  said  in  the  course  of  the  argummt,  that  in  a  suit  constituted  as 
this  is  a!2:ainst  the  executor  and  sun'i\dng:  partner  of  the  testator,    pjwies  v. 
for  an  account  of  the  partnership  transactions,  it  was  not  necessary    i^nvies. 
to  prove  the  fraud  and  colhision  which  are  charged  in  the  bill,  and  the 
case  of  *Bowsher  r.  Watkins  was  cited  in  supi>ort  of  that  proposition.      I      *933 
well  recollect  that  there  were  special  circumstances   which  induced  Sir 
John  Leach  to  come  to  the  conclusion  he  did  in  that  case,  and  that  the  decision 
was  far  from  establishing  the  general  proposition  that  in  every  case  a  bill  might 
be  filed  agamst  an  executor  and  surviving  partner  of  the  testator  without  charging 
and  proving  fraud  or  collusion.     In  this  case  there  are  no  special  circumstances. 
It  is  a  bill  filed  by  persons  beneficially  interested  in   the  testiitor's  estate  against 
the  executor  and  the  survinng  partner,  and  it  seeks  to  have  the  partnei-ship  ac- 
counts now.     The  defendant,  the  survnving  partner,  by  his  plea  avers  that  an  ac- 
count was  settled  with  the  executor  on  the  .list  of  December,  1832,  and  that,  if  un- 
impeached,  is  a  sufficient  defense  to  the  bill.  " 

Later  cases  are  in  conformit}'  with  this  decision,  (a) 

(.r)  See  Blisset  v.  Daniel,  10  Ha.  538;  (z)  2  Keen.  534. 

as  to  damnges,  see  Wood  r.  Woad,  L.  {a)  Chambers  r.  Howell.  11  Beav.  fi: 

R.  9  Ex.  190,  noticed  ante,  vol.  i,  p.  8")1.       Stainton  r.  The  Carron  Co.  l!^  Beav.  14(1: 

(ij)  See  Bowsher  c.  Watkins.  1  R.  &      and  a.s  to  accounts  settled  by  one  of  several 
M.  277;  Gedge  v.  Traill,  ib.  '2c<l.  executors,  Smith  v.  Everett.  27  Beav.  446. 

1209 


*93i  ACTIONS    BETWEEN    PARTNERS,    ETC.  [jJOOK  Ul. 

If  there  lias  been  fraud  or  collusion  between  the  surviving  part- 
ners and  the  executors  of  the  deceased  partner,  the  case  naturally 
Effect  of  fraud  ^ssumcs  a  different  aspect,  and  any  arrangement  be- 
andcouusion.  ti^^ceu  thcui  will  be  liable  to be  set  aside  at  the  instance 
of  the  persons  interested  in  the  estate  of  the  deceased,  (b)  And, 
even  although  there  be  no  fraud  or  collusion,  still,  if  the  executor 
has  obtained  less  than  the  true  value  of  the  deceased's  share  in  the 
partnership  estate,  the  executor  may  be  liable  as  for  a  devastavit, 
although  the  surviving  partner  may  be  protected  against  all  demands. 
But  if,  in  a  case  of  difficulty,  the  executor  has  acted  with  a  bond 
fide  view  to  do  his  best  for  the  estate  he  represents,  the  Court  will 
not  be  willing  to  make  him  account  for  what,  without  his  willful 
default,  he  might  have  received  from  the  surviving  partners,  (c) 

If  a  partner  dies  and  leaves  his  co-partner  his  executor,  much 
2.  Where  the  ^^'P^atcr  difficulty  is  met  with  than  in  the  case  last  sujv 
is  Muileif  a^^  posed.  By  the  present  hypothesis  the  executor  is  in- 
partuer.  vested  with  two  characters,  and  his  interest  as  surviv- 

ing partner  is  often  in  conflict  with  his  duty  as  representative  of 
the  deceased.  This  conflict  of  duty  and  of  interest  renders  it 
almost  impossible  for  the  executor  to  enter  into  anyarrange- 
*!.<34  nient  with  respect  *to  the  share  of  the  deceased  in  the  part- 
nership estate  which  those  interested  in  that  share  may  not 
afterwards  succeed  in  setting  aside,  {d) 

In  Wedderburn  v.  Wedderburn  (e),  a  leading  case  on  this  sub- 
...  ,,   ,  iect,  an  account  of  a  deceased  partner's  estate  was  di- 

\\  edaerburn  V.     J        '  J 

wedderhuru.  j-cctcd  after  a  lapse  of  thirty  years,  and  repeated 
changes  in  the  firm,  and  after  several  deeds  and  a  release  had  been 
executed  by  the  parties  beneficially  interested.  The  surviving- 
])artners  were  the  executors  of  the  deceased,  and  were  guardians  of 
the  persons  beneficially  entitled  to  his  share,  and  the  settlements 
and  releases  were  executed  in  ignorance  of  the  true  state  of  the 
partnership  accounts.     So  in  Millar  v.  Craiijf  f\  where 

Millar  i;.  Craig.     ^  i-     i     i  •         _£«  ,.       , 

one  partner  died,  leaving  tour  executors,  oi  wliom  two 

(&)  As  in  Cook  v.   CoUingridge,  Jac.  tered  for  payment  of  the  share  of  the 

607;  Rice  v.  Gordon,  11  Beav.  265.  Less  deceased. 

than  fraud  or  colkision  will  justify  an  (c)  See  Rowley  v.  Adams,  7  Beav.  395. 

action  against  an  executor  of  a  deceased  (d)  See  Cook  v.  Collingridge,  Jac.  607. 

partner    and    the  surviving  partners,  (e)  2  Keen,  722,  and  4  M  &  Cr.  41. 

Travis  r.  Milne,  9  Ha.  141,  but  will  not,  (/)  6   Beav.   433;    in   this    case  no 

it  is  apprehended,  invalidate  arrange-  question  was  raised  as  against  the  part- 

ments  into  which  they  may  have  en-  ners  who  were  not  executors. 

1210 


CHAP.  X.]  RESCISSION   FOR    FRAUD.  *935 

were  members  of  tlie  firm;  an  account  was  settled  between  tlie  ex- 
ecuturs  and  the  residuary  legatees,  and  releases  were  executed;  but 
errors  having  been  ]M'oved  in  the  accounts,  the  releases  were  set 
aside,  and  the  accounts  were  re  o]:)ened.  Again  in  gfocjtonv 
Stocken  v.  Dawson  (g),  a  partner  by  his  will  author-  i>awbon. 
ized  a  sale  of  his  sliare  to  his  co-]jartner,  whom  he  appointed  one 
of  his  executors.  Tlie  surviving  partner  purchased  the  siiare  of 
the  deceased  at  a  valuation,  but  the  purchase  was  set  aside  at  the 
suit  of  the  son  of  the  deceased,  after  a  hijise  of  seven  years.  So  in 
liice  V.  Gordon  (h),  where  a  partner  died,  some  of  his 

,       .        1       ,      .    .  .  ,  .  J    Rice «.  Gordon. 

co-partners  obtained  administration  to  his  estate,  and 

sold  part  of  the  assets  of  the  deceased  to  another  of  the  partners,  but 

at  an  under  value;  the  sale  was  set  aside  at  the  suit  of  a  creditor. 

In  all  these  cases  there  was  some  ground  for  setting  aside  the  ar- 
rangement made  by  the  executors,  in  addition  to  the  niffifuu posi- 
mere  lact  that  they  were  also  surviving  partners.     Jiut,  semative. 
as  observed  by  L(jrd  Eldon  in  Cook  v.  Collingridge  (?'),  ''one  of  the 
most  firmly  established  rules  is,  that  persons  dealing  as  trustees  and 
executors  must  put  their  own  interest  entirely  out  of  the  question; 
and  this  is  so  difficult  to  do  in  a  transaction  in  which  they 
are  dealing  with  themselves  that  the  Court  will  not  ^inquire    *935 
whether  it  has  been  done  or  not,  but  at  once  says  such  a 
transaction  cannot  stand."  (A:) 

However,   a  surviving  partner  who  is  the  executor  of  his  de- 
ceased co-partner,  mav  retain  out  of  his  assets  what  is   Risihtof  re- 

"  .  .  tainor  out  of 

due  from  the  deceased  to  himself  on  taking  the  part-  assets. 
nership  accounts.  (1) 


(6.)     Contracts  to  take  shares  in  companies. 

The  foregoing  principles  are  as  applicable  to  companies  as  part- 
nerships; but  in  ap])lyiiig  them  to  companies  care  must  be  taken 
not  to  lose  sight  of  the  rights  of  creditors;  and  for  this  purpose, 
it  is  necessary  to  distinguish  companies  which  are  being  wound 
u])  from  companies  which  are  not  in  that  ]>o&ition. 

(g)  9  Beav.  239.  lengfth  hereafter,  and  the  subject  above 

(A)  11  Beav.  265.  noticed  will  be  again  adverted  to  on 

(i)  Jac.  621.  that  occasion. 

(A-)  The  position  of  the  executors  of  (0  Morris  v.  Moiris,  10  Cli.  6^,  where 

the  deceased  partner  will  be  examined  at  the  account^s  were  still  un.settlt'd. 

1211 


*936  ACTIONS    BKTW£E>I    TARTXEES,    ETC.  [cOOK  III. 

After  the  winding-up  of  a  company  has   commenced,  it  is  too 

1.  Companies  late  foi"  a  shareholder  to  repudiate  his  shares  on  tlie 
up.  ground  of  fraud;  even  although  that  fraud  maj  in 
point  of  law  be  imputable  to  the  company,  and  may  have  been 
discovered  since  the  winding-up  commenced.  Tliis  was  decided 
in  Oakes  v.  Turquand  {m),  and  is  settled  law,  and  is  based  upon  the 
tjrourid  that  such  fraud  affords  no  answer  to  the  claims  of  the  cred- 
itors of  the  company. 

But  where  the  company  is  not  being  wound  up,  the  right  of  a 

2.  Companies     person  who  has  been  induced  by  the  fraud  of  the  com- 

not  being  ■■  .       ,  i .  i  i  i 

wound  up.  pany  to  take  shares  in  it,  to  repudiate  those  shares  and 
to  be  relieved  from  them  is  indisputable;  provided  1,  the  fraud  of 
which  he  complains  is  prov^ed  and  is  sufficiently  material;  and  2,  he 
has  not  deprived  himself  of  his  right  of  repudiation  by  his  own 
laches,  or  by  conduct  inconsistent  with  such  right,  (n) 

Thus  in  Kisch  i).  Central  Railway  Company  of  Venezuela  (o), 
Kischf.cen-  the  prospcctus  in  effect  stated,  (1.)  That  the  company 
Company  of  ^i^d  obtained  a  concession  from  a  foreign  government; 
Venezuela.  ^q.)  That  the  Contractor  had  guaranteed  a  dividend  of 
*936  two-and-a-half  per  "^cent.  on  the  paid-np  capital  during  the 
construction  of  the  works,  and  (3.)  That  the  foreign  gov- 
ernment had  guaranteed  a  dividend  of  nine  per  cent,  on  the  paid- 
up  capital  for  twenty  years.  The  real  facts  were  (1.)  That  the 
company  had  for  a  large  sum  bought  a  concession  made  to  an- 
other company;  (2.)  The  contractors'  guarantee  was  limited  to 
20,000Z.,  the  capital  of  the  company  being  500,000Z.;  (3.)  The  gov- 
ernment guarantee  only  came  into  operation  in  the  event  of  the 
company  failing,  witliont  any  default  of  its  own,  to  realize  a  profit 
of  nine  per  cent,  on  its  paid-up  capital  from  its  business.  Tlie 
memorandum  of  association  empowered  the  company  to  purchase 
concessions,  and  the  agreement  for  the  purchase  of  the  concession 
already  obtained  by  others  was  referred  to  in  the  company's  arti- 
cles, but  was  not  disclosed  in  them.  The  court  held  that  the  mis- 
representations in  the  prospectus  were  such  as  to  entitle  a  person 
taking  shares  on  the  faith  of  it  to  rescind  his  contract,  although  lie 
was  not  entitled  to  rely  upon  his  own  ignorance  of  the  memoran- 

{»,)  L.  R.  2  H.  L.  325;  Kent  v.  Free-  (o)  3  DeG.  J.  &  Sm.  122;  afif.  L.  R.  2 

hold  Land  Co.  3  Ch.   493,  revei-sing  S.  H.  L.  99,  under  the  name  Dkcctors  of 

C.  4  Eq.  588.  Central  Rail.  Co.  of  Venezuela  v.  Kiseh. 

(«)  As  to  which,  see  ante,  p.  114. 

1212 


CIIAl'.  X.]  RESCISSION    FOR    FRAUD,  *037 

(Inm  and  articles  of  association,  and  of  what  was  there  disclosed. 

In  Smith  v.  Reese  Ilivcr  Company  (p),  the  prospectus  described 
some  silver  mines  abroad  which  the  company  had  con-  smith  t-.  Reese 

i"         1       1  1         River  Com- 

traeted  for,  and  proposed  to  work  as  extremely  valuable,  iw»y- 
whereas  in  fact  they  were  wholly  worrhless,  and  were  afterwards 
given  up  by  the  company  for  others,  which  were  more  promising. 
The  directors  who  issued  the  prospectus  did  not  know  that  the  mines 
referred  to  in  the  prospectus  were  worthless,  they  having  themselves 
been  duped;  but  the  court  held  that  a  person  who  had  taken  shares 
on  the  faith  of  the  prospectus  was  entitled  to  rescind  his  contract,  and 
to  have  the  company  restrained  from  suing  him  for  calls,  (q) 

in  Ross  V.  Estates  Investment  Company  (r),  a  prospectus  was 
issued  bv  the  directors  of  a  comiiany  after  its  formation,   Rossi-.  Estates 

1      1     "  1      ^<  1      I  1     1  •    1       /•  Investment 

and  the  prospectus  stated,   lalsely,   tiiat   halt  the  nrst  company. 
issue  of  shares  had  been  already  subscribed  for,  and  that  the  comjiany 
had  contracted  for  the  purchase  of  two  ])roperties,  on  one  of 
*whicli  the  vendor  had  already  spent  70,000^.     A  person     *037 
who  had  been  induced  to  take  shares  in  the  company  on  the 
faith  of  this  prospectus,  was  held  entitled  to  rescind  his  contract, 
to  recover  from  the  company  the  money   he  had  paid  to  it  for  the 
shares,  to  have  his  name  removed  from  the  register  of  shareholders, 
and  to  have  the  company  restrained  from  suing  him  for  calls. 

In  Henderson  v.  Lacon  (s)  the  prospectus  stated,  falsely,  that 
the  directors  and  their  friends  had  subscribed  a  larse  „    ^ 

C)       Henderson  v. 

portion  of  the  capital;  and  a  shareholder  who  had  ap-  Lacon. 
plied  for  and  obtained  shares  on  the  faith   of  this  prospectus,  was 
held  entitled  to  repudiate  his  shares  and  to  have  his  money  back, 
and  to  have  his  name  removed  from   the  register  of  members,  and 
to  be  indemnified  b}^  the  directors. 

Moreover,  in  such  cases  as  these,  the  plaintiff  is  entitled  to  relief, 
although  a  petition  to  wind  up  the^ompany  may  be  presented  after 
action  brought,  (t) 

These  cases  may  be  conveniently  contrasted    with  the  following 
in  which  the  misrepresentation  relied  upon  was  held  prnudnot 
not  to  be  sufficiently  material,  or  not  to  have  been  re-  """'^■■'i'- 
lied  upon  by  the  plaintiff  so  as  to  entitle  him  to  relief. 

ip)  L.  R.  4  H.  L.  64,  and  2  Eq.  264.  (r)  L.  R.  3  Eq.  122.  aff.  3  Ch.  6S3. 

(q)  See,   as  to  the   immateriality  of  (s)  5  Eq.  249. 

Irnowledge  on  the  part  of  the  directors  (t)  Smith   r.   Reese    River    Co.    and 

that  their  statements  were  false,  aiiie,  Henderson  v.  Lacon,  ubi  supra. 


pp.  319,  320. 


1213 


*938  ACTIONS    BETWEEN    I'AllTNERS,    ETC.  [bOOK  III. 

In  Pulsford  v.  Eichards  {n\  the  projectors  of  a  Belgian  railway 
Private  ar-         issued  a  prospectus  for  the  formation  of  a  company, 

rangementsby  .  i  i  ,  p  i     ^       ^i  -i 

promoters.  Stating  that  they  transterred   to  tlie  company  the  cun- 

Pui  ford  cession  obtained  from  the  Belgian  government,  and  all 

Richards.  ^\^q  benefits  arising  from  it,  subject  to  certain  specified 

reservations  in  favor  of  the  promoters  for  reimbursement  of  ])re- 
liminary  expenses.  The  plaintiff,  acting  on  tlie  faith  of  this  pros- 
pectus, applied  for  and  accepted  shares  in  the  company,  but  after- 
wards filed  a  bill  against  the  projectors  for  a  return  of  all  moneys 
paid  by  him  in  respect  of  such  shares,  with  interest,  offering  to 
return  the  shares  and  all  dividends  received  on  account  of  them. 
The  grounds  on  which  the  plaintiff  sought   to  rescind  his  contract 

were  substantially:  (1),  that  an  arrangement  had  been  made 
*038     by  the  promoters  with  an  engineer  highly  ^beneficial  to  him 

and  detrimental  to  the  company,  and  that  this  arrangement 
was  in  no  way  alluded  to  in  the  prospectus;  and  (2),  that  the  promo- 
ters had  appropriated  to  themselves  20,000  shares  in  the  company, 
in  addition  to  the  benefits  expressly  reserved  to  them  in  the  prospec- 
tus. The  Court,  however,  held  that  there  was  no  such  fraud  as  was 
sufiScient  to  enable  the  plaintiff  to  rescind  the  contract  into  which 
he  had  entered,  and  his  bill  was  dismissed  with  costs.  As  regards 
the  shares,  the  Court  was  of  opinion  that  the  directors  took  the 
shares  bond  fide,  and  that  the  number  of  shares  allotted  by  them  to 
themselves  and  the  engineer  was  not  a  fact  so  material  that  the 
knowledire  of  it  was  a  matter  which  the  directors  were  bound  to  com- 
municate  to  the  public,  in  order  to  enable  them  to  come  to  a  sound 
conclusion  as  to  the  probable  success  of  the  undertaking  in  which 
they  were  invited  to  take  a  part.  As  to  the  concealed  arrangement 
with  the  engineer,  the  Court  came  to  the  conclusion  that  the  services 
performed  and  to  be  performed  by  him  must  have  been  performed 
by  some  one;  that  he  was  peculiarly  well  fitted  to  perform  them; 
that  supposing  the  remuneration  agreed  upon  to  have  been  exces- 
sive, still  that  would  only  entitle  the  shareholders  to  have  the  amount 
of  excess  paid  by  the  directors  themselves,  and  that  the  non-disclosure 
to  the  public  of  the  agreement  made  with  the  engineer  was  not  the 
suppression  of  a  fact  which  affected  the  intrinsic  value  of  the  under- 
taking, or  consequently  afforded  a  sufiicient  ground  for  a  rescission 
by  the  plaintifi'  of  his  contract  to  take  shares  in  the  company. 

(?<)  17  Beav.  87.     Se\  also.  Hpymann      Kennedy  v.  Panama,    &c.   Mail  Co.  L. 
r.  European  Central  Rail.  Co.  7  Eq.  154;       R.  2  Q.  B.  580. 
1214 


CHAP.  X.]  KKSCISSION    FOK    FKAUD.  *03!> 

In  Jennings'?).  Bronghton  {x),  the  plaintilf,  who  lia<l  taken  shares 
in  a  mining  company  formed  bv  tlie  (iefendaiits,  souirht  stntements  not 

o  t       ^  -  '3  relifd  (III  by 

to  rescind  tlie  contract  on  the  ground  that  ho  liad  been   pinimiir. 
induced  so  to  do  by  their  reprc'^entatioiis.     The  mis-   ilro'i"i!'t!.n! 
representations  consisted  of  exaggerated  statements  as  to  the  value 
and  prospects  of  the  mine,  contained  in  the  report  of  an  engineer 
employed  by   the  defendants,    and   which    report    was    submitted 
by  them  to  the  plaintiff.     The  plaintiff,  however,  did  not 
^altogether  rely  on  this  report,  but  went  and  examined  the     *939 
mine  himself  more  than  once,  before  he  purchased  the  shares 
in  it.     The  mine  had  undoubtedly  been  described  in  too  glowing 
colors,  and  it  by  no  means  came  up  to  the  expectations  formed  of 
it;  but  the  Court  was  of  opinion,  upon  the  evidence,  that  the  plain- 
tiff had  not  relied  on  what  was  represented  to  be  actually  existing, 
that  he  not  only  had  had  the  same  means  as  thedei'endants  of  ascer- 
taining the  truth,  but  that  he  had  availed   himself  of  those  means, 
and  that  his  deception  was  as   much   owing  to   his   own  error  of 
judgment  as  to  anything  else.     His  l)ill   therefore  was  dismissed, 
and  with  costs,  and  an  appeal  by  him  was  also  dismissed. 

In  Eobson  v.  The  Earl  of  Devon  {y),  the  plaintiff,  a  stock-broker, 
was  induced  by  the  secretar\'  of  a  c<jmpanv,  first  to  Prospectus  not 
advance  him  oOOL  on  the  security  ot  lOOU  11.  shares,  piaimiii. 
on  each  of  which  1^.  was  certified  to  have  been  paid  Devon""" 
up;  and  secondly,  to  purchase  1200  other  shares.  On  the  failure 
of  the  compan}',  the  plaintiff  sought  to  have  both  transactions  de- 
clared void,  and  to  obtain  back  from  the  company  his  500^.,  and 
the  money  paid  for  the  purchased  shares.  The  plaintiff  rested  his 
case  against  the  company  upon  the  following,  amongst  other 
grounds,  viz.:  First,  that  the  company's  prospectus  showed  that  no 
shares  ought  to  have  been  issued  before  a  certain  amount  of  capital 
liad  been  subscribed;  and  secondly,  that  nothing  had  ever  been 
paid  in  respect  of  the  shares  on  which  the  500Z.  had  been  advanced. 
But  it  was  held  that  the  plaintiff  was  entitled  to  no  relief  on  either 
of  these  grounds.  For,  first,  it  was  by  no  means  clear  that  the 
capital  required  by  the  prospectus  to  be  subscribed,  had  not  in  fact 
been  subscribed;  secondly,  the  plaintiff  had  not  parted  with  hi.>^ 
money  on  the  faith  of  the  prospectus,  so  that  it  was   immaterial  to 

(x)  17  Boav.   2:54,  and  5  DeG.  M.  &      relied  on  his  own  .iu<l<rnient. 
G.  126.     See,  also,  Small  r.  Attwood.  6  {;/)  o  Jur.  X.  S.  5C7,  and  4  ib.  24"). 

CI.  .t  Fin.  2:32,  where  the  phiintiff  also 

1213 


^'•diO  ACTIONS    BETWP:KN    partners,    etc.  [book  III. 

consider  what  was  there  stated;  and  thirdly,  the  shares  on  tlie  secu- 
rity of  Avliich  lie  lent  his  money,  were,  as  between  the  holder  and 
the  company,  to  be  taken  as  paid-up  shares,  and  therefore  it  was 
of  no  consequence  to  the  plaintiff,  whether  anything  had  actually 
been  paid  upon  them  or  not. 

Nor  will  the  !nere  circumstance  that  the  prospectus  of  a 
^94:0     *  company  sets  forth  the  value  of  the  proposed'  undertaking 

^  ,       in  too  oflowinof  colors,  enable  a  person  to  rescind  a  con- 
Exaggerated  (-1  a  '  r 

description.  tract  to  take  shares  entered  into  on  the  faith  of  the 
statements  contained  in  the  prospectus.  Contracts  cannot  be  re- 
scinded simply  on  the  ground  that  sanguine  expectations  have  been 
expressed  by  one  person,  and  raised  in  the  mind  of  another,  and 
have  not  been  ultimately  realized.  In  a  case  in  which  a  company 
was  formed  to  work  a  patent,  the  value  of  which  was  grossly  over- 
stated in  the  prospectus,  it  was  held  that  a  person  taking  shares 
on  the  faith  of  such  prospectus  could  not  afterwards  repudiate 
them,  (s) 

Again,  the  fraud  relied  upon  as  a  ground  for  rescinding  the  con- 
Fraud  must  be  ^^'^^^  must  be  clearly  proved;  and  if  there  has  been  no 
clearly  proved,  positive  misrepresentation  and  no  intentional  conceal- 
ment, the  circumstance  that  the  plaintiff  was  in  fact  misled  by 
what  he  was  told  and  by  documents  furnished  to  him,  will  not 
entitle  him  to  be  relieved  from  his  contract.  This  is  well  illustrated 
by  Conybeare  v.  New  Brunswick  and  Canada  Eailway 

Convbeare  v.  -J  ■'  t     i         i  m       i 

Ne\yBruns-       Compauv.  (o)     The  material  facts  of  tins  dithcult  case 

wiek,  <tc.  Com-  1.j\J 

pany.  ^^.gj.g  shortly  as  follows: — The  company  was  formed  for 

the  purpose  of  purchasing  and  carrying  on  a  railway  belonging  to 
the  St.  Andrews  and  Quebec  Railway  Company,  and  of  purchasing 
all  the  lands  and  property  of  that  company,  and  all  the  riL''hts  of  the 
holders  of  a  certain  class  of  shares  (called  A.  shares)  in  it.  The  plain- 
tiff applied  for  shares  in  the  new  company,  and  was  informed  by 
the  Secretary  that  the  A.  shares  w^ere  entitled  to  a  preferential  divi- 
dend of  61.  per  cent.,  and  that  the  holder  of  every  A.  share  was  enti- 
tled to  four  acres  of  land.     The  secretary  also  stated  that  the  new 

(2:)  Denton  r.  Macneil,  2  Eq.  352;  and  164.     See,  also,  as  to  the  necessity  of 

as  to  prospective  advantages  set  forth  clearly  proving  the  fraud  relied  upon, 

in  a  prospectus,  see  Hallows  v.  Fernie,  Robson  v.  Earl  of  Devon,  noticed  above, 

3  Ch.  467.  ancl  Kennedy  v.  Panama,  &:c.  Mail  Co. 

(a)  7  H.  L.  C.  711,  reversing  S.  C.  1  L.  R.  2  Q.  B.  580;  and  as  to  giving  par- 

DeG.  F.  &   J.   578,    and  affirming  the  ticulars  of  fraud,  McCreight  v.  Stevens, 

decision  of  V.-C.  Stuart  in  6  Jur.  N.  S.  1  Hurls.  &  Colt.  454. 

1216 


UIIAP.  X.]  RESCISSION    FOi:    FRAUD.  *r>41 

coinpuiiv  liad  acfinlred  some  tliousnnds  of  acres  of  land  from  tlie 
Colonial  (rovermiient,  and  that  all  claims  a;^ainst  the  com])aiiy  were 
rcf^ularly  li<|\ii(lated  every  six  \vcek>;  and  lie  «^ave  the  phiin- 
tilf  rejtorts  from  the  *dii-ectors,  in  which  these  and  other  *041 
matters,  tending  to  show  the  prosperity  of  the  coin]iany,  were 
stated.  The  plaintiff  was  shown,  and  he  examined  the  statutes  of  the 
Colonial  Legishitnre,  by  which  the  lands  were  granted;  and  he  took 
copies  of  all  those  statutes,  except  one,  away  with  him.  That  one 
statute,  wliich  had  been  produced  to  the  i)laiiititK  but  wliich  was 
not  amongst  those  he  took  away,  showed  that  the  title  of  the  com- 
pany to  the  lands  depended  on  the  completion  of  the  railway  by  a 
certain  time.  The  effect  of  this  statute  was  correctly  stated  in  the 
com]jany's  articles  of  association,  and  there  was  nothing  to  show 
that  it  had  been  intentionally  concealed  from  the  plaintiff.  It  aj)- 
peared,  however,  that  the  directors  liad  been  advised  by  counsel 
upon  the  effect  of  the  statute  upon  the  title  of  the  comp;iny,  and 
that  his  o])inion  was  not  communicated  to  the  plaintiff. 

Upon  the  faith  of  the  above  statements  and  reports,  and  of  the  stat- 
utes furnished  to  him,  the  ]>huntitf  took  shares  in  the  new  company; 
but  before  he  had  completed  the  purchase,  he  was  informed  that  the 
manager  abroad  had  exceeded  his  authorit}',  and  incurred  debts  to  a 
considerable  amount.  The  plaintiff",  having  afterwards  discovered 
that  the  comjjan}'  was  in  fact  greatly  in  debt,  that  its  affairs  were 
far  from  prosperous,  and  its  title  to  the  lands  was  not  al)solute  but 
liable  to  forfeiture,  insisted  on  rescinding  his  contract.  Tliis  demand 
was  not  acceded  to,  and  he  conseiiuentl}^  liled  a  bill  to  enforce  it. 

The  Vice-Chancellor  Stuart  and  the  House  of  Lords  were  of  oj>in- 
ion  that  no  positive  misrejyresentation  had  been  made,  that  no  wil- 
ful concealment  had  been  practiced  with  reference  to  the  title  to 
the  land,  and  that  the  plaintiff"  had  not  been  induced  to  take  the 
shares  u])on  the  faith  of  that  title  being  indefeasible.  Great  stress 
was  deservedly  laid  upon  the  circumstance  that  the  company's  arti- 
cles correctly  recited  the  statute  alleged  to  have  been  su])])ressed. 
The  Vice-Chancellor  refused,  however,  to  dismiss  the  bill  with  costs, 
but  in  this  respect  his  decision  was  reversed.  {I) 

{b)  The  Lords  Justices  held  that  the  inquiry  by  the  statements  so  made   to 

plaiiitirt"  was  entitled  to  relief  upon   the  him,  and  that  even  if  the  acquisition  of 

grounds  that  the  title  of  the  company  land  wius  not  the  main  inducement  of 

to  the  land  had  boon  reprosontod  to  him  tlie  plaintil!  in  takinj;  shai-os.  it  formed 

as  indefeasible,  that  he  had  been  put  off  a  material  ingredient  in   th?  purchase. 

"  V217 


■•'Oio  ACTIONS    BETWEEN    TAKTNERS,    ETC.  [bOOK  III. 

942"  *I"pon  tlic  subject  of  the  riglit  to  rescind  a  severable  con- 

tract in  part  wliere  it  cannot  be  rescinded  in  toto  the  case  of 
TeverSn'-^       Maturin  V.  Tredinnick  {e)  is  very  important. 
*'^'^^^-  There  the  phiintiff  had  been  induced  by  the  fraud  of 

Tredinnick.  the  defendant  to  purchase  from  him  several  shares  in 
several  niinini^  companies.  Before  the  plaintiff  had  discovered  the 
fraud  he  sold  some  of  his  shares  in  one  of  the  companies.  lie 
afterwards  tiled  a  bill  to  rescind  the  contract  as  to  all  the  remaining 
shares.  Pending  the  suit  one  of  the  companies  in  which  some  of 
these  shares  were  held,  was  ordered  to  be  wound  up;  and  the  shares 
in  one  of  the  other  companies  were  forfeited  for  non-payment  of 
calls,  bnt  the  defendant  had  full  notice  of  the  intended  forfeiture. 
The  Yice-ChanceHor  Wood  held  (1),  that  the  sale  of  some  of  the 
shares  before  the  bill  was  filed  did  not  disentitle  the  plaintiff  to  re- 
scind tlie  contract  as  to  the  other  shares;  and  (2),  that  neither  the 
subsequent  order  to  wind  np  one  of  the  companies,  nor  the  subse- 
quent forfeiture  of  shares,  afforded  any  defense  to  the  suit. 

Cases  of  repudiation  on  the  gronnd  of  fraud  must  not  be  con- 
fonnded  with  those  noticed  in  an  earlier  part  of  the  work,  in  which 
persons  have  been  held  not  bound  to  take  shares,  in  consequence  of 
a  departure  from  the  scheme  as  advertised,  {d) 

If  a  director  of  a  company  is  applied  to  for  unallotted  shares,  and 
^.  „       he  transfers  to  the  api^licant  shares  alreadv  allotted  to 

Director  sell-  i  '  ^    "        _ 

jnghisiANn       liimsclf,  he  thereby  commits  a  fraud  which  will  enable 

shares  as  unal-  '  -^ 

loted  shares.  ^j^g  transferee  to  set  aside  the  transfer,  and  to  recover 
back  what  he  may  have  paid  for  the  shares.  (<?) 

When  a  person  has  been  induced  by  the  fraud  of  some  particular 
^     ;,u      ,1      shareholder  to  purchase  shares  of  him,  the  right  of  the 

Frnud  by  seller  '  '  " 

of  shares.  persou  dcfraudcd  is  to  rescitid  the  contract  of  sale,  and 

to  throw    the    shares   back  on    the  person    from    whom    he    took 

them,   and    to  be  indemnified    by    him    against    all    losses 

943*     ^sustained  in  consequence  of  liaving  taken  the  shares.  (/*) 

(e)  2  NewRop.  514,  and  4  ib.  15.    In  Eq.  455. 

this  case  the  V.-C.  is  reported  to  have  (d)  Ante,  p.  106,  et  seq. 

said  that  a  sale  of  some  shares  in  one  of  (e)  Blake  v.  Mowatt,  21  Beav.  603. 

the  companies  would  have  afforded  a  (/)  See  Stainbank  v.  Fernley,  9  Sim. 

defense  to  the  suit  as  to   the   shares  in  556,  and  Seddon  v.  Connell,  10  Sim.  58 

the  other  companies.     But  qacere  how  &  79,   and    Maturin   v.   Tredinnick,    2 

this  is  consistent  with  the  relief  actually  New  Rep.  514,  and  4  ib.    15,  ante,   p. 

given.     See,    further,    Curtis 's  case,   6  942. 

1218 


{•MAP.  X.]  DISSOLUTION,    ArcOfNT,    KTC.  *944 

This  is  apparently  tlic  limit  of  the  right  of  the  person  defrauded  in 
such  a  case.  (</)  If  the  shares  have  been  actually  transferred  to  him. 
lie  is  not  entitled  to  have  the  transfer  treated  as  null  and  void  as  be- 
tween himself  and  the  company;  nor  to  restrain  the  company  from 
making  calls  upon  him  whilst  he  is  a  shareholder.  (A)  lie  may  be 
entitled  to  compel  his  vendor  to  accept  a  re-transfer  of  the  shares, 
but  even  this  right  must,  it  is  conceived,  depend  upon  whether  the 
company  is  being  wound  up  or  not,  and  upon  the  power  of  the  di- 
rectors to  refuse  to  register  transfers. 

A  charter  which  has  been  obtained  from  the  Oown  by  fraud  may 
be  repealed  hy  scire  facias  ;  but  so  long  as  it  remains  chnrtered 
unrepealed  its  validity  cannot  be  disputed.  (^)  compunies. 

The  right  of  a  company  to  rescind  a  fraudulent  contract  entered 
into  with  its  promoters  has  been  already  considered.  (^•) 


SECTION  VI.— ACTIONS  FOR  DISSOLUTION,  ACCOUNT,  ETC. 

The  remedy  for  a  partner  who  insists  on  a  dissolution  which  is 
opposed  by  his  co-partners  w^as  formerly  by  a  suit  in  equity,  and  is 
now  by  an  action  which  should  be  brought  in  the  Chanccrv  Di- 
vision of  the  High  Court.  (Z)  Actions  involving  the  taking  of 
partnership  accounts  should  also  be  brought  in   the  same  division. 

In  an  action  for  dissolution  the  statement  of  claim  should 
*claim  a  dissolution  and  an  account,  and  also  an  injunction  *944 
and  a  receiver  to  restrain  the  defendants  from  dealing  with 
the  ])artnership  assets  and  from  issuing  bills  or  notes  in  the  name 
of  the  firm.  Such  an  action  lies,  although  the  partnership  be  a  part- 
nership at  will  and  can  therefore  be  dissolved  by  the  plaintiff  Iiim- 
self  (m);  but  if  the  partnership  has  been  dissolved  before  action,  the 
plaintiff  should  claim  a  declaration  to  that  effect.     It'  the  partner- 

(g)  An  action  for  damages  will  lie,  hiins'-^lf  no  title.  The  transfer  was  there- 
see  ante,  p.  717,  but  this  is  not  so  com-  fore  wholly  void, 
plete  a  remedy.  (i)   See  Maduide   r.  Lindsay,  9  Ha. 

(70  Bloxam  v.  Metropolitan  Cab  Co.  574. 

4  Now  Rep.  51.  is  not  opposed  to  this.  (A-)    See    Phosphate    Sewage  Co.    r. 

For  although    the    company    was    re-  Hartmont.  5  Ch.  D.  304.  and  other  cases 

strained   from    s\n'ng    the  plaintiff"  for  of  that   cla.ss   notio^'d    oiitr,  vol.    i.  p. 

calls,  the  plaintiff  had  not  acquired  any  584. 

title  to  the  shares,   they  having  been  (/)  Jud.  Act,  1873,  §  34. 

transferred  to  him  by  a  person  who  had  (/h)  Msister  r.  Kirton,  3  Ves.  74. 

1219 


*Di5  AccouxT.  [book  iir. 

ship  is  admitted  and  the  right  to  dissolve  is  not  contested,  the  Court 
will  decree  a  dissolution  on  motion  before  the  hearing  or  trial.  (71) 

An  action  for  the  dissolution  of  an  ordinary  partnership  may  be 
maintained,  although  the  partnership  is  one  which  may  be  wound 
up  under  the  statutory  jurisdiction  conferred  by  the  Companies  act, 
1862  (c);  but  practically  it  is  more  convenient  to  have  recourse  to 
that  act  where  it  applies. 

The  grounds  on  which  the  Court  will  dissolve  a  partnership  have 
been  already  considered  {p);  and  the  mode  of  winding  up  the  af- 
fairs of  a  partnership  in  the  event  of  death  or  bankruptcy  will  be 
examined  in  Book  IV.;  in  the  present  place  it  is  proposed  to  deal 
with  the  subjects  of  Account  and  Discovery,  Injunctions,  Receivers, 
Sale  of  Partnership  Property. 


1.     Of  account  and  discovery. 

Under  this  head  it  is  proposed  to  consider,  with  reference  to  part- 
ners and  persons  claiming  under  them — ■ 

1.  The  right  to  an  account  and  discovery  generally. 

2.  The  defenses  to  an  action  for  an  account  and  discovery. 

3.  The  decree  for  a  partnership  account. 


*945      *(«)  Of  the  right  to  an  account  and  discovery  generally,  as  let  ire  en  part- 
ners and  those  claiming  under  them. 

1.  As  to  Account. — The  right  of  every  partner  to  have  an  account 
.    .     ,        from  his  co-partners  of  their  dealings  and  transactions, 

1.    Action  for  r  ^  ' 

au account  |g  ^q  obvious  to  require  comment.  An  action  for  an 
account  may  be  maintained  by  partners  although  the  partnership 
accounts  are  not  complicated  {q\  and  although  an  action  for  dam- 
ages may  be  sustainable  (r).'     Moreover,  although  formerly  the 

(n)  Thorp  v.   Holdsworth,   3  Ch.    D.  (r)  Wright  v.   Hunter,   5  Ves.   792, 

637,  where  the  terms  of  the  partnership  where   the  bill  was    for    contribution, 

were  in  dispute.  Blain  v.  Agar,  1  Sim.  37,  and  2  ib.  289, 

(0)  Jones  V.  Charlemont,  16  Sim.  271;  where  the  bill  was  for  the  recovery  back 

Clements  v.  Bowes,  17  ib.  167.  of  deposits.     See,  too,  Townsend  v.  Ash, 

{p)  As  to  fraud,  see  ante,  p.  927.     As  3  Atk.  336,  as  to  the  profits  of  pai-tner- 

to  other  grounds,  see  book  i.  ch.  3,  §  2.  ship  real  estate. 

{q)  Cruikshank  v.  M'Vicar,  8  Beav.  'In  matters  of  difficulty  or  contro- 

106.     See  Frietas  v.  Dos  Santos,  1  Y.  &  versy  between  partners,  it 's  most  usual, 

J.  574.  and  by  far  the  most  convenient  to  resort 

1220 


CJIAP.  X.] 


ACCOUNT. 


'Oil 


Court  of  Chancery  would  not  cntertuin  a  suit  for  damages  merely, 
although  the  suit  was  in  form  a  suit  for  an  account  (s);  yet  in  a 


to  a  court  of  equity  for  their  final  adju- 
dication and  settlement.  Bracken  v. 
Kenned^',  3  Scam.  558. 

To  efi'ect  a  complete  adjustment  of  co- 
parbiership  concerns,  the  exti'aordinary 
powers  of  a  court  of  chancery  may  be 
necessarj';  and  when  necessary  for  that 
purpose,  it  will  entertain  jurisdiction, 
whether  an  action  of  account  would  or 
would  not  lie  between  the  parties.  Gil- 
lett  I'.  Hall,  l:}  Conn.  42G. 

The  jurisdiction  of  courts  of  equity 
extends  to  the  settlement  of  pai-tnership 
accounts,  however  small  may  be  the 
number  of  partners,  where  a  court  of 
law  cannot  make  a  complete  and  final 
adjustment  of  the  partnership  concerns, 
by  reason  of  its  inability  to  furnish  the 
peculiar  relief  necessary  for  that  pur- 
pose.    Niles  V.  "Williams,  24  Conn.  279. 

A  court  of  equity  will  not  compel  an 
account  of  partnership  dealinfrs,  when 
a  suit  at  law  is  pending^,  in  which  the 
same  should  be  adjusted  and  settled, 
unless  the  aid  of  the  court  is  necessaiy 
to  ascertain  the  particulars  of  the  ac- 
count.    Hunt  V.  Gookin,  6  Vt.  462. 

A  bill  by  one  of  a  former  pai-tnership, 
against  another,  for  a  debt  due  on  ac- 
count stated,  and  not  asking  a  settle- 
ment of  partnership  accounts,  cannot 
be  sustained  until  the  plaintiff  has  ex- 
hausted his  remedy  at  law.  Bethell  v. 
Wilson.  1  Dev.  &  B.  Eq.  610. 

On  a  bill  in  equity  for  an  account  be- 
tween partners,  the  defendant's  liabihty 
to  account  is  a  preliminary  question  in 
the  cause,  which  should  be  decided  by  a 
decree  for  or  against  him,  before  refer- 
ence to  a  mast»'r,  on  the  general  questions 
connected  with  their  partnership  trans- 
actions. 'Collyer  v.  CoUyrr,  38  Pa.  St.  257. 

During  the  pendency  of  a  bill  in  equity 
by  two  of  four  partners  against  the 
other  two  for  an  accounting,  the  sec- 
ond two  cannot  bring  a  bill  against  the 


first  two  for  the  same  purpose.  Wallace 
V.  Robinson,  52  N.  H.  280. 

A  bill  in  equity,  filed  by  one  partner 
against  his  insolvent  co-partner  in  the 
business  of  carrying  on  a  farm  for  one 
year,  asking  a  settlement  of  the  part- 
nership accounts,  and  the  foreclosure  of 
a  mortgage  executed  by  the  defendant 
partner  on  his  share  of  the  crop  to  be 
raised,  to  secure  an  indiNndual  liability 
to  the  complainant, — is  not  obnoxious  to 
the  objection  that  there  is  an  adequate 
remedy  at  law;  nor  is  it  demuixable  for 
multil'ariousness,  although  several  pur- 
chasers from  the  defendant  partners,  of 
different  portions  of  the  crop  at  different 
times,  are  united  with  him  as  defendants. 
Monroe  v.  Hamilton,  47  Ala.  217. 

A  files  a  bill  to  enforce  a  vendor's  lien 
against  B,  since  decea-sed,  and  former 
partner  of  C  and  D,  who,  by  cross-bill, 
set  up  a  mechanic's  lien  for  improve- 
ments made  upon  the  land  sold  to  B  by 
A,  while  B  was  in  possession,  and  a 
partner  of  C  and  D,  in  building  and  con- 
tracting: Held,  that  C  and  D  cannot, 
as  surviving  partners  of  the  old  finn, 
settle  in  their  cross-bill  their  partnt^r- 
ship  dealings  with  B"s  estate;  but  tlit-y 
can,  with  proper  avemients,  put  in  issue 
and  try  such  dealings  for  the  purjiosc 
of  showing  how  much  they  are  entitled 
to  receive  of  the  debt  due  them  aj5  build- 
ers and  material  men.  Stammers  r.  Mc- 
Naughten,  57  Ala.  278.  See  jwst,  961, 
note. 

See  Palmer  r.  Tyler,  15  Minn.  106.  a-s 
to  when  one  paiiner  will  be  entitled  to 
an  account,  notwithstanding  he  has 
failed  to  pay  in  the  whole  sum  agreed 
by  him  to  he  contributed. 

(.s)  Duncan  v.  Luntly,  2  Mac.  &  G.  30, 
where  shares  had  been  wrongfully  sold 
by  the  seci-etary  of  a  compiuiy.  See, 
also,  Clifford  v.  Brooke,  13  Ves.  132. 

1221 


*945 


ACCOUNT. 


[book  hi. 


pnrtnersliip  suit  involving  a  general  account,  claims  were  adjusted 
which  in  ordinary  cases  would  have  formed  the  subject  of  an  action 
at  law  {t);  and  it  is  apprehended  tliat  now  the  Court  will  in  taking 
such  an  account  deal  with  every  claim  which  it  may  be  necessary  to 
investigate  in  order  to  adjust  and  finally  settle  the  account."  But 
disputes  not  aifecting  the  account  will  naturally  be  excluded  from  it. 
An  account  may  be  had  by  one  partner'  or  his  executors  or  ad- 


(/)  See  Bmy  r.  Allen,  1  Coll.  589; 
Mack^nna  v  Parkes,  ante,  p.  74,  note 
(n).  Compare  Great  Western  Ins.  Co. 
t>.  Cunliffe,  9  Ch.  525. 

2  Where  an  action  is  brought  for  the 
cr.ssolution  of  a  partnership,  and  an  ac- 
coimtincr,  a  court  of  equity  having  ob- 
tained jurisdiction  of  the  cause  may  re- 
tain it  for  the  pui-pose  of  doing  complete 
justice  between  the  partners,  and  to 
avoid  a  multiplicity  of  suits.  Shepherd 
V.  Boggs,  2  N.  W.  Rep.  N.  S.  370;  S. 
C.  9  Neb.  257. 

^  A  bill  for  accounting  and  a  receiver, 
on  dissolution,  will  be  sustained,  not- 
withstanding the  partnership  is  a  limit- 
ed one,  and  the  complainant  the  special 
I)artner.  The  latter  has  the  same  right 
ii-s  a  general  partner,  to  insist  that  the 
lissats  be  applied  to  pay  the  partnership 
debts;  and  1  Rev.  Stat.  766,  §18,  ex- 
[)ressly  entitles  him  to  an  accounting. 
Roggv.  ElHs,  8  How.  Pr.  473.  See, 
also,  Lattuig  v.  Passman,  29  La.  Ann. 
280. 

A  party  who  is  a  silent  partner  in  a 
firm,  and  whos;^  interest  was  kept  con- 
cealed in  order  that  it  might  not  be  at- 
tached by  his  creditors,  may  maintain  a 
bill  in  equity  for  an  account  and  settle- 
ment against  the  other  partners  who 
participated  in  the  concealment.  Har- 
vey V.  Varney,  98  Mass.  118. 

If  either  of  the  partners,  being  with- 
out fault,  can  show  that  his  adversary 
has  violated  the  terms  of  the  partner- 
ship contract,  and  abused  the  trust  with 
which,  as  a  partner,  he  was  clothed, 
and  that  he  has  partnership  assets  that 
he  has  not  accounted  for,  that  showing 

1222 


entitles  such  partner  to  an  accounting. 
"HoUaday  v.  EUiott,  3  Oreg.  340. 

Each  pai-tner  is  liable  to  account  to 
every  other  for  himself,  and  not  for  his 
co-partner  ;  and  no  two  partners  are  re- 
sponsible to  another  jointly.  Ports- 
mouth V.  Donaldson,  32  Pa.  St.  202. 

Where  a  partnership  is  alleged'  in  a 
bill,  and  admitted  by  the  answer,  an  ac- 
count, as  a  general  rule,  is  of  course,  un- 
less the  party  has  slept  upon  his  rights* 
Glenn  v.  Hebb,  12  Gill  &  J.  271. 

Although  it  is  the  general  rule,  where 
a  partnership  is  alleged  and  admitted, 
to  order  an  account  of  the  partnership 
affairs,  as  a  matter  of  course,  unless  the 
right  of  the  complainant  to  relief  is 
baiTcd  by  the  lapse  of  time,  such  ac- 
count should  not  be  ordered  where  it 
manifestly  appears,  from  the  proof,  that 
the  party  asking  the  interposition  of  the 
court  has  no  real  cause  of  complaint, 
and  that  no  good  pm-pose  or  end  can  be 
accomplished  by  du-ccting  an  account  to 
be  taken.  McKaig  v.  Hebb,  42  Ind. 
227. 

"Wliere  the  plaintiff  files  his  complaint, 
alleging  a  partnership,  and  asking  for 
an  accounting  by  the  defendant,  if  he 
does  not  estabUsh  the  existence  of  the 
partnership,  he  wiU  not  be  entitled  to 
the  accountmg.  Salter  v.  Ham,  31  N. 
Y.  321;  Arnold  v.  Angell,  62  N.  Y.  508. 
See,  also  Adams  v.  Gaubert,  69  111.  585; 
Moffatt  V.  Moffatt,  10  Bosw.  468;  White 
V.  White,  4  Md.  Ch.  418.  Compare 
Perkms  v.  Perkins,  3  Graft.  364. 

Under  a  bill,  however,  for  an  account 
and  dissolution  against  three  alleged 
partners,  the  complainant  can  have  the 


CHAP.  X.] 


ACCOUNT. 


*945 


relief  he  is  entitled  to  against  the  others 
though  the  proof  shows  that  one  of  the 
alleged  partners  defendant  is  not  in  fact 
a  partner.     Bass  v.  Taylor,  34  Miss.  :M2. 
A,  B  and  C  formed  a  partners-hip  in 
which   A  and  B  were  each  interested 
one-fonrth  part  and  C  one-half.    At  the 
same  time   D,   the  father-in-law  of  C, 
gave  a  written  guaranty  to   A  and  B 
that  C  should   fulfill  all  contracts  the 
partnenship  should  make  in  their  busi- 
ness, to  the  extent  of  his  interest  in  the 
partnership.     The  business  was  earned 
on  undev  the  management  of  C,   as  ac- 
tive ]  a  -tner  for  some  years,  when  C  re- 
moved to  Canada  and  there  died  insol- 
vent and   intestate,  before  any  dissolu- 
tion oT  the  partnership,  leaving  no  prop- 
erty in  this  state,  except  such  interest  as 
he  might  have  in  the  partnership  con- 
cerns.     There  being  no  settlement  of 
the  partnership    accounts,    either    be- 
tween  the  partners  themselves,  or  be- 
tween the  partnership  and  other  per- 
sons,   A   and  B  brought  their  action  at 
law  against  D  on  the  guaranty,  and 
during  the  pendency  of  the  suit  sought 
the  interposition  of  a  court  of  chancery, 
by  a  bill  against  D,   stating  these  facts 
and  averring  that  in  order  to  have  com- 
plete justice  done  in  said  action  it  was 
desirable,  if  not  necessary,  to  have  the 
accounts  of  the  partnership  fully  set- 
tled, and  praying  for  an  adjustment  of 
such   accounts,   and  that  such  sum  as 
should  be  ibund  due   from  C  to  A  and 
B,  should  be  paid  by  D  or  be  made  the 
inile  of  damages  in  said  action.      On  a 
demurrer  to  this  bill,  it  was  held,  that 
such  bill  was  not  sustainable  :    1.  Be- 
cause it  did  not  appear  from  the  facts 
stated  that  the  plaintiffs  could  not  have 
adequate  redress  in  said  action.     2.  Be- 
cause D  was  neither  party  nor  privy  to 
the  partnership  accounts.     3.    Because, 
if  the  settlement  sought  were  made  it 
would   not  be  conclusive  upon  D,   nor 
equitable  that  it  should  be.    4.  Because 
a  court  of  equity  will    not  extend  the 


liabilities  of  a  surety  beyond  their  legal 
limits.  5.  Because  no  discovery  was 
called  for.  no  injunction  sought,  no  mis- 
take, accident,  fraud  or  other  ground  of 
equitable  relief  alleged.  Bissell  r.  Ames, 
17  Conn.  121. 

A  complaint  which  sets  forth  a  part- 
nership Ijetween  the  plaintiff  and  de- 
fendant, a  dissolution,  the  existence  of 
unsettled  accounts,  and  a  balance  in  fa- 
vor of  the  plaintiff,  and  demands  an  ac- 
cpunting,  and  judgment  forth'!  balance, 
shows  a  sufficient  cause  of  action.  Lud- 
ington  V.  Taft,  10  Barb.  447. 

A  petition  in  an  action  by  one  partner 
against  another,  which  alleges  the  part- 
nership, gives  a  copy  of  the  written  con- 
tract therefor,  alleges  that  the  plaintiff 
at  the  outset  paid  in  a  certain  specified 
amount,  that  the  partnership  wa.s  ter- 
minated, an  I  that  during  its  existence 
plaintiff  had  paid  on  account  of  debts 
and  expenses  a  large  sum  and  that, 
upon  a  settlement  of  the  partnership 
accounts  which  the  plaintiff  had  vainly 
sought,  a  large  sum  would  be  found  due 
the  plaintiff,  and  which  shows  that  the 
pai-tnership  owned  a  large  number  of 
chattier,  and  involved  a  series  of  trans- 
actions, states  a  cause  of  action,  and  is 
as  good  as  against  any  objection  that 
can  be  raised  by  demurrer,  notwith- 
standing it  does  not  in  terms  allege  that 
defendant  had  possession  of  any  of  the 
partnersliip  property,  or  that  he  had 
any  accounts  to  render.  Carling  v. 
Donegan,  lo  Kan.  495. 

In  a  proceeding  for  a  settlement  of 
partnership  accounts,  a  bill  which  did 
not  show  the  existence  of  the  partnership 
and  did  not  contain  any  statement  of  the 
account  by  th(?  plaintiff,  nor  a.sk  for  a 
statement  by  the  defendant,  was  held 
defective.  Pope  v.  Salsman,  35  Mo.  362. 
A  bill  for  a  dissolution  of  partnei-ship 
and  an  account  cannot  be  sustained  in 
that  form,  if  the  evidence  shows  that 
the  membei-s  have  been  incorporated. 
Benninger  r.  Gall,  1  Cmcin.  ;5;51. 

1-223 


'Oio 


ACCOL"NT. 


[liOOK  II  r. 


A  bill  in  equity,  brought  by  a  partner 
against  his  co-partner,  for  an  account, 
etc. ,  wherein  it  is  averred  that  the  de- 
fendant has  all  tlie  partnership  books 
and  papers  in  his  possession,  or  under 
his  control ,  and  refuses  to  permit  the 
plaintiff  to  examine  them,  need  not  con- 
tain such  certainty  and  particularity  of 
statement  as  would  be  held  necessary  if 
the  plaintiff'  had  access  to  those  books 
and  papers.  Towle  v.  Pierce,  12  Mete. 
329. 

A  complaint  of  one  partner  against 
another,  asking  for  judgment  of  a  par- 
ticular sum,  forming  a  part  of  the  part- 
nership profits  and  not  praying  for  an  ac- 
count of  the  partnership  concerns,  can- 
not be  sustained.  Russell  v.  Byron,  2 
Cal.  86. 

If  in  a  bill  by  one  partner  against  a 
co-partner  he  prays  that  his  co-partner 
may  be  decreed  to  pay  over  to  him  one- 
half  of  the  net  profits  of  the  partnership, 
such  prayer  is  equivalent  to  a  prayer 
for  an  account.  Beimett  v.  Woolfolk, 
15  Ga.  213. 

A  biU  in  equity  by  a  partner  for  his 
balance  in  the  co-partnership  account, 
failing  to  allege  that  there  are  no  liabil- 
ities, or  that  final  settlement  has  been 
had;  or,  in  case  of  dissolution,  not  ask- 
ing ibr  a  marshahng  of  the  assets,  or 
for  a  final  settlement,  is,  generally 
speaking,  insufficient,  and  bad  on  de- 
muiTer.  Williamson  v.  Haycock,  11 
Iowa,  40. 

I  Where,  by  agreement  of  the  parties, 
one  of  the  partners,  on  a  dissolution  of 
the  partnership,  is  to  make  the  collec- 

j  tion  of  debts  due  the  concern,  a  bill  af- 

[  terwards  filed  by  the  other  partner 
against  him  for  his  share  of  the  mon- 

;  eys  collected,  must  allege  when  the 
collection  was  made,  or  it  will  be  bad 

ion  demurrer.  McCament  v.  Gray.  6 
Blackf.  233. 

In  a  bill  by  a  co- partner  to  compel  a 
settlement  of  the  partnership  accounts, 
the  complainant,  being  administrator  of 

1224 


a  deceased  co-partner,  may  join  with 
his  own  the  claims  of  such  deceased 
partner.  McLaughlin  v.  Simpson,  3 
Stew.  &  P.  85. 

Where  A  and  B  entered  into  an 
agreement,  by  the  terms  of  which  B 
was  to  buy  a  tract  of  land  of  C,  on 
which  was  a  mill-seat  and  mill,  and 
they  were  to  build  the  mill  anew ;  A  was 
to  do  the  work  and  B  to  furnish  the 
material  and  money;  and,  out  of  the 
profits,  they  were  to  pay  for  the  land, 
and  reimburse  B  tor  liis  outlay,  and  pay 
the  plaintiff  for  his  work;  and  after- 
wards they  were  to  share  the  profits  or 
losses  equally,  as  partners;  and,  in  pur- 
suance of  the  agi'eement,  the  land  was 
bought,  and  the  mill  built,  and  became 
profitable,  and  B  received  the  profits, 
reimbursed  himself,  and  paid  for  the 
land:  Held,  that  A  was  entitled  to  an 
account  as  a  partner;  and  that  it  was 
not  necessary  that  the  contract  should 
be  in  writing.  Falkner  v.  Hunt,  73  N. 
C.  571. 

If  partners  agree  upon  terms  of  dis- 
solution, whereby  one  agrees  to  take 
the  assets  and  pay  the  other  a  given 
sum  and  pay  all  the  partnership  debts, 
and  the  one  so  promising  fails  and  re- 
fuses to  perform  his  agreement  to  pay 
the  other  and  the  debts,  that  other,  if 
subjected  to  loss  by  being  compelled  to 
pay  debts,  may  repudiate  the  agree- 
ment and  maintain  a  bill  for  an  account 
according  to  his  rights  as  they  existed 
before  the  agi-eement.  Bailey  v.  Moore, 
25  III.  347. 

A  and  B  carried  on  a  trade  as  part- 
ners, with  the  funds  of  A,  in  the  name 
of  B,  who,  without  any  dissolution  of 
the  co-partnership,  or  rendering  any  ac- 
count to  A,  afterwards,  without  the 
consent  of  A,  entered  into  partnez-ship 
with  C,  and  carried  into  the  new  con- 
cern all  the  funds  of  the  former  part- 
nership. A,  on  the  death  of  B,  filed  a 
bill  against  his  administrator  and  C,  his 
surviving  partner,  for  a  discovery  and 


CHAT.   X.] 


ACCOUNT. 


•Wi 


miTiistrators  (u)*  afrainst  liis  co-partner  or  liis  executors  „  .... 

^     '^       -  I  Persons  entitled 

or  adiiiinistruturs  (y).     So  by  the  trustees  of  a  bankrupt  to  an  account. 


account:  Held,  that  A  vraa  entitled  to 
an  account  from  C,  of  the  tran.saction3 
and  profits  of  the  partnership  between 
him  and  B,  and  of  the  personal  estate 
of  the  intestate,  in  his  hands.  Long  v. 
Majestre,  1  Johns.  Ch.  .30."). 

The  a<?ent  of  one  partner,  coming  in- 
to possession  of  the  effects,  will  be  re- 
garded as  a  trustee,  and  accountable 
in  equity  to  the  creditors  of  the  firm 
and  the  other  partners,  though  his 
principal  has  deceased  and  no  admin- 
istration has  been  granted.  Peterson  v. 
I'oignard,  6  B.  Mon.  570. 

One  who  has  subscribed  to  the  arti- 
cles of  association  of  a  land  company, 
but  has  failed  to  pay  in,  on  calls,  the 
amount  therebj'  required  as  a  condition 
of  membership  is  not  as  it  seems,  en- 
titled to  main  tarn  a  bill  for  account  of 
profits,  and  for  partition  of  lands  un- 
sold.    Stevenson  v.  Mathers.  67  111.  123. 

AVhere  two  persons  made  an  agree- 
ment to  form  a  partnership,  but  such 
partnership  was  never  launched,  and 
one  of  the  parties  proceeded  to  conduct 
the  ent<'rprise  in  his  own  name,  at  his 
own  cost,  and  for  his  own  exclusive  ben- 
efit, excluding  the  other,  and  repudiat- 
ing the  partnership  agreement;  the  hit- 
ter's remedy  is  not  for  an  accounting, 
but  an  action  at  law  for  breach  of  con- 
tract.    Powell  V.  IMaguire,  43  Cal.  11. 

A  person  having  a  contract  on  public 
works  entered  into  an  agreement  with 
another  to  fonn  a  partnership  in  the 
business  under  such  contract  and  in 
other  contracts  that  they  might  obtain. 
Tliey  completed  such  contract  and  di- 
vided the  profits.  After  which  the  first 
gave  notice  that  he  would  continue  the 
arrangement  no  longer,  but  would  bid 
on  his  own  account.  A  subsequent  con- 
tract was  awarded  to  him,  from  which 


he  excluded  the  other:  Held,  that  there 
was  no  partnei'ship  in  the  business  under 
the  la-st  contract,  and  a  bill  for  an  ac- 
count, &'c.,  would  not  lie;  that  the  rem- 
edy of  the  other  party  was  at  law  for  a 
violation  of  the  agreement.  Doyle  r. 
Bail.'y.  75  111.  418. 

((/)  Ilcyne  r.  Middlemore,  1  Rep.  in 
Ch.  138;  HackwuU  i'.  Eustman,  Cro.  Jac. 
410. 

*To  the  point  that  the  surviving  part- 
ner, to  whom  the  settlement  of  the  co- 
partnership affairs  is  left,  can,  upon  the 
settlement  of  the  co-partm^rship  ac- 
counts, be  comp 'Hod  to  account  for  the 
surplus  or  portion  due  the  estate  of  the 
deceased,  see  Stewart  v.  Burkholter,  28 
Miss.  896,  and  the  cases  hereinafter 
cited.  See,  also,  Roberts  v.  Kelsey,  38 
Mich.  602;  Sewell  o.  Humphrey,  37  Vt. 
265;  Scott  V.  Searles,  13  Miss.  25. 

The  surviving  p.irtner  of  a  firm  must 
account  to  the  representatives  of  a  de- 
ceased partner  for  the  prop  ^rty  of  the 
firm  as  it  was  at  the  time  of  the  deceased 
partner's  death.  The  representatives 
are  entitled  to  an  accounting  absolutely, 
and  need  not  show  that  there  would  be 
something  due  to  them  from  the  fii-ra  on 
settlement.  Their  right  to  an  accoimt 
results  from  their  interest  in  the  eifects 
of  the  fimi,  and  the  liability  of  the  estate 
to  contribute  to  the  payment  of  the  firm 
debts.  Cheeseman  r.  Wiggins,  1  Thomp. 
<k  C.  595.  See,  also,  Denver  t'.  Roane, 
8  Reporter,  33;  S.  C.  99  U.  S.  355. 

A  complaint,  however,  by  the  admin- 
isi  rator  of  the  estate  of  a  deceased  piu-t- 
ner  against  the  surviving  partner,  to  re- 
cover the  value  of  assets  of  the  partner- 
ship, which  the  defendant  has  refused 
to  account  for,  misapplied,  and  con- 
verted to  his  own  use,  it  is  held,  should 
contain  proper    traversable    averments 


(v)  Beaumont  v.  Grover,  1  Eq.  Ab.  8,  pi.  7. 


1225 


*915 


ACCOUNT. 


[book  iir. 


partner'  against  tlic  solvent  partner  (x)  or  Ins  executors  (y).     So  a 
solvent  partner  may  maintain  an  action  for  an  account  against  tlie 


that  the  partnersh'p  debts  have  been 
paid;  that  the  aflairs  of  the  partner- 
ship have  been  finally  settled;  and  that 
the  shares  of  the  partners  have  been  as- 
certained; and  should  show  a  demand 
made,  or  a  proper  excuse  for  not  mak- 
ing a  demand,  before  the  bringing  of 
the  action.  Krutz  v.  Craig,  53  Ind.  561. 
If  surviving  partners  unreasonably 
delay  in  closing  the  partnership  affairs 
or  waste  the  property,  the  administrator 
of  the  deceased  partner  should,  if  the 
partnership  creditors  neglect  so  to  do, 
file  a  bin  calling  the  survivors  to  ac- 
count, and  praying  for  an  adjustment 
of  the  partnership  affairs.  Miller  v. 
Jones,  39  111.  54. 

Where  a  surviving  partner  used  the 
partnership  funds,  after  a  dissolution  by 
the  death  of  his  former  partner,  in  the 
busmess  of  a  new  partnership  which  he 
entered  into  with  another:  Held,  that 
an  action  would  lie  by  the  administra- 
tor of  the  deceased  partner  for  an  ac- 
counting, against  the  survivor,  or  his 
representatives  after  his  decease,  and 
his  last  partner,  and  that  the  adminis- 
trator could  recover  from  the  latter  the 
amount  found  due  from  him  to  the  first 
partnership.  Castly  v.  Towles,  46  Ala, 
660. 

A  surviving  partner  by  misrepresenta- 


tions and  fraudulent  dealmg  procured 
from  the  decedent's  administratrix,  who 
was  also,  as  he  knew,  trustee  for  dece- 
dent's children,  a  conveyance  of  part- 
nership interests  belonging  to  dece- 
dent's estate,  for  much  less  than  their 
reasonable  value  :  Held,  that  the  use 
of  the  property  thus  wrongfully  appro- 
priated must  be  regarded  as  a  conthiued 
use  of  the  partnership  assets  never  ac- 
counted for,  which  the  survivor  might 
properly  be  decreed  to  make  good  to  the 
admuiistratrix  on  a  bill  brought  by  her 
for  an  accounting.  Heath  v.  Waters, 
40  Mich.  457. 

A,  B  and  C,  who  were  partners  as 
attorneys  and  counsellors-at-law,  agreed 
that  the  general  partnership  between 
them  should  terminate  March  18,  1869; 
that  thereafter  no  new  business  should 
be  received  by  the  firm,  and  that  any 
coming  to  it  through  the  mails  should 
be  equitably  divided.  It  was  also  stip- 
ulated that  the  busmess  then  in  hand 
should  be  closed  up  as  rapidly  as  possi- 
ble by  them  "  as  partners  under  their 
original  terms  of  association,  and  in  the 
firm  name."  They  agreed,  Aug.  13, 
1869,  that  in  case  of  the  death  of  either 
of  them,  his  heirs  or  personal  represen- 
tatives should  receive  one-third  of  the 
fees  in  cases  nearly  finished,  and  twenty. 


^  A  partner  may  maintain  a  bill  in 
equity  against  his  co-partner  and  a  third 
person,  to  recover  his  proportion  of 
moneys  paid  to  the  defendant  by  the 
United  States  in  accordance  with  a  de- 
cision of  the  court  of  Commissioners  of 
Alabama  claims,  under  the  U.  S.  Stat, 
of  June  23,  1874,  for  property  of  the 
partnership  destroyed  by  an  insurgent 
cruiser,  although  after  the  destruction 
of  the  property  and  before  the  making 
of  the  treaty  of  Washington  of  1871, 
the  plaintiff  was  adjudged  an  insolvent 

1226 


debtor  under  the  laws  of  this  common- 
wealth, and  all  his  property  was  duly 
assigned  to  his  assignee,  if  all  the  debts 
proved  against  the  plaintiff's  estate  in 
insolvency,  or  existing  at  the  time  of  the 
assignment  have  been  paid,  satisfied  and 
discharged,  and  the  assignee  has  signi- 
fied his  assent  in  writing  to  the  main- 
tenance of  the  bill  in  the  name  of  the 
debtor.     Jones  v.  Dexter,  125  Mass.  469. 

(.r)  As  in  Wilson  v.  Greenwood,  1 
Swanst.  471. 

{y)  As  in  Addis  v.  Knight,  2  Mer.  119. 


CUAP.  X.] 


ACCOUNT. 


•04; 


trustees  of  his  bankrupt  co-partner;   and,  notwithstanding  the  rule 
against  nuiking  mere  witnesses  parties,  the  bankrupt  himself  may, 


five  per  cent,  in  other  partnership  case;!. 
A  having  died,  his  executor  filed  his  bill 
against  B  and  C  for  a  discovery,  and  to 
recover  A's  share  in  the  fees  received  by 
them  out  of  the  partnership  business 
which  remained  unfinished  when  the 
firm  w-a-s  dissolved:  Held,  That  a  court 
of  chancery  had  jurisdiction  to  entertain 
the  bill  and  power  to  decree  the  relief 
asked  so  far  as  the  fees  had  been  col- 
lected.    Denvei-r.  Roane,  99  U.  S.  355. 

A  and  B  were  partners,  A  caiTying  on 
the  business  of  the  firm  in  Boston,  and 
B  in  New  Orleans.  A  took  in  C  as 
a  partner  in  the  busiHCss  carrieil  on  in 
Boston,  and  A  and  B  agreed  in  writing 
that  after  a  settlement  with  C  all  the 
business  in  Boston  should  be  settled  by 
the  articles  of  agreement  between  A 
and  B.  Real  estate  was  afterwards  ac- 
quired by  A  and  C  hi  Massachusetts  and 
other  States  with  partnership  funds,  and 
was  agreed  to  be  treated  as  partnership 
propr-rty.  A  died:  Held,  that  the  ad- 
ministratrix of  his  estate  could  not 
maintain  a  bill  m  equity  to  compel  C  to 
sell  said  real  estate  as  surviving  part- 
ner, and  to  account  to  her  directly  for 
the  proceeds;  but  that  B,  as  surviving 
partner  of  the  origuial  finn,  had  a  right 
to  insist  on  C's  accounting  with  him 
therefor.  Shearer  v.  Paine,  12  Allen, 
289. 

The  surviving  partner  of  a  commer- 
cial firm  is  not  liable  as  lifiuidator  to  ac- 
count to  the  succession  of  his  deceased 
partner  for  any  single  item  of  indebted- 
ness to  the  succession,  but  to  pay  over 
the  entire  sum  found  to  be  due  on  the 
succession  on  the  settlement  of  the 
partnership.  Walmsley  v.  Mendelsohn, 
31  La.  An.  152. 

Where  a  suit  was  brought  by  the  heir 
of  one  of  the  members  of  a  partnership 
against  the  heirs  of  the  other  member, 


claiming  a  certain  sum,  and  giving,  in 
his  petition,  a  detailed  statement  of  the 
property  belonging  to  the  partnership, 
and  of  its  annual  revenues:  Held,  that 
if  i)laintiff  had  any  right  to  the  property 
described  in  his  petition,  and  was,  there- 
fore, entitled  to  an  account  from  the 
heirs  of  the  surviving  partner,  his  right, 
and  the  rendition  of  an  account  of  the 
partnership  affairs,  could  be  detei-mined 
in  such  a  form  of  action  as  well  as  any 
other;  and,  that  such  a  suit  was  in  the 
nature  of  an  action  for  the  settlement 
of  partnership  affairs,  and  a  partition 
and  a  division  of  the  partnership  eflvcts. 
Atkinson  v.  Rogers,  14.  La.  Ann.  G33. 

One  who  is  next  of  kin,  or  a  legatee 
or  creditor,  cannot  file  a  bill  against  the 
.surviving  partner  of  a  testator  or  intes- 
tate, for  the  sole  purpose  of  compelling 
him  to  account  and  settle  the  partner- 
ship accounts  with  the  personal  repre- 
sentative of  the  deceased  partner.  Har- 
rison V.  Righter,  11  N.  J.  Eq.  ;)S9. 

Upon  the  death  of  a  partner,  one  of 
the  survi\ang  partners  was  made  ad- 
mmistrator:  Held,  that  next  of  kin 
could  not  file  a  bill  against  the  surviv- 
ing partners  for  an  account,  there  being 
no  charge  of  collusion  between  the  ad- 
ministrator and  the  other  partnei-s. 
Ilyer  v.  Burdett,  1  Edw.  Ch.  3J5. 

The  widow  of  a  deceased  member  of 
a  partnership  is  entitled  to  a  discovery 
and  account,  from  the  surviving  part- 
ner of  all  moneys  belonging  to  her 
separate  estate,  received  by  her  husband 
as  trustee  for  her  under  the  Code,  and 
and  mingled  by  him  witli  the  partner- 
ship funds,  and  of  all  disbursements 
made  by  the  partnership,  and  propi>rly 
chargeable  to  her,  and  interest  on  the 
amount  due  her  at  the  death  of  her  hus- 
band.    Dent  I'.  Slough,  40  Ala.  518. 

1227 


^*:)J:3 


ACTIONS    BETWEEN    T'-VHTNEUS,    ETC. 


[book  III. 


■••'JIG     it  is  said,  be  made  a  defendant  for  the  purposes  ^W  discov- 
ery (s).     Again,  if  a  ])artner"s  share  is  taken  in  execution, 
the  purchaser  from  the  sheriff  is  entitled  to  an  account  from  the 
solvent  partners,  as  is,  also,  the  execution  debtor  himself  (a). 
An  agreement  to  pay  out  of  profits  confers  a  right  to  an  account; 
and  servants  entitled  to  a  share  of  yjrolits  can  maintain 

Servants,  &c.        ^^  ^^^j^^^  f^^.  ^^^  RCCOUUt  of  them  {1).' 

A  sub-partner  has  no  right  to  an  account  from  the  principal  firm, 
^  ^      ,  or  any  members  of  it,  except  the  one  with  whom  he  is 

Sub-partners,  J  '         ^    ^ 

'^^-  a  sub-partner;  for  there  is  no  conti-act  or  privity  save 

between  those  two  (c).  It  has  even  been  said  that  if  a  partner 
charges  or  mortgages  his  share  in  favor  of  a  creditor,  the»latter  has 
no  right  to  an  account  from  the  other  partners  of  the  profits  to 
which  their  co-partner  may  be  entitled.  This,  however,  is  not  quite 
correct  (c^);  and  as  regards  partners  in  mines,  it  has  been  decided 
that  a  mortgagee  of  one  partner  is  entitled  to  an  account  against 
the  other  partner  (e).  If  a  partner,  with  the  consent  of  his  co- 
partners, assigns  his  share  in  the  partnership,  the  assignee  will,  by 
virtue  of  this  assent,  acquire  the  rights  of  the  assignor,  and  be, 
therefore,  entitled  to  an  account  from  the  other  partners  (/)." 


(2)  Whitworth  v.  Davis,  1  V.  &  B. 
545.     See  Mitford  PI.  187,  ed.  5. 

(a)  See  Habershon  v.  Blurton,  1  De 
G.  &  Sm.  121;  Perens  v.  Jolinsou,  3  Sm. 
&  G.  419. 

(ft)  See  Han-ington  v.  Churchward,  6 
Jur.  N.  S.  576;  Rishtonv.  Grissel,  5  Eq. 
326;  Tui-ney  v.  Bayley,  4  DeG.  J.  & 
Sm.  332. 

1  One  who  is  to  receive  a  share  of  the 
profits  of  a  business  may  maintain  a 
bill  in  equity  for  an  account  thereof. 
Bentley  v.  Harris,  10  R.  I.  434  (distin- 
guishing Hazard  v.  Hazard,  1  Stoiy, 
371);  Hallett  v.  Cumston,  110  Mass.  32, 
decided  under  Mass.  Gen.  Stat.  eh.  113, 

§2: 

(c)  Brown  v.  De  Tastet,  Jac.  284;  Ray- 
mond's case,  cited  in  Ex  j^rte  Barrow, 
2  Rose,  225;  Bray  v.  Fromont,  6  Madd. 
5,  and  see  Killock  v.  Greg,  4  Russ.  285, 
as  to  agents. 

{(l)  See  ante,  p.  698. 

(e)  Bentley  I'.  Bates,  4  Y.  &  C.  Ex.  182. 

1228 


(/)  See  Fawcett  v.  Whitehouse,  1  R. 
&  M.  132;  Redmayne  v.  Forster,  2  Eq. 
467. 

'■'  Where  one  partner  assigns  his  inter- 
est in  the  assets  of  an  unsettled  part- 
nership to  a  third  person,  and  draws  an 
order  upon  his  co- partner,  directing  him 
to  pay  over  to  the  assignee  all  moneys 
that  may  due  him  on  final  settlement 
of  the  partnership  affairs,  the  assignee 
is  entitled  to  all  the  remedies  for  pro- 
cming  a  settlement  which  the  drawer 
would  have  had  against  the  drawee,  if 
there  had  been  no  assignment;  and  he 
may  maintain  a  bill  for  account  against 
the  drawee  without  making  the  drawer 
a  party.  Fountaine  v.  Urquhart,  33  Ga. 
(Supp.)  184.  See,  also,  Matthewson  v. 
Clarke,  6  How.  122;  Strong  v.  Clawson, 
6  Gilm.  346. 

An  assignee  of  an  assignee  of  a  co- 
partner in  a  joint  purchase  and  sale  of 
lands,  may  sustain  a  bill  in  equity 
against  the  other  co-partners   and  the 


CUAV.  X.] 


ACCOUNT. 


*D4^ 


If  a  partner  dies,  a  question  arises  as  to  the  ri;^lit  of  his  creditors 
and  legatees  to  sue  tlie  other  i^'xrtiiers  for  an  account  of  crc.mors,  &c., 
tlie  share  oi  the  deceased.      1  he  creditors  oi  the  late  nrin   pHrmer. 
can  maintain  an  action  against  tlie  executors  of  the  deceased  and 
the  surviving  partners,  in  order  to  obtain  payment  of  their  debt  out 
of  the  assets  of  the  deceased  (g).     But  the  separate  creditors,  or  the 
legatees,  or  next  of  kin  of  a  deceased  partner,  stand  in  a  very 
different  position.     In  the  absence  of  special  *circumstance3,     *9-i7 
they  have  no  locns  standi  against  the  surviving  partners,  but 
only  against  the  legal  ]>ersonal  representative  of  the  deceased  part- 
ner (A);  and  it  is  only  when  there  is  collusion  between  these  per- 
sons, or  when   circumstances  have  occurred  which  preclude   the 
i-epresentative  from  himself  obtaining  a  decree  for  an  account  of  the 
share  of  the  deceased,  that  his  separate  creditors,  legatees,  or  next 
of  kin,  may  themselves  file  a  bill  for  that  purpose  against  the  sur- 
viving partners  (/).' 


agent  of  the  partnership,  to  compel  a 
discovery  of  the  quantity  purchased  and 
sold,  and  for  an  account  and  distribution 
of  the  proceeds.  Pendleton  v.  Wam- 
bersie,  4  Cranch.  73. 

One  partner  assigned  his  interest  in 
the  concern  as  security  for  a  debt,  but 
continued  to  be  treated  as  a  partner  by 
the  other  partner:  Held,  that  the 
first-mentioned  partner  might  file  a  bill 
against  the  other  partner  and  the  as- 
signees of  his  own  share  for  an  account 
of  the  partnership.  Buford  v.  Neely, 
2Dev.  Eq.  481. 

A.,  and  W.  being  partners,  A, with  the 
consent  of  W.,  transferred  his  interest 
to  D.,  and  D.  and  W.  agreed  to  collect 
assets,  and  pay  the  debts  of  the  old 
firm.  Afterwards  D.  brought  a  suit 
against  W.  for  a  dissolution  and  an  ac- 
count: Held,  that  A.  could  not,  upon 
petition,  become  a  party  to  the  pro- 
ceedings for  the  purpose  of  securing  his 
rights  in  the  firm  property.  Dayton  v. 
Wilkes,  5  Bosw.  655. 

If  a  partner  has  transferred  his  in- 
terest in  the  partnership  to  a  thii'd  per- 
son, such  third  person  is  a  necessaiy 
party  to  a  bill  filed  to  settle  the  part- 


nei-ship  concern.  White  v.  Whit  ■,  4 
Md.  Ch.  418. 

A  bill  was  filed  by  one  partner  to  set- 
tle the  aflairs  of  the  partnership,  which 
bill  was  supported  by  affidavits  The 
defendant  appeared,  and  after  appear- 
ance the  complainant  moved  to  amend 
the  bill  by  making  the  a.ssignee  a  party 
for  the  purpose  of  setting  aside  an  as- 
signment made  by  the  other  partner, 
and  for  a  temporary  injunction  against 
the  assignee  and  for  a  receiver:  Held, 
that  the  bill  would  not  be  multifarious 
as  amended,  and  the  amendments  were 
allowed  on  the  usual  terms.  Hayes  v. 
Heyer,  4  Sandf.  Ch.  485. 

{g)  Wilkinson  v.  Henderson,  1  ]\r.  & 
K.  582,  and  see  post. 

(/()  Davies  v.  Davies,  2  Keen,  534; 
Travis  r.  Milne,  9  Ha.  141;  Langley  r. 
The  Earl  of  Oxford,  2  Amb.  798,  Blunt'? 
ed.;  Seeley  v.  Boehm,  2  Madd.  180. 

(i)  See  the  cases  last  cited,  lliis  sub- 
ject will  be  again  alluded  to. 

^  A  bill  filed  by  a  member  of  a  partner- 
ship, which  has  been  dissolved,  praying 
that  a  receiver  be  appointed  to  collect 
and  receive  the  debts  due  and  coming  to 
the  firm,  that  an  account  be  taken  of  all 

1229 


''^048  ACTIONS    EETWEKN    PAIITXERS,    ETC.  [bOOK  III, 

The  account  -winch  a  partner  may  seek  to  have  taken,  may  bo 
General  or  lim-  ^itlicr  a  general  account  of  the  dealings  and  transactions 
ited  account.  •  ^f  ^]jg  f^j^j^,  with  a  view  to  a  winding  up  of  the  partner- 
ship; or  a  more  limited  account,  directed  to  some  particular  trans- 
action as  to  which  a  dispute  has  risen. 

It  was  formerly  considered  that  no  account  between  partners 
Account  with-    could  be  taken  in  eciuity,  save  with  a  view  to  a  dissoln- 

out  a  dissolu-  •         /  7  J  1       ■/  ' 

t'on-  tion  (Jc),  and  a  bill  praying  an  account  but  not  a  disso- 

lution has  been  held  bad  on  demurrer  {l).  The  reason  alleged  foi- 
this  doctrine  was,  the  impossibilitj^  of  doing  complete  justice  with- 
out winding  up  the  whole  concern,  and  ascertaining  the  final 
balances  due  to  or  from  the  partners  respectively.  This  reason 
however,  is  far  from  satisfactorv,  and  it  has  been  lonj;  felt  that  in 
their  anxiety  to  do  complete  justice,  courts  of  equity  often  refused 
relief  in  cases  where  their  interference,  to  a  limited  extent  ordy, 
would  have  been  highly  beneficial  and  was  loudly  called  for.  It 
has  been  felt,  in  short,  that  much  more  injustice  frequently  arose 
from  their  refusal  to  do  less  than  complete  justice,  than  could  have 
arisen  from  their  interfering  to  no  greater  extent  than  was  desired 
by  the  suitor  aggrieved.     Accordingly,  in  Prole  v.  Masterman  (??i,), 

where  the  promoter  of  a  company  sought  to 
tennan.    ^^'      *948     make  liis  co-promotcrs  Contribute  to  a  *debt  paid 

by  him,  but  for  which  they  were  liable  as  well  as 
he,  it  was  held  that  a  decree  might  be  made  without  directing  a 
general  account  of  what  was  due  from  the  plaintiff  in  respect  of 
other  matters.  Again,  in  the  case  of  a  mutual  insurance  society, 
where  the  funds  of  the  society  are  answerable  for  the  payment  of 
the  moneys  due  upon  their  policies,  an  assured  member  is  entitled 
to  an  account  of  wdiat  is  due  to  him  upon  his  policy,  and  to  a  decree 

the  partnership   dealings  and  transac-  a  decree  is  entered   the   suit  cannot  be 

tions,  and  that  the  other  co-partners  be  dismissed  without  their  consent.  Updike 

compelled  to  pay  the  complainant  what  v.  Doyle,  7  R.  I.  446. 
should  appear,  upon  the  taking  of  the  (k)  Forman  v.  Homfray,  2  V.  &  B. 

accounts,  to  be  due  hira  from  them,  is  a  329;  Knebell  v.  White,  2  Y.  &  C.  Ex. 

bill  for  the  complete  administration  of  15;  ante,  p.  894. 
the  partnership  pi-operty,  in  which  the  (?)  Loscombe  v.  Russell,  4  Sim.  8. 

creditors  of  the  firm  are  interested;  and  (m)  21  Beav.  61.     Compare  Munnings 

a  decree  granting  relief  is  for  their  ben-  v.  Bury,  Tam.  147.     The  circumstance 

efit  as  well  as  for  the  benefit  of  the  par-  that  an  action  for  contribution  woulrl 

ties  to  the  suit,  and  they  have  a  right  to  lie,   did  not  oust  the  jurisdiction  of  a 

insist    upon  its  execution,  though  not  court  of  equity.    Wright  v.   Hnnte.',  5 

made  parties  in  the  bill,  and  after  such  Ves.  792. 

1230 


CHAP.  X.]  ACTIONS    BETWEEN    I'ARTNKIIS,    ETC,  *1J4S 

for  the  payment  of  \vli:it  is  so  due,  witlioiit  involvin^r  liiinself  in  any 
general  account  of  the  dcalinijs  and  transactions  of  the  society,  or 
seekinjj  for  a  dis.sohition  thereof  (;i\ 

The   old   rule,   therefore,  that  a  decree  for  an  account  between 
partners  will  not  he  made  save  witli  a  view  to  the  final    cases  in  which 
determination  of  all  questions  and  cross  claims  between   °"iftJ:de"ree.i. 
them,  and  to  a  dissolution  of  the  partnership,  must  be  Slll'uimlou  is 
regarded  as  considerably  relaxed,  although   it  is  still  i""">'^"^^- 
applicable  where  there  is  no  sufficient  reason  for  dei)arling  from  it.' 

There  are  three  classes  of  cases  in  which  actions  for  an  account, 
without  a  dissolution,  are  more  particularly  common,  and  to  which 
it  is  necessary  specially  to  refer.     Tiiese  are — 

1.  AVhcre  one  partner  has  sought  to  withhold  from  his  co-partner 
the  profit  arising  from  some  secret  transaction. 

2.  Where  the  partnership  is  for  a  term  of  years  still  unexpired, 
and  one  partner  has  sought  to  exclude  or  expel  his  co-partner  or  to 
drive  him  to  a  dissolution. 

3.  "Where  the  partnership  has  proved  a  failure,  and  the  partners 
are  too  numerous  to  be  made  parties  to  the  action,  and  a  limited 
account  will  result  in  justice  to  them  all. 

1.    Where  one  ]iartner  has  obtained  a  secret  benefit,  from  which 
he  seeks  to  exclude  his  co-])artners,  but  to  which  they  i.  Arronnt 
are  entitled,  thev  can  obtain  their  share  ot  such  benent   ia;v  wuhiuii.is 

'  "  ...  whnt  the  firm  IS 

bv  an  action  for  an  account,  and  such  action  is  sustain-   emiiied  to. 
able,  although  no  dissolution  is  sought.     The  cases  illustrating  this 

(n)  Seo  Bromley  v.  Williams,  32  Boav.  prayer  are  technically  necessary.     Fair- 

177;   Hutchinson  v.   Wrig'ht,  25  Beav.  child  v.  Valentine,  7  Robt.  564. 

444;  Taylor  v.  Dean,  22  Bt>av.  429.  See,  Where  one  partner  filed  his  bill  for  a 

too,  Kobson  v.  McCreight,  25  Beav.  272.  dissolution  of  the  partnership,  prayinj; 

'  See  Hudson  v.  BaiTctt,  1  Pars.  Sel.  for  an  account,  and  showing  that  on  a 

Cas.  414.  particular  day  the  partnership  would  ex- 

In  a  bill  for  an  account,  where  both  pire:     Held,  ihni  although  the  pra.ver 

parties  agree  that  the  business  is  at  an  for  an  account  was  premature,  but  be- 

end.  and  that  the  suV)ject-matter  of  the  came  proper  in  a  short  time  afterwards, 

agreement  is   extinguished,  and    both  no  additional  statement  wa.s  necess.iry  ; 

seek  an  accounting,  disputing  only  as  to  the  defendant  also  praying  that  the  bu.s- 

the  pi-inciples  on  which  it  shall  be  taken,  iness  of  the  firm  might  be  closed :  and  as 

the  court,  in  disposing  of  the  cause  after  the  business  was  conducted  by  one  alone, 

trial,  may  well  disregard  the  want  of  an  that  it  was  his  duty  to  keep  an  account; 

averment  that  the  partnership  has  been  and  that  he  might  be  examined  on  oath 

dissolved,  or  of  a  prayer  for  a  decree  of  as  to  all  the  partnei-ship  transactions. 

dissolution,evenif  such  an  averment  and  Funk  r.  Leachman,  4  Dana,  24. 

1-2SI 


*949  ACCOUNT.  [book  iit. 

doctrine  have  l3een  already  noticed  at  length  (o),  and  it  will  there- 
fore be  sufficient  here  to  state  that  an  account  was  directed, 

*949  although  *the  plaintiff  did  not  seek  to  have  the  partnership 
dissolved,  or  its  affairs  wound  up,  in 

Hichens  v.  Congreve,  1  R.  &M.  150,  ante,  p.  581. 

Fawcctt  V.  AVhitehouse,  1  R.  &  M.  132,  ante,  p.  579. 

Beck  r.  Kantorowicz,  3  K.  &  J.  230,  ante,  p.  581. 

The  Society  of  Practical  Knowledge  v.  Abbott,  2  Beav.  559,  ante,  591. 

In  all  the  other  cases  of  this  class,  except  Clegg  v.  Fishwick  (/>), 
in  which  a  dissolution  was  prayed,  the  report  is  silent  as  to  whether 
a  general  winding  up  was  sought  or  not. 

With  reference  to  cases  of  this  description,  it  may  be  observed 
The  equity  of  that  wlicrc  the  benefit  which  the  plaintiffs  assert  their 
ngliiiTuie        right  to   share  has   not  yet  been  obtained,  but  only 

fU'linquent  if.ii.  "  ^  i     •     j^-ny      ^ 

partnLT only.  •  agreed  lor  by  their  co-partners,  tiie  plaintiiTs  nave  no 
locvs  standi  against  the  person  with  whom  the  agreement  has  been 
entered  into  by  those  partners,  and  cannot  therefore  restrain  such 
person  from  performing  that  agreement.  The  proper  course  for 
the  aggrieved  partners  to  take  is  to  proceed  against  their  co-part- 
ners, and  claim  from  them  the  benefit  of  the  agreement  into  which 
they  have  entered,  {q) 

2.  Where  the  partnership  is  for  a  term  of  years  still  unexpired, 
2.  Account  in  and  ouc  partner  has  sought  to  exclude  or  expel  his  co- 
sfouT&c.*^^^ '^^  partner,  or  to  drive  him  to  a  dissolution.  In  cases  of 
this  description  an  account  has  been  directed,  although  no  dissolu- 
tion has  been  asked. 

The  general  proposition  that  courts  of  equity]  would  interfere 

under  the  circumstances  now  supposed,  was  laid  down  by  Sir  John 

Leach  in  Harrison  v.  Armitage  (?'),  where,  however,  no  account  was 

directed,  inasmuch  as  the  evidence  did  not  establish  a  partnership. 

But  in  Chappie  v.  Cadell  (.9)  an   account  was  directed 

Cbapplc  V.  it  V   / 

Cadell.  f^t  j;]-ie  g^^it  Qf  a  minority  wdiere  the  majority  had  sold  a 

partnership  newspaper  to  a  stranger,  and  some  of  the  more  active  of 
the  majority  had  then  entered  into  a  fresh  agreement  with  the  pur- 

(o)  Ante,  p.  571  et  seq.  of  a  lease  from  disposing  of  the  lease 

{)?)  1  Mac  &  G.  294.  when  granted,  except  for  the  benefit  of 

{q)  See  Alder  v.  Fouracre,  3  Swanst.  the  partnership. 

489,  where  an  injunction  was  granted  (r)  4  Madd.  143. 

restraining  the  executors  of  a  deceased  {s)  Jac.  537. 

partner  who  had  agreed  for  a  renewal 

1232 


OUAP.  X.]  ACTIONS    DKTWKKN'    I'AUTNKUS,    LTC.  *950 

chaser  to  carry  on  tlie  pa])t'r  in  partiierslii])  witli  liini.     Rich- 
ards V.  Davies  (^)  wont  a  step  further.     *Thcre  a  jiartrier-     *050 
ship  had  been  entered    into  for  a  term  of  years  which   uiohards  r. 
was   still   unexpired.     The  defendants  would  come  to   in'rondnnt r-- 
no  account  with  the  plaintiff  respecting  the  partnership   [ouui!  '"'"^^' 
dealings  and  transactions,  but  on  the  a])])lication  of  the  plaintiff  a 
decree  for  an  account  of  all  ]>ast  transactions  was  made.     Sir  John 
Leach,  in  pronouncing  judgment,  observed  that  the  plaintiff  liad 
no  relief  at  law  for  money  due  to  him  on  a  partnership  account; 
that  if  a  court  of  equity  refused    him  relief,  he  would   be  wholly 
without  remedy;  and  in  answer  to  the  objection  that  if  such  a  suit 
were  entertained  the  defendant  might  be  vexed  by  a  new  bill  when- 
ever new  profits  accrued  {ic\  his  Honor  asked  what  right  would  the 
defendant  have  to  complain  of  such  new  bill   if  he   repeated  tlie 
injustice  of  withholding  what  was  due  to  the  plaintiff? 

Fairthorne  v.  Weston  (x)  is  another  authority  in  point.     In  that 
case  two  solicitors  entered   into  partnership  for  a  terra  Fairthorne  r. 
of  years,  and  before  the  term  expired  the  defendant  ^*^!"'!"   , 

•^  '  Defendant 

conducted  himself  in  such  a  wav  as  to  prevent  the  pos-  ^j^^P^^s^?  .._ 

-  r  f     "      drive  i>laintiff 

sibility  of  the  partnership  business  being  carried  on.  '*> <i'«s"i^'«- 
The  defendant's  object  was  to  compel  the  plaintiff  to  dissolve. 
The  plaintitf,  however,  instead  of  dissolving,  filed  a  bill  for  an 
account  of  the  partnership  dealings  and  transactions  since  the  last 
settlement,  and  for  a  receiver.  The  defendant  insisted  that  the 
jilaintiff  was  entitled  to  no  relief  except  with  a  view  to  a  dissolu- 
tion; but  the  Court  held  otherwise,  and  observed  that  there  was  no 
universal  rule  to  the  effect  that  a  bill,  asking  for  a  particular  ac- 
count but  not  for  a  dissolution,  was  demurrable;  and  that  if  there 
were  any  such  rule,  a  person  fraudulently  inclined,  might,  of  his 
mere  will  and  pleasure,  compel  his  co-partner  to  submit  to  the 
alternative  of  dissolving  a  partnership,  or  ruin  him  by  a  continued 
violation  of  the  partnership  contract. 

Again,  where  a  person    seeks   to  establish  a  partnership  with 
another  who  denies  the  plaintiff's  title  to  be  considered  a 

,  -x' i.1       r  •  CI  ii  •  •     ,     Other  cases. 

])artner,  it  tlie  tormer  is  successiul  iqion  the  main  point 

in  dispute,  an  account  of  the  past  dealings  and  transactions  will  be 

(0  2  R.  &  M.  347.  V.  Russell,  4  Sini.  8;  and  by  Baron  Al- 

((0  This  objection  was  made  by  Lord      derson  in  Knebell  v.  White,  2  Y.  &  C. 

Kldon  in  Forraan  r.  Homfray,  2  V.  &      Ex.  15. 

B.  330;  by  V.-C.  Shadwell  in  Loscombe  [x)  3  Ha.  387. 

«  1233 


^952  ACTIONS    BETWEEN    TAHTNIlRS,    ETC.  [bOOK  III. 

*951  ^dec.eed,  altLongli  the  plaintiff  does  not  seek  for  a  dissolu- 
tion of  the  partnership  which  he  has  proved  to  exist,  (y)  Upon  the 
same  principle  it  is  apprehended,  that  if  a  j)ai-tner  is  wrongfully 
expelled,  and  he  is  restored  to  his  status  as  partner  by  the  judgment 
of  the  Court,  an  account  will  be  directed,  but  the  partnership  will 
not  necessarily  be  dissolved,  (z) 

As  regards  mines  it  has  also  been  decided,  that  if  one  co-owner 
excludes  another  from  his  share  of  the  profits,  an  ac- 
count will  be  directed,  although  no  dissolution  is  pra}-- 
ed.  (a)  But  as  each  co-owner  of  a  mine  can  sell  his  share  without 
the  consent  of  tlie  other  owners,  there  is  no  occasion  for  him  to  ask 
for  a  dissolution,  and  the  case  of  a  mine  is  therefore,  perhaps,  not 
an  apt  illustration  of  the  doctrine  in  question. 

3.  AVhere  the  partnership  has  proved  a  failure,  and  the  partners 
?,  Account         are  too  numerous  to  be  made  parties  to  the  action,  and 

where  tlie  con-  ,.       .       ,  .,,  ,...,,  n  i 

corn  has  failed,   a  limited  accduut  Will  rosult  in  justice  to  them  all,  such 

an  account  will  be  directed,  although  a  dissolution  is  not  asked  for. 

The  leadincf  case  in  support  of  this  proposition  is  Wali- 

^\  allworth  v.  ^  '  '  ^        ^ 

Holt.  M'orth  V.    Holt  (fj),   iu  which  Lord  (.'ottenham,  in  an 

elaborate  and  justly  celebrated  judgment,  overruled  a  demurrer  to 
a  bill  by  some  of  the  shareholders  of  an  insolvent  joint-stock  bank, 
on  behalf  of  themselves  and  others,  against  the  directors,  trustees, 
and  public  ofHcerof  the  company,  and  certain  shareholders  who  had 
not  paid  up  their  calls,  praying  that  an  account  might  be  taken  of 
all  tlie  partnership  assets,  and  that  the  outstanding  assets  might  be 
got  in  by  a  receiver,  and  that  the  whole  might  be  c;mverted  into 
money,  and  applied  towrjds  the  satisfaction  of  the  partnership 
debts.     In  delivering  judgment  the  Lord  Chancellor  observed, — 

"When  it  is  said  that  the  Court  cannot  g've  reli-i'f  of  this  liraiti-d  kind,  it  is  I 
presume,  meant  that  the  bill  ought  to  have  prayed  a  dissolution,  and 

*952  *^  fin^l  winding  up  of  the  affairs  of  the  company.  How  far  this  Court  will 
interfere  between  partners,  except  in  cases  of  dissolution,  has  been  the 

subject  of  much  difference  of  opinion,  upon  which  it  is  not  my  purpose  to  say  any- 

(i/)  Knowles  v.   Haughton,    11  Ves.  but  no  dissolution  was  decreed.     In  the 

168,  as  reported  in  Coilyer  on   Partn.  case  of  an  incorporated  company  this 

198,    note.      The   defendant,  however,  point  cannot  arise,  Garden  Gully  Co.  r. 

did  not  resist  the  account  after  the  ques-  McLister,  1  App.  Ca.  39.  is  an  instance. 

tion  of  partnership  was  decided  against  (a)  Bentley  r.  Bates.  4  Y.  &  C.  Ex. 

l-,ji^^_  182.     See,  also.  Redmayne  v.  Forster,  2 

{z)  See  Blissett  v.  Daniel,  10  Ha.  493,  Eq.  467. 

where  the  bill  prayed  for  a  dissolution,  (h)  4  M.  &  Cr.  619. 

1234 


CIIAI',  X.]  ACCOUNT.  ^do?^ 

thinf,'  b>yond  what  is  necesisary  for  the  decision  of  this  case;  but  there  are  strorifr 
authorities  for  hokling  that,  to  a  bill  praying  a  dissolution,  all  the  partners  must 
be  parties  (c);  and  this  bill  alleg3s  that  they  are  so  numerous  as  to  make  that  im- 
possible. The  result,  therefore,  of  these  two  rules  would  be — the  one  bindinpr  the 
Court  to  withhold  its  jurL^^dlction.  except  upon  bills  praj'inpr  a  dissolution,  and  the 
other  reqnirinfj:  that  all  the  partners  should  be  parties  to  the  bill  praying  it — that 
the  door  of  this  Court  would  be  shut  in  all  cases  in  which  the  partners  or  sharf- 
holders  are  too  numerous  to  be  made  parties,  which  in  the  present  state  of  the 
transactions  of  manlcind  would  be  an  absolute  denial  of  justice  to  a  large  portion 
of  the  subjects  of  the  realm,  in  some  of  the  most  important  of  their  affairs.  This 
result  is  quite  sufficient  to  show  that  such  cannot  be  the  law.  " 

In  "Walhvortli  v.  Holt,  tJio  1)111  was  filed  for  the  sole  purpose  of 
liaving  the  assets  of  the  company  applied  in  payment  of  its  joint 
debts;  it  did  not  pray  an  account  of  the  partnership  dealings  and 
transactions,  for  the  purjiose  of  obtaining  a  division  of  the  profits 
(if  any)  amongst  the  persons  entitled  thereto.  If  it  had,  probably 
a  decree  would  have  been  refused,  either  because  a  dissolution  ought 
to  hiive  been  asked,  or  because  all  the  shareholders  were  not  parties 
to  the  bill.  ((I)     Eut  since   Wallworth   v.  Holt   other 

1  I     '        1      -1     T     •  1  •    1     1  -11  •  ^  Later  cases, 

cases  have   been   decided,  m  winch   bills  praying  for  a 

division  of  the  surplus  assets  amongst  the  shareholders,  but  not  ex- 
pressly praying  lor  a  di.^soliitiuii,  have  been   held  good  on  demur- 
rer. («)     The  case  which   has  gone  furthest  in  this  di-    pjieppar^^, 
i-ection    is   Sheppard  r.  Oxenford  (/');  for  there  every  ^x'^"ft>'"<i- 
kind  of  relief  which   would   have  been  rccjuired    in  the  event  of  a 
dissolution  was  prayed  for,  although  a  dissolution  in  terms  was  not 
asked.  In  Sheppard  v.  Oxenford,  a  number  of  persons  formed  an  as- 
sociation for  working  mines  in  Brazil.     The  defendant  was  the  sole 
trustee  of  the  property,  and  the  sole  director.  Disj>utes  having  arisen, 
a  bill  was  filed  by  a  shareholder  on  behalf  of  himself  and  all  the  other 
shareholders  against  the  defendant  for  an  account  of  the  moneys  re- 
ceived and  paid  b}'-  him  on  behalf  of  the  association,  and  for 
*an  accjunt  of  its  debts,  and   for  ti.eir  payment  out  of  the     *0.">.'» 
available  assets,  and  for  a  sale,  if  necessary  for  that  purpose, 
of  part  of  the  property,  and  for  a  division  of  j^fojits.  The  bill  also 
prav'cd  an  injunction  to  restrain  the  defendant  from  selling  or  dis- 
posing of  the  pro])erty,  and  for  a  receiver  to  get  in  the  debts  due  to 

(c)  See  as  to  this,  ante,  p.  881.  (e)  See  Apperley  r.  Page,  1  Ph.  779: 

(d)  See  Richardt-on  v.  Hastings.  7  Wilson  r.  Stanhope,  2  Coll.  629;  Cooper 
Beav.  323,  and  11  ib.  17;  Decks  r.  Stan-  r.  Webb,  15  Sim.  454,  and  Clements  r. 
hope,  14  Sim.  57,  which  were  similar  Bowes,  17  ib.  167. 

cases  to  Wallworth  r.  Holt.  (/)  1  K.  <t  J.  491. 

1235 


*95'i:  ACTIONS    BETWEEN    PARTNERS,    ETC.  [bOOK  III. 

tlie  association,  and  to  manage  the  affairs  thereof,  until  the  ac- 
counts were  taken,  but  no  dissolution  was  asked.  A  demurrer  to 
this  bill  was  put  in  and  overruled  (^),  and  an  injunction  was  granted 
restraining  the  defendant  from  selling  or  disposing  of  the  property 
otherwise  than  in  the  ordinary  course  of  business;  and  a  receiver 
and  manager  of  the  property  in  this  country  was  appointed.  It  is 
to  be  observed  that,  although  this  was  a  case  of  a  mine,  the  mine 
was  in  a  foreign  country,  and  was,  strictly  speaking,  partnership 
property,  and  not  merely  so  much  land  belonging  jointly  or  in  com- 
mon to  several  co-owners. 

Having  regard  to  the  decisions  in  Sheppard  v.  Oxenford,  and 
Result  of  latest  other  modern  cases  of  a  similar  kind,  especially  Ap- 
cases.  perly  V.  Page  (/i)  and  Clements  v.  Bowes  (*),  it  is  con- 

ceived that  the  doctrine  established  in  Wallworth  v.  Holt  may  be 
considered  as  extending  not  only  to  cases  where  an  account  is  sought 
for  the  purpose  of  having  joint  assets  applied  in  discharge  of  the 
joint  liabilities,  but  also  to  cases  where  an  account  is  sought  for  the 
additional  purpose  of  obtaining  a  division  of  the  surplus  assets  and 
profits  amongst  the  persons  entitled  thereto.  If  this  be  so,  the  last 
remnant  of  the  doctrine  that,  in  partnership  cases,  there  can  be  no 
account  without  a  dissolution,  must  be  considered  as  swept  away, 
at  least  as  regards  partnerships  the  members  of  which  are  too  nu- 
merous to  be  made  parties  to  the  action. 

Similar  in  many  respects  to  the  class  of  cases  last  referred  to, 
Actions  for  the  are  tliose  in  which  an  unsuccessful  attempt  has  been 
posits  where       made  to  fomi  a  company,  and  the  shareholders  seek  an 

the  company  t       ,•  n   .^  i  mi 

is  abortive.  accouut  01  the  application  01  the  money  subscribcu, 
and  for  a  return  of  the  whole  or  part  of  their  subscriptions. 

Before  the  Judicature  acts  courts  of  equity  interfered  at  the  suit 

of  the  subscribers  of  bubble  companies,  and  compelled  the 
*954     *projectors  to  return   the   deposits,  not  only   in   cases   of 

fraud  (/^),  but  also  where  there  was  no  fraud.  (Z)  Since  the 
Judicature  acts  an  action  for  this  purpose  can  clearly  be  main- 
tained; and  in  such  action  the  Court  will,  if  necessary,  direct  an 
account  of  the  moneys  received,  and  of  the  expenses  properly  in- 

ig)  See  1  K.  &  J.  501.  45;  Cridland  v.  DeMauley,  1  DeG.  &  S. 

{h)  1  Ph.  779.  459;  Hallows  v.  Femie,  3  Ch.  467,  re- 

{(•)  17  Sim.  167.  versing  S.  C.  3  Eq.  520. 

[k)  As  in  Colt  v.  Woolaston,  2  P.  W.  (?)  As  in  Harvey  v.  Collett,   15  Sim. 

154;  Blain  v.  Agar,  1  Sim.  37,  and  2  ib.  332. 
289.     See,  too,  Green  v.  Barrett,  1  Sim. 
1236 


CHAP.  X.] 


ACTIONS    BETWEEN    TARTNEKS,    ETC. 


^954 


cniTcd  by  the  inan.agers,  and  pajnient  out  of  the  deposits  of  tliose 
expenses,  and  a  distribution  of  the  surphis;  and  it  will  interfere  by 
injunction,  and  by  appointing  a  receiver  in  tlie  meantime,  althougli 
no  dissolution  is  asked,  (m) 

A  claim  for  an  account  need  not  contain  an  offer  by  the  plaintiff 
to  pay  what,  if  anything,  may  be  found  due  from  him  o^g^b-  ^lain- 
on  taking  such  account,  {n)  It  is,  however,  usual  to  i^'^lfe^fr^m '^^^ 
insert  such  an  ofter.  ^^™- 

An  action  for  an  account  of  partnersliip  dealings  is  not  objec- 
tionable, simply  because  it  relates  to  the  dealings  of   Action  for  ac- 

-  ,..,.,  .  .  ,  ,        count  of  several 

several  partnerships,  it  they,  in  point  oi  tact,  are  noth-  partnerships, 
ing  more  than  continuations  of  one  firm,  (c)'     But  an  action  which 
involves  the  taking  of  an  account  of  the  dealings  and   transactions 
of  two  co-existing  firms,  may  be  open  to  objection  on  the  ground 
of  practical  inconvenience,  (j?) 

Before  the  Judicature  acts  a  bill  in  equit}^  against  two  persons 
pravini;  for  relief  a-^ainst  one,  and  in  the  event  of  the    .,. 

••       "       ^  °  '  Alternative 

plaintiff  not  being  entitled  to  relief  against  him,  then   *^^^- 


{in)  Cooper  r.  Webb,  15  Sim.  454; 
Wilson  V.  Stanhope,  2  Coll.  629;  Ap- 
perly  v.  Page,  1  Ph.  779;  Clements  v. 
Bowes,  17  Sim.  167,  and  1  Drew,  684, 
where  tli'muiTers  to  such  bills  were  over- 
ruled. See,  too,  Sheppard  v.  Oxenford, 
1  K.  &  J.  491,  ante,  p.  952,  and  Butt  v. 
Monteaux,  1  K.  &  J.  98. 

(>f)  The  Colombian  Government  v. 
Rothschild,  1  Sim.  103. 

(o)  See  Jefferj's  v.  Smith,  3  Russ.  158. 

'  When  a  partnership  is  dissolved  by 
the  death  of"  a  partner,  and  the  survivors 
enter  into  a  new  partnership,  and  under- 
take to  settle  the  affairs  of  the  old  part- 
nership, in  an  action  for  dissolution  of 
the  new  partnei-ship,  the  affairs  of  the 
old  may  be  investigated.  Burchai'd  r. 
Boyce,  21  Ga.  6. 

A  complaint  filed  to  conipjl  a  partner- 
ship accoimt,  if  it  contain  sufficient  to 
call  upon  the  defendant  for  an  account- 
ing as  to  one  branch  of  the  partnership 
business,  though  iiisuHicient  as  to  the 
other  branch  of  their  b\isiness,  will  not 
be  bad  on  a  general  demurrer  to  the 
whole  complaint.     Young  v.  Pearson, 


1  Cal.  448. 

On  a  bill  brought  by  a  partner  against 
his  co-partners  for  account  and  settle- 
ment as  to  a  branch  of  the  business 
which  had  been  discontinued,  and  in 
respect  to  which  the  partnership  had 
been  dissolved,  and  also  for  a  share  of 
profits  in  a  second  branch  of  the  busi- 
ness, not  discontinued,  but  in  active 
progress,  and  in  respect  to  which  the 
pai-tnership  still  subsisted,  the  jury  hav- 
ing found,  in  effect  (and  this  finding 
being  supported  by  the  evidence),  that 
the  suit  when  commenced  was  ground- 
less as  to  both  branches  of  the  business, 
a  verdict  in  complainant's  favor  for  a 
share  of  the  profits  which,  pending  the 
suit,  accrued  from  the  latter  branch,  was 
held  illegal;  more  especially  as  the  bill 
did  not  seek,  nor  the  verdict  provide  for. 
a  dissolution  of  the  subsisting  partner- 
shi]i.  a  final  settlement  of  the  accounts, 
a  discontinuance  of  the  business,  or  a 
disposition  of  the  assets.  Wadley  c. 
Jones,  55  Ga.  329. 

(/>)  See  Rheam  r.  Smith,  2  Ph.  726. 

1237 


*955  DiscovEUV.  [book  hi. 

for  relief  ao-ainst   the  other,  was  cleiniiri-able.     In  Seddon  v.  Con- 

Seddon  v  "®^^  (*?)'  ^  ^'^^  ^''^^  ^^^^  ^^   ^  jiersoii  who  alleged  that 

conneii.  \^q  Jj^j   jjeeii  induced   by  the  fraud  of  directors  to  bu}' 

shares;  and  the  relief  prayed  was,  that   it  might  be  declared  that 

the  purchase  was  void  as  between  the  pUiintiti'  and  the  coni- 
*955     pany,  and  that  the  ^company  might  be  ordered  to  repay  the 

plaintiff  his  purchase  money,  with  interest;  o)\  in  the  event 

of  the  Court  not  thinking  the  plaintiff  entitled  to  such  relief,  then 

that  the  purchase  money  might  be  repaid  by  the  directors  who  had 

been  guilty  of  the  fraud.     A  demurrer  to  the  bill  was  allowed,  on 

the  ground  that  it  ought  to  have  shown  a  direct,  and  not  a  contiu- 

irent,  ri^ht  to   relief  arjainst  each   defendant  against  whom  relief 

was  sought,  and  to  have  prayed  accordingly.     How  far  this  rule 

still  prevails  cannot  be  considered  as  settled,  (?') 

In  an  action  for  a  partnership  account,  if  the  partnership  is  ad- 

^,  ,.  ^  ,  mitted,  and  there  is  in  fact  nothing  in  dispute  between 
Motion  before  '  "  '- 

hearing.  ^\^q  parties  except  the  accounts,  an  order  directing  them 

ma}'  be  applied  for  and  obtained  before  the  hearing  of  the  action,  {s) 

2.  As  to  discovery  mid  joroduction  of  documents. — The  right 
of  every  partner  to  a  discovery  from  his  co-partner  of  all 

isco\ery.  j^^|-{.gj.g  relating  to  the  partnership  dealings  and  trans- 
actions is  as  incontestable  as  his  right  to  an  account;  and  such 
right,  like  the  right  to  an  account,  devolves  upon  and  is  enforceable 
against  a  partner's  legal  personal  representatives  and  trustees  in 
bankruptcy.  How  far  discovery  can  be  rcipiired  from  an  alleged 
partner  who  denies  the  partnership  alleged,  will  be  examined  here- 
after; in  the  present  place  it  will  be  sufficient  to  allude  to  a  few 
points  of  practical  importance  arising  where  the  right  to  discovery 
is  not  denied. 

A  party  to  an  action  for  an  account  is  often  required  to  discover 
.     .       and  set  forth  in  answer  to  interroiratories,  details  which 

Oppressive  in-  ^ 

terrogatories.  \)^  jg  impossible  for  him  to  remember,  and  to  ascertain 
which  inquiry  and  study  are  necessary;  but  all  that  he  is  bound  to 
do  is,  it  seems,  to  furnish  the  interrogator  with  every  means  of  in- 
formation possessed  or  obtainable  by  himself,  leaving  the  interrog- 
ator to  make  what  he  can  of  the  materials  thus  furnished  to  him. 
The  party  interrogated  is  not  bound  to  digest  accounts,  nor  to  set 

(g)  10  Sim.  79.  2  Ex.  D.  301,  with  Evans  v.  Buck,  4  Ch. 

(r)  See  Ord.   xvi.   rr.   3  and  6,  and      D.  432. 
compare  Honduras,  &c.  Co.  v.  Lefevre,  (s)  Turquand  v.  Wilson,  1  Cli.  D.  85. 

1238 


CHAl'.  X.]  ACTIONS    UKTWKKX    I'AKr.NiaiS,    LTC.  *9o6 

out  voluminous  accounts  existino;  alroiuly   in  another  chrLstian 
shape,  and  which  he  offers  to  produv^e.     Thus,  in  Chris-  v.  Taylor, 
tiau  V.  Taylor  {t),  in  which  the  executor  of  one  deceased 
''•'partner  tiled  a  bill  for  an  account  against  the  executors  of    *956 
another  deceased  partner,  and  required  them  to  set  out  in 
detail  many  complicated  and  voluminous  accounts,  it  was  held  that 
tliey  were  not  bound  to  do  so;    that  they  were  under  no  obligation 
of  going  through  the  Ijooks  for  the  purpose  of  giving  the  plaintiff 
the  information  which  he  asked;  and  that  the  defendants  could  not 
l)e  compelled  to  do  more  than  to  refer  to  the  books  and  documents 
ill  their  possession  in  such  a  way  as  to  entitle  the  plaintiff  to  have 
them  produced  for  his  inspection,  (u) 

Where,  however,  there  are  specitic  questions,  it  is  not  sufficient 
to  refer  generally  to  l^ooks  and  say  that,  save  as  therein   Drake  r. 
appears,  no  answer  can  be  given.     The  person  answer-  ^i"^"*- 
ing  must  go  a  step  further,  and  point  out  where  in  particular  the 
the  information  required  by  each  interrogatory  is  to  be  found,   {x) 

A  person  interrogated,  moreover,  is  bound  to  state  what  he  knows, 
to  make  inquiries  of  his  agents  and  servants,  to  obtain   Person inter- 
documents  to  the  possession  ot  which  he  has  a  right,  make  inquiries. 
and  to  afford  his  opponent  either  the  information  sought,  or  all  the 
means  of  obtaining  information  wliich  the  answerer  himself  pos- 
sesses, (t/)     A  pers<m  who  has  it  in  his  power  to  obtain  information 
cannot  escape  from  discovert'  sim])ly  by  saying  he  does  not  know. 
In  Taylor  v.  Rundell  (2),  the  executors  of  a  lessor  of  a  Taylors 
mine  tiled  a  bill  against  the  lessees  for  a  discoveiw  of  ^""^eii- 
the  ground    o]K'ned,  and   for   an    account   of  the  jiroduce.      The 
dufeudants  were   two   of   the  directors  of  the  com])any  by  which 
the  mine  was    worked.      The  defendants   put   in    an    incompletQ 

(0  11  Sim.  401.  on  Discovery,  165-169. 

ill)  See,  too,  Lockett  v.  Lockett,  4  Ch.  (//)  As  to  what  accountants'  reports, 

:;;!G;  White  v.   B;u-ker,   5  DeG.  &  Sm.  <S:c.    are  privileged,    see    Walshani  r. 

7-46;  Seeley  v.  Boehm,  2  Madd.  176.    A  Stainton,  2  Hem.    &  M.  1 ;     Wilson  r. 

defendant  is  not  entitled  to  set  out  the  Kortliampton    &    Banbury,   &c.    Rail. 

;;ccounts  sought  for  in  a  book,  and  to  Co.  14  Eq.   477.      As  to  setting  out  a 

refer  to  the  book  instead  of  scheduling  list  of  the  debtoi-s  to  the  finn,  see  Tel- 

tiio  accounts  to  the  answer.  See  Telford  ford  r.  Ruskin,  1  Dr.  ic  Sm.  148,  where 

r.  Ruskin,  1  Dr.  <fc  Sm.  148.  it  was  held  that  such  a  list  must  be 

(x)  Drak?  v.  Symes,  Johns.  647.  See,  given.    Compare  the  observation  of  V.- 

:i.s  (o  taking  oppressive  inteiTOgatories  C.  Wood  m  Drake  r.  Symes,  Johns.  651. 

.•.:T  the  file,  S.  C.  2  DeG.  F.  <fe  J.  81,  {z)  11  Sim.  aiJl,  and'Cr.  and  Ph.  104. 
r.ad  generally  on  this  subject  Wigram 

1239 


*958  ACTIONS    BETWEEN    PARTNERS,    ETC.  [bOOK   III. 

^957  *ans\ver,  stating,  by  way  of  excuse  for  so  doing,  that  certuiii 
accounts  were  in  possession  of  the  company's  agent  in  Anier- 
ica;  that  the  copies  furnished  by  hira  were  in  the  custody  of  the  sec- 
retary of  the  company,  that  the  defendants  had  no  power  to  inspect 
the  accounts  except  by  an  order  of  tlie  Board,  or,  as  shareholders,  at 
certain  short  and  specified  times;  and  that  the  phtiutitTs  had,  by 
means  of  an  agent  appointed  for  that  very  purpose,  equal  facilities 
and  powers  with  the  defendants  to  obtain  the  information  desired. 
The  answer  was  held  insufficient,  first  by  Vice-Chancellor  Shadwell^ 
and  afterwards  by  Lord  Cottenham,  on  appeal;  the  former  holding 
that  the  defendants  ought  to  have  stated  that  they  had  applied  to  the 
agent  abroad;  and  the  latter  holding  that  it  ought  to  have  appeared 
in  the  answer  that  the  Board  of  Directors  had  been  applied  to  for 
leave  to  procure  and  give  the  information  required,  and  that  such 
leave  had  been  refused.  Lord  Cottenham  added,  "  If  it  is  in  your 
power  to  give  the  discovery,  you  must  give  it;  if  not,  you  must  show 
that  you  have  done  your  best  to  procure  the  means  of  giving  it."  (a) 
[n  another  suit  between  the  same  ])arties  for  similar  objects,  but 
Tavior?'  relating  to  another  mine  (i),  the  defendants  again  put 

Rundeii(2).  in  an  incomplete  auswcr,  excusing  themselves  on  the 
o-round  that  the  books  and  documents  containing  the  information 
sought  to  be  obtained  were  in  the  possession  of  the  secretary  as  the 
agent  of  the  company,  and  that  the  directors  had  ordered  him  not 
to  allow  the  defendants  to  see  the  books;  but  this  was  held  insuffi- 
cient by  the  V.-C.  Knight  Bruce,  and  by  Lord  Cottenham,  on  the 
irround  that  the  defendants  had  a  right  to  see  the  books,  and  that 
they  were  bound  to  exercise  that  right,  and  if  necessary,  to  file  a 
bill  for  the  purpose  of  enforcing  it.     Lord   Cottenham  there  said. 

"A  party  is  bound  to  inspect  and  answer  as  to  the  contents 
*958     of  all  documents  that  are  in  his  *possession  or  poioer;  and 

all  which  he  has  a  right  to  inspect,  provided  he  can  enfoi'cc 
that  right,  are  in  his  power. ^^ 

Books  and  papers  which  are  in  the  possession  of  a  company  arr, 
for  pur])oses  of  discovery,  in  the  possession  or  power 

Directors  deny-  f      i  •'  ^  .    ,  ,.  , 

ing  possession,    ^^f  |;|jg  directors,  and  they  cannot  avoid  giving  a  list  oi 

(rt)  See,  too,  Stuart  v.  Lord  Bute,  11  ing  on  business  in  a  foreign  country, 

Sim.  442,  and  12  ib.  460;  A.-G.  v.  Rees.  was  not  bound  to  set  out  a  list  of  dofvi- 

12  Beav.  50;  P]arl  of  Glengall  v.  Fraser,  ments  in  the  possession  of  the  partners 

2   Ha.   99,  and  compare  Martineau   v.  abroad. 

Cox,  2  Y.  &  C.  Ex.  638,   where  it  was  {h)  Taylor  v.  Rundell,  1  Y.  &  C.  C. 

held  that  a  partner  here  in  a  firm  carry-  128,  and  1  Ph.  222. 
1240 


CHAP.  X.] 


ACTIONS    IJKTWEKN    rAKlNEUS,    ETC. 


'OoS 


tlie  documents  of  the  compuny  by   saying  that  they,  tlie  directors, 
have  none,  (c) 

In  case  it  becomes  necessary  for  a  person  interrogated  to  rem't\ e 
obstacles  tlirovvn  in  his  way,  he  should  apply  for  further  time  tu 
answer,  and  not  put  in  an  answer,  whicli  is  insufficient,  (il) 

In  connection  with  this  subject  it  may  be  useful  to  remind  the 
reader  of  the  rule,  that  a  person  cannot  be  compelled  to  produptiAu  uf 
produce  books'  which  belong  to  himself  and  others  i^ocumems 
who  are  not  before  the  Court.  Thus  in  Murray  v.  Walter  (<j),  t!ie 
defendant  in  his  answer  stated,  that  cei-tain  books  relating  to  a  con- 
cern in  which  the  ])laintitf  claimed  to  be  a  i)artnerwith  the  delciHJ- 
ant  were  in  the  possession  of  the  treasurer  of  the  concern  on  be- 
half of  the  several  shareholders  in  it,  many  of  whom  were  not 
parties  to  the  suit;  and  it  was  held  that  the  defendant  could  not  l)e 
compelled  to  produce  the  books  in  question,  although  it  was  insist- 
ed on  the  authority  of  Walburn  v.  Ingilby  {/),  that  the  })laintiff 


(c)  Clinch  V.  Financial  Coi-poration, 
2  Eq.  271. 

(d)  Taylor  v.  Rundell,  1  Ph.  222; 
Pickering  r.  Kigby,  18  Ves.  4S4. 

'  In  an  action  between  partners  for  an 
accounting,  either  is  entitled,  at  any 
stage  of  the  action,  to  an  order  requiring 
the  production  of  all  partnership  books, 
and  the  papers  and  accounts  relating 
thereto,  and  their  deposit  with  the  clerk 
to  be  inspected  and  copied.  Stebbins  v, 
Harmon,  17  Hun,  445;  Kelly  v.  Eck- 
ford,  5  Paiga,  548. 

In  the  settlement  of  an  account  be- 
tween partners,  the  parties  have  the  • 
same  rights  before  the  circuit  court  as 
before  a  master,  in  regard  to  the  pro- 
duction of  books,  examination  upon 
interrogatories,  etc.  Moutanye  r.  Hatch, 
:U  111.  :J94. 

Where  partnership  accounts  are  re- 
feiTed  to  a  commissioner  for  settlement, 
the  court  will  rule  the  parties  to  produce 
before  him  such  books  and  papers  a^ 
relate  to  the  partnership,  and  direcifc 
liim  to  disregard  any  matter  therein 
which  relates  to  the  private  affairs  of 
the  parties.  Calloway  v.  Tate,  1  Hen. 
&  Munf.  9. 


A  and  B,  being  partnei-s  in  trade, 
mutually  agreed  that  A  should  devote- 
his  attention  to  one  kind  of  business, 
and  B  to  another,  and  that  all  the  prof- 
its and  losses  accruing  from  both  kinds 
should  be  equally  shared  between  them: 
Held,  on  a  bill  in  chancery  brought  by 
A,  after  the  death  of  B,  against  his  ad- 
ministrators, for  the  account-books  kept 
by  B,  that  these  facts  alone  evinced  no 
title  in  A  to  the  partnership  effects,  and 
the  bill  was  dismissed.  Canfield  r. 
Hard,  6  Conn.  180. 

In  an  action  by  the  executors  of  a 
partmn-  who  had  conveyed  all  his  inter- 
est in  the  firm  to  the  other  pai-tner,  to 
set  aside  the  releases  and  conveyances, 
it  was  held  that  the  plauitiffs  were  not 
entitled  to  a  general  inspection  of  the 
books  of  the  firm  before  judgment,  th"y 
being  the  exclusive  property  of  the  de- 
fendant as  long  as  the  sale  stood.  Piatt 
t'.  Piatt,  Gl  Barb.  52;  S.  C.  11  Abb.  Pr. 
N.  S.  110. 

{e)  Cr.  &  Ph.  114.  The  interest  of 
the  absent  parties  must  be  stated,  Bovill 
V.  Cowan.  5  Ch.  495. 

(/)  1  M.  &  K.  79. 

12-41 


*959  DISCOVERY    AND    PKODUCTION    OF    DOCUMENTS.         [l?0OK  III. 

h.id  a  rio-lit  to  have  whatever  access  to  the  books  the  defciKhmt 

hhnself  was  entitled  to.     There  are   sev^eral  other  decisions  to  the 

same  effect  as  Murray  v.  Walter  ((/),  but  the  doctrine 

Murray  V.  •'  ^"^  ^ 

Walter.  there  laid  down  does  not  apply  to  cases  in   which  the 

absent  parties  interested  in  the  books  are  in  fact  represented  by  thede- 
fendants  on  the  record,  and  have  no  interest  in  conflict  with  theirs;  (A) 
nor  it  is  said  to  an  action  b}'-  a  cestui  que  trust  aujainst  a 
*959  trustee  who  is  ch:ir:^ed  with  trading  with  trust  *inoneys  in 
partnership  with  other  persons  not  before  the  Court.  {I) 

If  the  plaintiff  has  agreed  to  accept  the  defendant's  statement 
Asjioementpre-  of  profits,  and  not  to  investigate  his  books  and  accounts, 
tiuii/"^' "^''^'^''  the  defendant  will  not  be  compelled  to  produce  them 
before  the  hearing  of  the  action,  (h) 

A  person  who  obtains  an  order  for  the  production  of  documents 
Inspecting  is  entitled  not  only  to  inspect  them  himself,  but  to  have 
documents.  them  inspected  by  his  solicitors  and  agents.  (?)  But 
neither  he  nor  they  are  entitled  to  make  public  the  information 
they  obtain  by  means  of  such  inspection.  The  order  is  made  with 
'a  view  to  the  administration  of  justice  between  the  litigant  parties; 
and  an  injunction  will,  if  necessary,  be  granted  to  restrain  the 
communication  to  strangers  of  what  may  be  ascertained  in  the 
course  of  an  examination  of  the  books  and  documents  produced 
under  the  order,  {m) 

The  common  order  does  not  entitle  the  ])erson  in  whose  favor  it 
.     ^       is  made  to  inspect  by  a  professed   accountant  specially 

Ins;  ectinn  by  i  .y       i  x  •/ 

accountants"  ap]iointed  for  the  purpose;  but  if  there  is  any  neces- 
sity for  so  doing,  a  special  order  for  inspection  by  such  a  person 
will  be  made,  in) 

Books  in  use  for  daily  business  are  ordered  to  be  produced  at  the 

{g)   Hadley  v.  M'Dougall,  7  Ch.  312;  (A-)  Turney  v.  Bayley,  4  D.  G.  J.  &  S. 

Reid  V.   Langlois,    1  Mae.   &    G.   627;  332. 

Burbidge  v.   Robinson,    2   Mac.  &  G.  (?)  Williams  v.  Prince  of  Wales'  Life, 

2-13;    Penney  v.  Goode,    1   Drew.    474;  &c.  Co.  23  Beav.  338. 

Stuart  V.  Lord  Bute,  13  Sim.  453.  Com-  [m)  Ibid, 

pare  Vysev.  Foster,  13  Eq.  602.  (/*)  Bonnardet  v.   Taylor,  1  J.  &  H. 

{h)   Glyn  v.  Caulfeild,  3  Mac.  &  G.  383.     In    Draper  v.    Manchester    and 

4G,3.  Sheffield  Rail.  Co.  7  Jur.  N.  S.  86,  L.  J. 

(j)  See  Vyse  v.  Foster,    13  Eq.   602,  an  unsuccessful   attempt  was  made  to 

which,   however,   turned  on  the  suffi-  cotnpel  a  company  to  submit  to  an  in- 

ciency  of    an    affidavit  of  documents.  spection  of  its  books  by  an  accountant 

See  Freeman  v.  Fairlie,  3  Mer.  43.  of  a  rival  company. 

1242 


CHAP.  X.]  ACTIONS    BETWEEX    PAKTNKUS,    ETC.  *9C0 

J >l;iee  where  they  are  usually  kept;  and  they  will  nut  Books  in  con- 
be  ordered  to  be  dei)osited  with  the  record  and  wi-it  stamuse. 
clerks,  unless  there  is  some  s])ccial  reason  for  so  doini;.  (o) 

When  an  order  is  made  against  a  company  for  the  inspection  of 
its   books,  and   the  directors  will  not  allow  them  to  be   inspection  of 

fi  i>i'  !•  'ni  1       Ijooks  ol  cor- 

produced,  an  order  tor  their  ])roduction  will  be  made   poraiious. 
ap^ainst  the  directors  ]iersonally.  {p  ) 

*3.  As  to  parj me) it  into  court. — If,  in  an  ac-     *960  3.  payment  of 
tion  by  one  partner  against  another  for  an  ac-  moneys  into 

count,  the  defendant  admits  in  his  answer  that  he  has 
in  liis  hands  money  belonging  to  the  firm,  or  that  he  had  such 
money,  and  ought  to  have  it  still,  he  can  be  compelled  to  pay  such 
money  into  court  before  the  hearing  of  the  action,  {q)  As  a  gen- 
aerl  rule,  however,  a  partner  having  partnership  moneys  in  his 
liands,  cannot  be  made  to  pay  those  moneys  into  court  if  he  insists 
that  on  taking  the  accounts  a  balance  will  be  found  due  to  him.  (r) 
Nor  will  he  be  compelled  so  to  do  unless  the  other  partners  will  pay 
in  what  they  may  have  in  their  hands,  (.v)  Nor  will  a  partner  be  ' 
ordered  to  pay  into  court  the  amount  of  a  debt  due  from  him  to 
the  firm,  if  the  amount  to  which  he  is  indebted  is  not  admitted,  and 
can  only  be  ascertained  by  a  complicated  calculation,  {t)  But  if  a 
partner  admits  that  he  has  partnership  moneys  in  his  hands,  and  it 
appears  from  his  own  statements  that  the}'  came  tliere  improp- 
erly (■?/),  or  in  violation  of  good  faith,  he  will  be  compelled  to  pay 
them  into  court  (,1?);  so  if  he  admits  facts  from  which  it  appears 

(0)  Mei-tens  v.  Hai<rli,  Johns.  735.  (s)  Foster  v.  Donald,  1  J.  &  W.  252. 

{}))  Lacharme  v.  Quartz   Kock  Min-  {t)  See  Mills  v.  Hanson,  8  Ves.  68. 

ing  Co.  1  Hurls.  &  Colt,  134.     As  to  the  («)  See  Costeker  v.  Horrox,  3  Y.  &  C. 

form  of  an  order  for  production  by  a  Ex.  530,  where  a  surviving  partner,  be- 

corporation,  see  Ranger  v.  Great  West-  ing  also  the  executor  of  his  deceased  co- 

orn  Rail.  Co.  4  DeG.  <fe  J.  74.  partner,  was  ordered  to  pay  into  court 

(7)  In  White  v.    Barton.    18    Beav.  7000/.  the  amount  of  assets  of  the  de- 

"19'2,  an  admission  by  one  partner  that  ceased  improperly  applied  to  pai-tnor- 

he  and  his  co-partner  who  was  not  a  ship  purposes.     See  the  next  nott>. 

party  had  money  in   their  hands  was  [x)  Jervis  v.  White,  6  Ves.  738;  Fos- 

iield  sufficient.  ter  v.    Donald,  1  J.  &  W.   252;  in  the 

(r)  Richardson  v.  The  Bank  of  Eng-  first  of  these  cases    the    motion    wa.s 

land,  4  M  &  Cr.  165.     But  in  Birley  v.  made   before  answer.      In   Hichens   r. 

Kennedy,  6  N.  R.  395,   a  partner  who  Congreve,  1  R.   &   M.    150,    note,  and 

admitted  that  he  had  drawn  out  more  Gaskell  v.  Chambers,  26  Beav.  360,  di- 

than  he  ought  was   ordered  to  pay  the  rectors    obtaining    secret    benefits   for 

excess  into  court.  themselves    were  ordered  to  pay   tin- 

1243 


^961 


DEFENSES    TO    ACTIONS    FOR    AN    ACCOUNT,    ETC.        [bOOK  III. 


that  he  is  indebted  to  the  firm  in  a  certain  sum,  and  he  does  not 
insist  that  on  tlie  whole  the  firm  is  indebted  to  him,  the  money  ad- 
mitted by  him  to  be  due  will  be  ordered  into  court,  {y) 
*961  *If  the  partnership  debts  are  unpaid,  and  the  defendant  is 
liable  to  be  sued  for  them,  the  order  directing  payment  into 
court  should  reserve  to  him  liberty  to  apply  for  payment  out  of  court, 
of  the  amount  of  the  debts  he  may  be  compelled  or  pressed  to  pay.  (s) 


(&.)  Of  the  defenses  to  an  action  for  an  account  and  discovery  between  partners 
and  persons  claiming  under  them. 

The  defense  on  the  ground  of  illegality,  of  fraud,  of  laches  on  the 
part  of  the  plaintiff,  and  of  want  of  proper  parties  to  the  suit,  have 
already  been  examined,  {a)  In  addition,  however,  to  these  grounds 
of  defense,  there  are  others  which  require  notice,^  and  which  cannot 


moneys  received  by  them  into  court. 
Compare  Hagell  v.  dime,  2  Ch.  449, 
where  the  liability  of  the  defendants 
did  not  sufficiently  appear. 

iy)  Toulmin  v.  Copland,  3  Y.  &  C. 
Ex.  643;  Costeker  v.  Horrox,  3  Y.  &  C. 
Ex.  530.  In  Domville  v.  Solly,  2  Euss. 
372,  an  order  was  made  though  the  de- 
fendants insisted  that  the  plaintiff  was 
entitled  to  nothing. 

{z)  Toulmin  v.  Copland,  3  Y.  &  C.  643. 
In  S.  C.  6  Price,  405,  it  was  held  that  a 
surviving  partner  was  not  entitled  to 
have  partnership  funds,  on  which  the 
plaintiffs  had  put  a  distringas,  trans- 
ferred to  him  to  enable  him  to  pay  out- 
standing debts. 

(a)  See,  as  to  illegality,  ante,  p.  201 
et  seq. ;  as  to  fraud,  ante,  p.  923  et  seq.  ; 
as  to  laches,  ante,  p.  902  et  seq.;  as  to 
parties,  ante,  p.  877  et  seq. 

^  A  cross-bill  is  not  necessary  in  a  suit 
between  partners,  wherein  the  com- 
plainant seeks  a  dissolution  and  an  {ac- 
count from  the  defendant,  to  enable  the 
latter  to  get  an  account  from  the  former, 
or  to  obtain  relief  against  fraudulent 
practices  of  the  complainant  in  giving 
the  note  of  the  firm  without  considera- 
tion, for  his  own  benefit,  and  in  buying 

1244 


up  the  paper  of  the  concern  at  a  dis- 
count, for  his  advantage  with  a  view  to 
obtaining  the  full  amount  thereof  out 
of  the  assets  of  the  firm.  Such  a  bill 
will  not  be  sustained  on  demurrer. 
Johnson  v.  Butler,  31  N.  J.  Eq.  35.  See, 
ante,  945,  note. 

In  a  suit  for  the  settlement  of  part- 
nership accounts,  the  parties  defendant 
are  entitled  to  an  investigation  of  all 
transactions  claimed  as  partnership  mat- 
ters, although  they  be  not  set  forth  in 
the  pleadings  by  way  of  counter-claim. 
Boyd  V.  Foot,  5  Bosw.  110. 

It  is  no  defense  to  a  bill  for  an  account 
and  settlement  of  a  partnership  that 
the  defendant  has  been  injured  by  the 
failure  of  complainant  to  perform  his 
stipulations  contained  in  the  articles  of 
partnership.  The  remedy  of  the  dt;- 
fendant  is  at  law,  on  the  agreement. 
Boyd  V.  Mynatt,  4  Ala.  79. 

Where  one  partner  sues  the  other  for 
a  liquidation  and  balance  due  on  part- 
nership account,  the  defendant  cannot 
set  up  in  re-convention,  damages  to 
the  business  of  the  pai-tnership  caused 
by  the  bad  habits  of  the  plaintiff.  Mills 
r.  Fellows,  30  La  Ann.  824. 

In  an  action  to  recover  the  balance  of 


CHAP.  X.J        DEFENSES   TO    ACTIOXS    FOR    AN    ACCOUNT,    ETC. 


^1»61 


l)e  more  conveniently  alluded   to  than  in  the   present  place,  and 
under  the  following  heads, 

1.  Denial  of  ])artnership. 

2.  Statute  of  limitations. 

3.  Account  stated. 

4.  Award. 

5.  Payment,  and  accord  and  satisfaction. 

6.  Release. 

1.  Denial  of  partnership. — An  action  by  one  partner  against 
1  Denial  by  ^.nothcr  for  an  account  of  the  dealings  and  transactions 
ufe'^ai'ie^ed^'^  of  an  alleged  partnership  may  be  met  by  the  denial  of 
partnership.  ^\^q  existence  of  any  such  partnership.(J)'  This  defense 
is  relied  upon  as  a  reason  for  not  answering  interrogatories  or  mak- 


a  pai-tnersliip  account,  the  accounts 
current  renc^red  by  each  of  the  part- 
ners to  the  others  are  admissible  in  evi- 
dence to  show,  by  the  admissions  of  the 
parties,  that  the  items  of  such  accounts 
are  not  items  of  partnership  account. 
BaiTy  r.  Barry,  3  Cranch  C.  Ct.  120. 

A  assigned  all  his  interest  in  the  part- 
nership effects  to  his  co-partner  B,  who 
was  to  settle  up  the  business,  take  a  rea- 
sonable pay  for  his  trouble  in  so  doing, 
and  divide  any  balance  then  remaining 
between  them:  Held,  that  in  a  suit  by 
A  against  B,  B  should  be  allowed  to 
show  the  value  of  his  services  in  set- 
tling up  the  business.  Pierce  v.  Cub- 
berly,  19  Ind.  157. 

{h)  Drew  v.  Drew.  2  V.  &  B.  159; 
Hare  v.  London  and  North- Western 
Rail.  Co.  John.  722,  is  an  instance  in 
which  a  bill  was  successfully  met  by 
a  plea  denying  that  the  plaintiff  was  a 
shareholder  in  the  company. 

'^  In  a  suit  for  an  account  of  an  alleged 
partnership,  a  plea  denying  the  part- 
nei^ship  must  be  supported  by  an  answer 
and  discovery  as  to  every  circumstance 
charged  in  the  bill  as  evidence  of  the 
partnership,  or  the  plea  will  be  bad. 
Kveritt  v.  Watts,  10  Paige,  82;  S.  C.  3 
Edw.  486. 
In  a  suit  for  an  account  of  an  alleged 


partnership,  it  was  refen-ed  to  a  master 
by  consent,  to  state  the  accounts  without 
prejudice:  Held,  that  the  existence  of 
the  partnership  could  not  be  questioned 
by  an  exception  to  the  mast^er's  report 
finding  a  partnei-ship,  though  that  ques- 
tion was  not  expressly  referred  to  him, 
and  that  the  proper  method  of  contest- 
ing the  question  would  have  been  to 
bring  the  cause  on  for  hearing.  Jones 
V.  Jones,  1  Ired.  Eq.  332. 

Where  a  bill  set  out  a  partnership, 
giving  its  duration  and  kind,  and  the 
answer  denied  generally,  and  then  ad- 
mitted, a  partnership  of  the  kind  de- 
scribed in  the  petition,  but  alleged  a 
different  time  and  duration,  claiming 
that  it  was  dissolved:  Held,  that  there 
was  no  issue  as  to  the  existence  of  the 
partnership,  and  that  an  accounting 
might  be  taken  by  a  special  referee. 
Lannan  r  Clavin,  3  Kan.  17. 

To  a  bill  in  equity  for  an  account  of 
sales  of  a  book  alleged  to  have  been 
published  by  the  defendant  on  the  joint 
account  of  the  plaintiff  and  himself,  an 
answer  which  denies  that  any  such  book 
was  published  during  the  time  alleged, 
and  asserts  that  the  book  published  by 
the  defendant  was  a  different  one,  ni^ed 
not  render  an  account  of  sales.  Arm- 
strong V.  Crocker,  10  Gray,  269. 

1245 


'■^963  ACTIONS    BETWEEN    I'AUTNERS,    ETC.  [bOOK  III. 

ing  a  discovery  of  documents  must  be  accompanied  by  statements 
on  oath  denying  tliose  allegations  which,  if  true,  would  establish 
the  partnership,  and  denying  the  possession  of  documents  relevant 

to  the  question  of  partnership  or  no  partnership.  (<?)  In 
*9G2     *]Mansell  v.  Feeney  {d)  it  was  held   that  the  plain titf  Avas 

entitled  to  an  ins])8ction  of  all  documents  admitted  by  the 
defendant  to  be  in  his  possession  and  to  be  relevant  to  the  matters 
in  question  in  the  suit,  although  the  defendant  denied  the  partner- 
ship alleged  by  the  bill,  and  also  denied  that  the  documc-.ts  in 
question  tended  to  prove  its  existence.  The  defendant,  however, 
was  allowed  to  seal  up  those  parts  of  the  books  which  he  swore  had 
no  relation  to  the  matters  in  question. 

Before  the  Judicature  acts  it  was  a  rule  in  equity  that  except  in 
one  or  two  cases  a  defendant  could  not  by  answer  (as  distinguished 
from  a  plea),  protect  himself  from  giving  discovery;  if  he  answered 
at  all  he  had  to  answer  fully,  {e)  This  rule,  which  no  longer 
exists  (/),  was  often  productive  of  great  hardship;  but  in  conform- 
ity with  it,  a  person  sued  for  a  partnership  account  was  not  allowed 
by  answer  to  deny  the  alleged  partnership,  and  excuse  himself  on 
that  ground  from  setting  forth  accounts,  or  producing  documents 
which  the  plaintiff  required  to  see.  {(/)  However,  notwithstanding 
this  rule,  the  Court  in  more  than  one  instance  declined  to  enforce 
it;  and  ordered  applications  for  discovery  in  such  cases  to  be  post- 
poned until  after  the  necessity  for  making  them  appeared  (A);  and 
as  now  a  court,  or  judge  at  chambers,  can  order  any  question  in  dis- 
pute to  be  tried  before  any  other  (^)  a  person  denying  an  alleged 
partnership  can  easily  be  protected  against  a  vexatious  or  oppres-  * 
sive  exercse  of  a  right  to  discovery.  Whilst  on  the  one  hand  he 
must  give  all  such  discovery  as  bears  upon  the  question  of  partner- 

(c)  Mansell  v.  Feeney,  2  J.  &  H.  313;  421;  Blackley  v.  Rymer,  4  Drew.  248; 

Han-is  v.  Hams',  3  Ha.  450;    Sanders  r.  Mansell  v.  Feenoy,  ubi  supra  ;  Thomp- 

King,  6  Madd.  61.  son  r.  Dunn,  573;  Saull  v.    Browne,  9 

{d)2  J.  &  H.  320.     See.  also,  Saull  v.  Ch.  364. 
Browne,  9  Ch.  364.  (h)  Clegg  v.  Edmondson,  8  DeG.  M. 

ie)  See  Elmer  v.  Creasy,  9  Ch.  69.  <t  G.  787;  De  LaRue  v.  Dickmson,  3K. 

(/)  Ord.  xxxi.  r.  8.  &  J.  336;  Lockett  v.  Lockett,  4  Ch.  336; 

(jr)  Hall  r.  Noyes,  3  Bro.   C.  C.   483;  Great  Western   Coll.   Co.  v.  Tucker,  9 


Harrison,    4    Madd.  252;  Ch.  376;  Cancer  v.   Phito  Liete,  7  Ch. 

Shaw  V.   Ching,    11  Ves.  303;  Somer:  90,  Wier  v.  Tucker,  14  Eq.  25. 

ville  r.  Ma.kay,  16  Ves.  3S2;  The  Great  (/)  Ord.  xxxvi.  r.  3.      See,  also,  order 

Luxembourg   Kail   Co.   r.  Magnay,   23  xxxi.  r.  19,  and  Be  Leigh's  estate,  6  Ch. 

Beav.  646;  R"ade  v.  Woodroofle,  24  ib.  D.  256. 
124G 


CHAP.  X.]      defp:nses  to  actioxs  fou  ax  account,  etc. 


^!h;:{ 


ship  or  no  partnership,  lie  would  not,  it  is  a]i])relicnfled,  l)e  com- 
pelled to  set  out  accounts  or  produce  documents   which    lie 
swears  *throw  no  lii,dit  on  that  question  and  can   only  be     *0(i;:; 
material  after  it  has  been  decided   in   favor  of  the  plaintiff. 

2.  The  Statute  of  Limitations. — The  Statute  of  Limitations,  21 
Jac.  1,  c.  16,  §3,  enacts  that  all  actions  of  account  o  st„tn,eof 
(other  than  for  such  accounts  as  concern  the  trade  of  Limitations. 
merchandise  between  merchant  and  mereliant,  their  factors  and 
servants  (!•))  shall  be  commenced  and  sued  within  six  years  next 
after  the  cause  of  such  action  or  suit.  A  court  of  equity  was  as 
much  bound  by  this  statute  as  a  court  of  law(Z),'  and  advantage 


{Tc)  This  exception  no  longer  exists. 
See  19  <fe  20  Vict.  c.  97,  §  9.  See,  as  to 
the  exception,  Robinson  v.  Alexander,  8 
Bli.  N.  S.  352,  and  2  CI.  k  Fin.  717, 
and  the  cases  there  referred  to. 

(0  Knox  V.  Gye,  L.  R.  5  H.  L.  656; 
Foley  V.  Hill,  1  Ph.  399;  Hovenden  r. 
Amiesley,  2  Sch.  &  Lef.  607;  and  see 
Whitley  v.  Lowe,  25  Beav.  421,  and  2 
DeG.  <fe  J.  704. 

^  See  McKeo^vn  v.  Guild,  12  Chicago 
Leg.  News,  IS;  Stout  r.  Seabrook,  30 
N.  J.  Eq.  187;  McClungr.  Copehart,  24 
Minn.  17;  McKelvey's  Appeal,  72  Pa. 
St.  409. 

Tlaough  lapse  of  time  is  allowed  to 
prevail  sometimes  in  equity,  it  is  (in 
those  cases  where  the  statute  does  not 
expres.sly  or  impliedly  include  courts  of 
equity  in  its  terms)  only  in  analogy  to 
the  plea  of  the  statute  of  limitations  at 
law;  and  it  cannot  be  allowed  in  favor 
of  one  partner  in  possession  of  real  es- 
tate purchased  with  partnei-ship  funds, 
against  the  other,  for  the  possession  of 
one  is  the  possession  of  both.  M'Guire 
r.  Ramsey,  9  Ark.  518.  See,  also,  Hall 
t\  Clagett,  48  Jnd.  225.  See  ante, 
Laches,  p.  902. 

Where  a  fonner  partner  and  brother, 
having  been  a  bookkeeper  of  the  finn, 
had  been  in  constant  correspondence; 
with  his  brother  since  the  dissolution, 
had  received  fiom  him  from  time  to 
tim  •   a  settl'inent  of  the  accounts  be- 


tween thf^ni.  had  been  perfectly  satisfied 
witli  this  sottl  'ment.  and  knew  that  thi' 
balance  was  against  himi;  upon  bill  filed 
to  open  the  accounts,  more  than  twenty 
years  having  elapsed  since  the  dissolu- 
tion of  the  firm,  and  nearly  that  p-^inod 
b?ibre  filing  the  bill,  held,  that  the  lapse 
of  time  would  be  almost  conclusive  evi- 
dence of  satisfactor}'  adjustment  hf- 
tween  the  parties.  Farrar  v.  Shepherd, 
60  Tpuu.  190. 

To  render  the  lapse  of  the  statutory 
period  a  bar  to  an  action  for  an  account 
by  one  partner  against  another,  it  must 
appear  that  the  account  has  been  closed 
for  six  years.  Stout  v.  Seabrook,  30  N. 
J.  Eq.  187. 

Where  the  accounts  between  partners 
have  been  closed  for  six  years,  and  there 
has  been  acquiescence  for  that  period 
witliout  fraud,  the  statute  constitutes  a 
bar:  l)ut  the  statute  aflbrds  no  defense 
in  a  case  where  there  have  been  dealings 
within  six  years.  Todd  v.  RafFertv,  ;'.0 
N.  J.  Eq.  254. 

The  statute  does  not  begin  to  nm 
against  each  item  of  an  account  between 
partners,  from  the  time  it  beeomes  a 
part  of  the  account,  but  if  part  be  with- 
in six  years  it  dniws  that  which  is  t>e- 
fore  after  it.     Todd  r.  Raflerty,  sujim. 

When,  after  dissolution,  the  parin'^is 
continue  closing  up  the  business,  receiv- 
ing and  paying  out  money,  the  cause  of 
action  is  deinn  d  to  have  rccnied  at  the 

1-217 


^064 


ACTIONS    BETWEEN    rARTNEIlS,    ETC. 


[hook  iir. 


coald  be  taken  of  it  by  plea  (m),  or  by  answer  (n),  or  by  demurrer 
if  the  facts  sufiicientlj'  appeared  on  the  face  of  the  bill,  {o) 

Thus,  where  an  account  had   been  stated  between  two  partners, 
Cases  in  which  and  a  balance  was  found  due  to  one  of  them  from  the 

the  statute  has  .  i  i  mi  lii     i 

been  held  a  bar  other,  and  twenty-iour  years  aiterwards  a  bill  was  nled 

in  equity.  i  i        ,.  •  i        i  ,•         ^•  ^ 

Bridges v  '^J  ^^^^  tornier  against  tlie  latter  lor  discovery  and  an 

Mitchell.  account,  a  plea  that,  according  to  the  plaintiff's  own 

showing,  the  balance  was  due  twenty -four  years  before  the  filing  of 
the  bill,  and  that  his  remedy  was  barred  by  the  statute,  was  al- 
lowed, {pf  In  a  subsequent  case  the  defendant  insisted  in  his 
Martin  v  aiiswcr  that  none  of  the  transactions  in  respect  of  which 

Heathcote.  ^}jq  account  was  sought  occurred  within  six  years  before 
the  filing  of  the  bill,  and  the  bill  was  thereupon  dismissed,  (q)    So, 

where  a  partner  died,  and  seventeen  j^ears  after- 
Wiuiams.  *964:     wai'ds  a  bill  for  an  account  was  filed  *against 

his  executors  by  the  surviving  partners,  the  bill 

was  dismissed  with  costs,  (r)' 

^  ,  Airain,  in  Foster  v.  Iloduson  (,v),  the  case  was,  in  sub- 

Fosters,  s        '  .--,         \  J1 

Hodgson.  stance,  as  follows:    there  was  a  running  account  be- 


date  of  the  last  item  received  or  paid 
out.  No  demand  is  necessary  before 
suit  brought.  McClung  v.  Copehart,  24 
Minn.  17. 

(m)  See  Welford  v.  Liddel,  2  Ves.  S. 
400;  Beames'  Pleas  in  Eq.  161.  In 
Kobinson  v.  Field,  5  Sim.  14,  and  Jones 
V.  Pengree,  6  Ves.  580,  the  plea  was 
overruled  as  covering  too  much. 

(w)  As  in  Martin  v.  Heathcote,  2 
Eden,  169;  Tatam  v.  Williams,  3  lla. 
847. 

(o)  Foster  v.  Hodgson,  19  Ves.  180; 
Hoare  v.  Peck,  6  Sim.  51;  Prance  v. 
Sympson,  Kay,  678. 

( p)  Bridges  v.  Mitchell,  Bunb.  217.- 
See,  too,  Whitley  V.  Lowe,  25Beav.  421, 
and  2  DeG.  &  J.  704. 

2  A  bni  will  not  be  entertained  to  es- 
tablish a  partnership  between  two  per- 
sons, settle  its  dealings,  and  declare  one 
of  them  a  trustee  for  the  benefit  of  the 
other  as  to  purchases  of  real  estate,  when 
more  than  twenty  years  have  elapsed 
since  the  accrual  of  the  right  before  suit 
brought,  doling  all  of  which  period  the 
1248 


defendant  denied  and  disregarded  the 
rights  of  the  other  alleged  partner;  and 
the  fact  that  the  partnei*s  were  brothers, 
complainant  being  averse  to  litigation, 
and  on  that  account  failing  to  sue  in 
time,  will  not  alter  the  case.  Phillipi  v. 
PhiUipi,  61  Ala.  41. 

{q)  Martin  v.  Heathcote,  2  Eden,  169, 
and  see  Barber  v.  Barber,  18  Ves.  286. 
These  cases  were  overruled  by  Robinson 
V.  Alexander,  2  CI.  &  Fin.  717,  on  the 
ground  that  they  came  within  the  ex- 
ception relatmg  to  merchants'  accounts, 
although  there  was  no  item  on  either 
side  within  six  years.  That  exception, 
however,  no  longer  exists. 

(r)  Tatam  v.  Williams,  3  Ha.  347. 

«  See  Ray  v.  Bogart,  2  John.  Cas.  432. 

Where  one  partner  dies,  however, 
neither  the  statute  of  limitations  nor  the 
equitable  bar  commence  running  in  favor 
of  the  surviving  partner  until  adminis- 
tration has  been  taken  out  on  the  estate 
of  the  deceased  partner.  Si)ann  v.  Fox, 
1  Ga.  Dec.  1. 

(s)  19  Ves.  180. 


cii-vr.  .\.] 


ACTION'S    IJKTWEKN    PAUTNEUS.    ETC. 


^904 


tweeii  a  firm  and  its  baiilvcrs;  the  licad  of  tlio  linn  died,  and  the  ac- 
count then  stoj>ped,  but  was  not  torniallyiidjustcd  or  settled;  twelve 
years  afterwards,  a  bill  was  filed  against  the  bankers  fur  an  account, 
on  the  ground  that  a  considerable  balance  was,  in  fact,  due  from 
them  to  the  firm.  The  defendants  demurred,  and  the  demurrer  was 
allowed,  on  the  ground  that  the  case  did  not  appear  to  be  within 
the  exception  relating  to  merchants'  accounts;  that  consequently 
the  l:;])se  of  more  than  six  years  since  the  account  stopped,  was  an 
answei-  to  the  suit;  and  that  as  this  fact  a])]>eftred  on  the  face  of  the 
bill,  tlie  objection  was  properly  taken  by  demurrer,  (t) 

Lastly,  in  Knox  v.  Gye  (w),  it  was   held,  that  a  suit  by  the  exec- 
utors of  a  deceased   partner  against  a  surviving   i^art- 

'  ^  ,      .  ^    '^  Knox  V.  Gye. 

ner  was   barred   by  the   la])se  of  six  years  wliere  there 

was  nothing  to  prevent  the  statute  of  limitations  from  running. 

But  the  statutes  of  limitatiuns  do  not  a])ply  to  cases  of  express 
trustor  of  concealed   fraud.      Therefore,  if  a   ]>artncr  cnsps where 
has  died,  having  by  will  disposed  of  his  property  on  attbrds'l'w 
trust  for  payment  of  his  debts,  this  is  sufiicient  to  jus-  <^t-iense. 
tify  a  decree  for  an  account  of  partnership  transactions  in  respect 


{t)  See,  too,  Hoare  v.  Peck,  6  Sim.  51, 
and  Prance  v.  Sympson,  Kay,  678. 

(m)  L.  R.  5  H.  L.  656. 

'  Partners  infer  .tese  arc  trustees  as  to 
firm  property  held  by  them  after  disso- 
lution, but  the  trust  is  implied,  not  ex- 
press. Hence,  actions  between  them  re- 
lating thereto  are  subject  to  the  statute 
of  limitations.  Coudrey  ik  Gilliam,  60 
Mo.  86;  McKoown*;.  Guild,  12  Chicago 
Leg.  News,  18  (a  surviving  partner). 

The  statute  does  not  necessarily  begin 
to  nm  from  date  of  dissolution.  Its 
operation  commmices  with  a  breach  of 
trust  by  the  partner  having  partnership 
property  on  accounts  in  charge.  And 
as  a  general  rule  the  breach  takes  place 
after.a  failure  to  account  and  settle  with- 
in a  reasonable  time  after  dissolution, 
and  must  be  ascertained  from  the  par- 
ticular circumstances  of  each  case. 
Where  an  account  has  been  stated  be- 
tween them  i't  the  close  of  the  partner- 
ship, the  statute,  as  to  the  items  em- 
braced therein,  runs  from  the  time  of 


the  statement.  Where  mutual  arrange- 
ment, after  dissolution,  delegates  to  one 
member  the  collection  of  debts  due  the 
firm,  no  causa  of  action  accrues  against 
him  in  favor  of  his  co-partner,  nor  does 
the  statute  begin  to  run,  so  long  as  a 
faithful  discharge  of  that  duty  postpones 
a  final  settlement.  Coudrey  v.  Gilliam. 
supra;  McNair  r.  Ragland,  3  Murph. 
i:J9. 

In  1865,  after  June  1st,  a  partner  re- 
tired, selling  out  to  his  co-partner  his  in- 
terest (one-half)  in  the  stock,  at  cost  or 
invoice  prices.  The  retired  partner  died, 
and  in  October,  1866,  administration  was 
granted  upon  his  estate.  A  suit  was 
commenced  against  the  administrator  in 
August,  187;{,  by  the  former  partn>T  of 
the  intestate  upon  a  certain  awaid,  to 
which  suit  the  administrator  pleaded,  in 
Januaiy,  1874,  among  other  things,  that 
at  the  time  of  the  dissolution  the  stock 
wa.s  worth  over  fifteen  hundred  dollars, 
and  that  he,  the  administrator,  chiimed 
to  be  entitled  to  one-half  thereof  with 

9  1249 


'^1]63  DEFENSES    TO    ACTIONS    FOK    AN    ACCOUNT,    ETC.        [bOOK  III. 

of  which  claims  existed  when  lie  died,  althouf^h  more  than  six 
years  liave  ehipsed  since  that  time,  and  hetbre  the  commencement 
of  the  action,  (x)  Aji^ain,  in  cases  of  breach  of  trust  and  of  fraud, 
there  seems  to  be  no  limit  to  the  time  at  which  a  court  will  inter- 
fere and  aflbrd  redress  to  the  parties  as^grieved.  The  mere  lapse 
of  thirty  or  forty  years  since  the  right  first  accrued,  is  insufficient  to 
bar  the  remedy  in  such  cases. 

In  Stainton  v.  The  Carron  Company  (y),  the  management  of  the 
affairs  of  a  company  \ras  entrusted  to  a  person  who  was  entitled 
to  one-sixth  of  the  shares  in  it.  lie  was  the 
mncompanyr  *965  ^manager  of  the  company  from  1808  until  1851, 
when  he  died.  For  twenty-five  years  he  rendered 
accounts  regularly,  and  these  accounts  were  never  questioned  during 
his  life.  But  after  his  death,  it  was  discovered  that  upwards  of  2000Z. 
a  year  for  many  years  had  not  been  properly  accounted  for  by  him, 
and  the  companj'  claimed  from  his  estate  nearly  70,000?.  in  respect 
of  this  annual  deficiency,  and  asserted  a  lien  for  this  sum  on  his 
stiares  and  assets  in  the  hands  of  the  company.  JSTotwithstanding 
the  lapse  of  time,  and  the  reception  without  dispute  of  the  accounts, 
sent  in  by  the  manager  irom  year  to  year,  a  decree  was  made,  open- 
ing the  wliole  account  from  the  year  1825  down  to  his  death,  (s) 

Again,  several  modern  acts  of  Parliament  limit  the  duration  of  a 
Difference  be-     retiring   shareholder's    liability   to   creditors  to    three 

tween  liability  ".  .  i      '     •.       i  j.      ,^  r- 

to  partners  and  years  after  his  retirement  I  but  it  does  not,  tnereiore, 

liability  to  "^  .  r-  i  -      ^•    i  -i-  -i 

creditors.  follow  that  the  duration  oi  his  liability  to  contribute 

with  his  late  co-shareholders  to  debts  for  which  he  was  liable  with 
them,  is  also  limited  to  the  same  three  years,  (a) 

With  respect  to  accounts  between  partners,  an   important  altera- 
tion of  the  law  has  been   effected   bv   the   rei^eal    of  so 

Merchants  ac-  i         '  i  i 

counts.  much  of  the  old   statutes  as  relates   to   merchants    ac- 

interest.     He  neither  offered  expressly  ground,  amont?  others,  was  held  to  have 

to  set  off  the  claim,   nor  prayed  judg-  been  properly  sustained.     Crane  v.  Bar- 

ment   therefor.     The    action   and  plea  ry,  60  Ga.  :^)6l'. 

remained  pending  until  February,  1877,  [x)  Ault  f.  Goodrich,  4  Russ.  404. 

when   the  action   was  voluntarily   dis-  (//)  24  Beav.  ;'.4G. 

missed    by  the    plamtiff  therein.    The  {z)  See.  too,  Allfrey  v.  Allfrey,  1  Ma(\ 

administrator  in  July  thereafter  filed  the  &  G.  87;  Wedderburn  v.  Wedderburn, 

present  bill  to  recover  for  his  intestate's  2  Keen,  722,  and  4  M.  &  Cr.  41. 

interest  in  the  stock.     The  bill  was  held  (a)  Gouthwaite's  case,  3  Mac.  &  G. 

to  be  barred  by  the  statute  of  limita-  187. 

tions,  and  a  demurrer  containing  that 

1250 


CIIAl'.  X.]  ACTIONS    BETWEEN    I'AIiTNERS,    ETC.  *&0G 

counts.  The  authorities  wliich  liave  been  already  referred  to  as 
showing  that  the  statutes  of  limitations  are  a  bar  to  an  action  fur 
an  account  did  not  apply  to  open  unsettled  accounts,  extendin<j^ 
from  a  time  more  than  six  years  before  a  bill  was  filed,  down  to  a 
time  witliin  such  six  years.  Formerly,  by  reason  of  the  express 
exception  in  the  statute  of  James,  accounts  which  concerned  the 
trade  of  merchandize  between  merchant  and  merchant  mi<^ht  be 
taken,  although  more  than  six  3'earshad  elapsed  since  the  last  trans- 
action forming  an  item  in  the  account,  and  although  there  had  been 
no  acknowledgment,  or  part-payment,  to  take  the  case  out  of  the 
statute,  (b)     And  notwithstanding  the    words    of   the  statute    of 

James,  "All  actions  of  account shall  be  commenced  and 

sued, "  &c.,  it  was  held  *that  even  as  between  ordinary  per-  966* 
sons,  the  statute  did  not  begin  to  run  so  long  as  the  account 
was  continued  (c);  and  that  the  statute  did  not,  in  any  case,  apply 
to  an  unsettled,  open,  mutual  account,  with  items  on  both  sides 
representing  cross  demands,  {d)  The  law  in  this  respect  was  mod- 
ified by  Lord  Tenterden's  act  (e),  the  eflfect  of  which  is,  Application  of 

,",,,■,  ,  ,  .  statute  to  cur- 

that,  allnougn  tliere  may  be  a  mutual  open  running  ac-  rent  account!-, 
count  the  mere  existence  of  items  not  barred,  is  not  sufiicient,  in 
actions  of  debt  or  assumpsit,  to  take  earlier  items  out  of  the  stat- 
ute of  limitations,  (f)  Lord  Tenterden's  act,  however,  did  not  ap- 
ply to  merchant's  accounts  as  to  which  there  was  no  statutory  bar; 
but  now  merchants'  accounts  are  on  the  same  footing  as  other  ac- 
counts. Consequently,  partnership  accounts,  whether  they  are  or 
are  not  merchants'  accounts,  are  now  within  the  statutes  of  limita- 
tions; and  those  statutes  are  a  bar  to  an  action  for  an  account  ex- 
tending to  a  period  more  remote  than  six  years  before  the  com- 
mencement of  the  action,  unless  there  has  been  a  breach  of  an  ex- 
press trust,  or  fraud,  or  payment,  or  an  acknowledgment,  such  as 
required  by  Lord  Tenterden's  act,  or  unless  the  partnership  articles 
are  under  seal.     So  long,  indeed,  as  a  partnership  is  subsisting,  and 

{b)  Robinson  r.  Alexander,  8  Bli.  N.  r.  Skoulding.  6  T.  R.  189. 

S.  352,  and  2  CI.  &  Fin.  717,  settled  this  (e)  9  Geo.  4,  c.  14. 

point,  and  finally  overruled  a  niunbcr  (/)  Williams  v,  Griffiths,  2  Cr.  M.  & 

of  earlier  cases.  R."  45;  Cottam  r.  Partrid|!re.  4  Man.    A 

(c)  See ^jgr  Lord  Eldon  in  Fost<?r  v.  Gr.  271:  Ashby  r.  James.  12  M.   &  W. 

Hodgson,  19  Ves.    185;    Scudemore  r.  542;  f'lark  v.  Alexander.  S  Scott.  N.  R. 

White,  1  Vern.  456.  147:  In^'lis  r.   Haigh,    8  M.  &  W.   780. 

(rf)  See  the  notes  to  Webber  r.  Tivill,  See,  too,  Jackson  r.  (.tgg.  Johns.  397. 
2  Wms.  Saund.  126  etseq.,  and  Catling 

1151 


*967  DEFENSES    TO    ACTIONS   FOR    AN    ACCOUNT,    ETC.        [bOOK  III. 

cacli  ])a:-tner  is  exercising  his  rights  and  enjoying  his  own  property, 
the  statute  has,  it  is  conceived,  no  application  at  all;  but  as  soon  as 
a  partnership  is  dissolved,  or  there  is  any  exclusion  of  one  partner 
by  the  otliers,  the  case  is  very  different,  and  the  statute  begins  to 
run.  ig)  This  has  been  decided  by  the  House  of  Lords  in  Knox  v. 
Gve  {h\  in  which  a  surviving  partner  relied  on   the 

Knox  t'.  Gye.  j      \    j^  .     ^  .     •       l- i.    i.   A 

statute  as  a  defense  to  a  suit  for  an  account  mstitutea 
*967  by  the  executor  of  a  deceased  partner.  *The  deceased  part- 
ner had  died  more  than  six  years  before  the  filing  of  the  bill, 
and  the  right  of  his  executor  had  never  been  recognized;  the  surviv- 
ing partner,  however,  had  continued  the  partnership  business,  and 
had  got  in  outstanding  assets  within  six  years.  The  Y.-C.  Wood 
held  that  the  statute  was  not  a  bar  to  the  suit;  but  the  decision  was 
reversed  by  Lord  Chelmsford  on  appeal,  and  the  House  of  Lords 
affirmed  Lord  Chelmsford's  decision. 

With  reference  to  acknowledgments,  it  was  held  in  a  partnership 
Effect  of  case,  where  no  account  had  been  come  to  for  six  years, 

meiu?^^  ^'^  that  a  signed  acknowledgment  of  a  liability  to  account 
in  respect  of  matters  more  than  six  years  old,  was  sufficient  to  jus- 
tify a  decree  for  an  account  in  respect  of  them,  although  the  ac- 
knowledgment did  not  contain  an  admission  that  anything  was  due 
nor  any  express  promise  to  pay  what  might  be  found  due  on  taking 
the  account.  (^) ' 

Where  a  partnership  account  is  agreed  to  be  taken,  and  a  recciv- 
rayment  by  re-  cr  is  appointed,  a  payment'  made  by  the  receiver  to  one 
ceiver  in  a         ^^  ^^^^  partners  on  account  of  a  debt  owing  to  him    by 

{g)  See  some  remarks  as  to  the  effects  of  R.'s  estate,  agreed  to  two  amicable  ref- 

the  statute  between  partners  in  Winter  erences,   etc. :    Held,   that  this  was  a 

V.  Innes,  4  M.  &  Cr.  Ill,    and  Way  v.  continuing  admission  of  liability  to  ac- 

Bassett,  5  Ha.  68.  count  so  as  to  suspend  the  running  of 

[h)  L.  R.  5  H.  L.  656.     See  19  &  20  the  statute  of  limitations.     Shelmire's 
Vict.  c.  97,  §  9.     Miller  v.  Miller,  8  Eq.  Appeal,  70  Pa.  St.  281. 
499,  is  hardly  consistent  with  this,   un-  ^  ^s  to  a  payment  on  account  not  con- 
less  it  be  upon  the  ground  that  there  stituting  a  settlement  of  accounts,  see 
was  no  dissolution.  McKelvy's  Appeal,  72  Pa.  St.  409. 

(i)  See  Prance  v.  Sympson,  Kay,  678.  Payment  of  the  deceased  partner's 
The  expression  was,  "  you  and  I  must  share  of  damages  recovered  in  a  suit  for 
go  into  it  and  settle  the  account."  See,  the  destruction  of  the  partnersk'p  prop- 
also,  Skeet  V.  Lindsay,  2  Ex.  D.  314.  erty,  is  not  such  a  payment  upon  the 
Compare  Mitchell's  claim,  6  Ch.  822.  general  account  of  the  partnership  busi- 

>  R.  and  J.,  brothers,  were  in  partner-  ness  as  will  remove  the  bar  of  the  stat^ 

ship.     R.   having  died,    J.   frequently  ute  of  Hniitations.     McKeown  v.  Guild, 

acknowledged  his  liability  to  account  to  12  Chicago  Legal  News,  18. 
1252 


CHAP.  X.]       DEFENSES   TO    ACTIONS    FOR    AN    ACCOUNT,    ETC. 


*967 


another  partner,  is  not  sufficient  to  prev^'iit  the  statute  from  being 
a  bar  to  such  debt,  {k) 

3.  Accou7it  stated. — To  an  action  for  an  account  of  partnership 
deah'ngs  and  transactions,  an   account  thereof  ab-eady  3  Account 
stated  between  the  parties  {I)  affords  a  good  defense,  (m)'  ^'**®'^- 


ik)  "^ATiitley  r.  Lowe,  25  Beav.  421, 
and  2  DeG.  &  J.  704. 

(/)  Of  course  the  maxim,  Res  inter 
alios,  etc.,  applies  to  settled  accounts, 
Carmichael  v.  Carmichael,  2  Ph.  101. 

(»i)  Taylor  v.  Shaw,  2  Sim.  &  Stu.  12; 
Endo  V.  Caleham,  You.  306.  An  ac- 
count settled  by  a  majority  was  held 
binding  on  the  minority  in  Robinson  v. 
Thompson,  1  Vom.  465.  See,  too, 
Stupart  V.  Arrowsmith,  8  Sm.  &  G.  176, 
and  Kent  v.  Jackson,  2  DeG.  M.  &  G. 
49. 

"Wells  V.  Erstein,  24  La  Ann.  317; 
Kidder  v.  Mcllhenny,  81  N.  C.  123; 
Wagner  v.  Wagner,  50  Cal.  76;  Cayton 
r.  Walker,  10  id.  450;  Silver  v.  St.  L. 
Iron  Mt.  &  T.  R'y.  Co.  5  Mo.  App. 
381;  Gage  v.  Parmalee,  87  111.  329; 
Hanks  v.  Baber,  53  id.  292.  See,  also. 
Wood  V.  Fox,  1  A.  K.  Marsh.  451,  and 
the  cases  cited  below. 

In  a  suit  for  a  dissolution,  however, 
an  answer  that  on  a  day  certain  the 
partners  accounted,  and  have  made  no 
new  contracts  since,  does  not  make  it 
improper  for  the  court  to  order  an  ac- 
count, without  first  determining  the 
truth  of  the  answer.  Kennedy  v.  Sliil- 
ton,  1  Hilt.  546. 

Where  there  has  been  a  partial  settle- 
ment of  a  pai-tnership  account,  and 
there  is  no  valid  objection  to  the  settle- 
ment, it  is  conclusive  upon  the  parties 
to  it  as  far  a.^  it  goes,  and  leaves  open 
only  the  unsettled  portion  of  the  account. 
Foster  v.  Rison,  17  Gratt.  321;  Park- 
hurst  V.  Muir,  7  N.  J.  Eq.  555. 

Where  the  juiy  find  that  a  note  in 
suit  was  given  in  settlement  of  the  final 
balance  due  on  partnership  transactions, 
all  inquiry  into  the   articles  of  co-part- 


nership is  immaterial.  Kidder  r.  Mc- 
llhenny, supra. 

Where,  however,  there  has  been  a 
dissolution  and  a  final  settlement,  and  a 
note  given  for  the  balance  ascertained 
to  be  due,  with  the  stipulation  that  the 
errors  and  omissions  in  the  settlement 
may  be  deducted  as  payments  on  the 
note,  a  court  of  law,  in  an  action  on  the 
note,  niay  allow  such  errors  and  omis- 
sions as  a  dfifense  to  the  action.  Frink 
V.  Ryan,  3  Scam.  322. 

So,  a  settlement  between  two  part- 
ners, whereby  one  buys  the  other's  in- 
terest in  the  partnership  property,  and 
gives  his  note  for  the  amount  found  to 
be  due  the  retiring  partner,  does  not 
estop  the  maker  of  the  note  from  plead- 
ing and  showing,  when  sued  on  the 
note,  that  it  was  given  for  too  much, 
by  mistake  arising  out  of  an  erroneous 
charge  against  the  maker  of  the  note 
in  the  settlement.  The  fact  that  the 
maker  received  the  note  after  discovery 
of  the  mistake  by  him,  and  while  it  was 
a  matter  of  dispute,  still  insistingr  that 
it  existed,  does  not  vary  the  rule.  Hertz 
V.  Clark.  46  Ga.  649. 

Two  partners  agreed  that  the  part- 
nership should  be  dissolved,  and  the 
business  closed,  and  that  the  partner- 
ship accounts  should  be  considered 
and  taken  as  if  the  partnership  had 
never  existed,  and  that  the  amount 
already  received  by  one  partner  from 
the  partnership  should  be  his  compen- 
sation paid  by  the  other  partner  to  him 
as  an  employe, 'and  that  the  other 
partner  should  collect  the  debts  due  the 
firm,  and  pay  the  debts  due  by  the 
firm;  and  the  agreement  was  acted  on: 
Held,  that  the  partner  who  received  the 

1253 


^967 


DEFENSES   TO    ACTIONS   FOK    AN    ACCOUNT,    ETC.        [bOOK  III. 


'No  precise  form  is  necessary  to  constitute  a  stated  and  settled  ac- 
count; but  an  account  stated,  unless  it  be  in  writing,  is  no  defense 


compensation  as  an  employe  had  no 
fuilher  interest  in  the  partnership  ac- 
counts, and  could  not  maintain  a  suit 
for  an  accounting.  Wagner  v.  Wag- 
ner, supra. 

Where  the  petition  in  a  suit  between 
I^artners  was  for  a  balance  stated  upon 
an  accounting,  and  the  answer,  after 
setting  up  the  statute  of  limitations, 
admitted  the  partnership,  its  dissolu- 
tion, and  a  large  partnership  account, 
<lenying  the  striking  of  a  balance  by 
the  parties,  but  claimed  a  balance  in 
the  defendant's  favor,  and  prayed  for 
Ltn  accounting  and  judgment;  and 
where  both  parties,  in  open  court,  as- 
sented to  an  order  made  for  taking  an 
account  before  a  referee,  which  was 
taken:  Held,  that,  by  assenting  to  the 
taking  of  the  account,  plaintiff  aban- 
doned his  claim  to  recover  as  upon  an 
account  stated,  and  defimdant  waived 
any  bar  to  the  claim  of  plaintiff,  and 
the  action  became  an  equitable  one 
f-r  a  final  accounting,  between  former 
}).u-tners.     Auld  v.  Butcher,  2  Kan.  135, 

A  and  B  formed  a  partnership,  agree- 
ing, by  an  indenture,  that  A  should 
pub  in  $20,000,  that  B  should  transact 
the  finu's  business,  that  the  profits 
should  b3  divided  in  the  proportion  of 
17  to  7,  and  that  A  might  draw  out 
$2500,  and  B  |300  annually.  The 
partnership  was  dissolved,  and  the 
goods  divided;  and  it  was  then  agreed 
that  A  should  estimate  the  profits,  and 
B  should  elect  whether  to  buy  A's  in- 
terest, or  sell  his  own,  according  to  that 
estimate.  A  estimated  the  profits  at 
$25,500,  and  B  elected  to  take  the  ef- 
fects, and  pay  A  his  share  of  the  profits. 
A  memorandum  was  also  made  by  A 
and  B  of  certain  items  which  were  to  be 
left  to  arbitrators.  A  brought  a  bill  to 
obtain  an  account  from  B :  Held,  that 
the  agreement,    after  dissolution,    was 

1254 


not  void  for  uncertainty,  because  of  its 
silence  as  to  interest  on  the  amounts 
withdrawn  by  the  partners,  nor  be- 
cause the  disputed  items  were  excluded 
from.  it.     MiUer  v.  Lord,  11  Pick.  11. 

Where  several  persons  entered  into  a 
co-partnership  to  trade  in  plank  and 
lumber,  and  some  years  after  made  a 
settlement,  in  which  the  parties  mutu- 
ally signed  a  paper  purporting  to  be  '  'a 
settlement  of  their  plank  and  lumber 
account:"  Held,  that  the  presumption 
that  such  settlement  was  a  dissolution 
of  the  partnership  was  not  repelled  by 
a  recital  in  the  memorandum  that  the 
parties  were  to  be  entitled  to  certain 
proportions  of  the  profits,  when  ascer- 
tained; but  that  it  rather  imported  a 
final  settlement  of  the  business,  and 
postponed  a  division  of  the  profits  until 
the  uncollected  balances  were  made 
available,  and  that  a  party  pleading 
such  settlement  was  estopped  from 
opening  it.  Ferguson  v.  Hite,  9  Dana, 
553. 

Where  it  appeared  that,  during  a  co- 
partnership of  eight  years  duration, 
there  had  been  occasional  calculations 
of  interest,  and  summing  up  of  results, 
and  a  division  of  profits,  but  no  sur- 
render of  vouchers,  or  cancellation  of 
books,  nor  release,  nor  receipt  in  full: 
Held,  that  the  transactions  were  not  of 
such  a  conclusive  nature  as  to  bar  an 
account.  Lynch  v.  Bitting,  6  Jones, 
Eq.  238. 

A  settlement  made  by  a  surviving 
partner,  under  the  provisions  of  the  first 
article  of  the  administration  act  of  1845 
(Rev.  Code  1845,  70,)  is  evidence  in 
favor  of  the  representative  of  the  de- 
ceased partner  against  the  survivor,  as 
an  admission.  State  v.  Baldwin,  31 
Mo.  561. 

In  a  settlement  between  two  partners, 
it  was  agreed  that  "  S.  is  due  L.  $295.86 


ClIAl'.  X.]        DEFENSES   TO    ACTIONS    FOR    AN    ACCOUNT,    ETC. 


^967 


to  an  action  for  a  further  account.     It  is  not,    liowever,  necessary 
that  the  account  should  be  signed  by  the  parties,*  if  it  can   be 


to  make  him  equal  with  the  said  L.  in 
the  outlays:  "  Held,  that  the  true  con- 
struction is  that  S.  owes  to  L.  (not  to 
the  firm)  the  said  sum.  Little  v.  Stan- 
ton, ;}2  Pa.  St.  299. 

On  the  dissolution  of  a  partnership 
between  A  and  B,  B  was  to  retain  the 
Koods  of  the  firm  and  A  was  to  have  all 
the  lands  and  all  the  debts  due  the  firm, 
and  pay  all  the  debts  due  from  them, 
and  by  a  clause  added  at  the  suggestion 
of  A  at  the  close  of  the  articles  of  dis- 
solution, they  were  to  operate  as  a  re- 
ceipt for  all  demands  then  existing  be- 
tween A  and  B,  as  exhibited  by  the 
books  of  the  firm,  with  a  few  exceptions 
specified :  Held,  that  A  thereby  approved 
and  ratified  a  payment  by  B  of  an  individ- 
ual debt,  the  entrj-  of  which  was  ina^le  up- 
on the  books,  and  which  entry  the  clerk 
testified  he  had  shown  to  A,  who  said 
"that  it  was  of  no  account  and  would 
make  no  difference. ' '  Brewster  t'.  Mott, 
4  Scam.  378. 

On  the  dissolution  of  a  fii-m,  without 
taking  an  account,  it  was  agreed  be- 
tween them  that  one  should  take  a  cer- 
tain amount  of  the  effects  and  the  other 
the  residue,  and  "pay  all  the  debts  due 
from  the  firm."  The  former  had  be- 
fore advanced  to  the  firm,  and  taken  his 
partner's  memorandum  for  the  same: 
Held,  that  by  the  settlement  he  was 
precluded  from  claiming  such  memoran- 
dum as  a  "  debt  due  from  the  firm." 
Patterson  r.  Martin,  G  Ircd.  L.  111. 

Where  an  account  of  the  mutual  deal- 
ings of  two  finns,  of  both  of  which  A 
was  a  member,  had  been  stated,  and  all 
the  partners  of  the  creditor  firm,  save 
A,  who  refused  to  join  as  plaintiff  and 
was  made  defendant,  brought  an  action 
against  the  debtor  firm:  Held,  that  the 
plaintiil's  were  entitled  to  judgment  for 
the  balance  on  the  account  stated,  and 
that,  facts  appearing  that  would  render 


a  recovery  without  adjusting  the  ac- 
counts of  the  inilividual  member  inequi- 
table, such  adjustment  would  be  directed 
by  the  court.  Colo  v.  Reynolds,  18  N. 
Y.  74. 

On  the  dissolution  of  a  co-partnership 
between  S.  and  P.,  it  was  agreed  that  S. 
should  settle  the  jmrtnership  concerns; 
and  the  agreement  between  them  in 
writing  contained  the  clause,  "  that  the 
accounts  of  the  partners  shall  be  made 
equal  by  the  said  S.,  selecting  and  tak- 
ing to  his  own  account,  from  the  assets 
or  effects  of  the  firm,  an  amount  suflB- 
cient  to  equalize  the  accounts  of  said 
partners  with  interest: "  Held,  that 
this  clause  did  not  release  P.  from  lia- 
bility for  loss  to  the  partnership,  nor 
from  his  liability  to  pay  to  S.  the  amount 
which  might  be  due  him  after  settling 
the  concern;  and  that  it  did  not  show 
an  intention  that  S.  should  apply  doubt- 
ful or  uncoUectable  debts  due  the  firm  in 
payment  of  the  amount  due  him,  at 
their  nominal  value.  Sayre  v.  Peck,  1 
Barb.  464. 

A  sale  by  one  partner  of  his  interest 
in  the  business  to  a  third  party,  followed 
by  his  purchase  of  his  former  partner's 
interest  at  a  fixed  price,  is  presumptive 
evidence  that  all  the  former  accounts 
were  settled,  or  at  least  merged  in  the 
new  agreement.  Norman  v.  Hudleston, 
64  111.  11. 

♦  See  Jessup  i\  Cook.  6  N.  J.  L.  4:U. 

Where,  in  an  action  for  a  partnerehip 
settlement,  under  the  plea  of  a  settle- 
ment made  and  release  granted,  de- 
fendant produces  and  relies  on  a  private 
instrument  written  and  signed  by  plain- 
tiff alone,  in  which  the  latter,  after 
mentioning  various  partnership  trans- 
actions, declares  that  the  partnership 
has  been  fully  settled,  and  grants  full 
acquittance  thereof  to  defendant,  but 
the  docununt  stiinds  alone  without  ex- 


ms 


ACTIONS    i'.KTWKKN    rAIirNEKS,    ETC. 


[UOOK  in. 


*9G8  be  shown  to  have  been  acquiesc-ea  in  by  tliein  (;^)  '  and  *an 
account  may  bo  stated  snd  settled,  although  a  tew  doubtful 
items  are  omitted,  {o)  It  is  to  be  observed,  that  the  fact  that  aii 
account  has  ah-eady  been  rendered  by  the  defendant  to  the  plaintiff 
does  not  deprive  the  latter  of  his  right  to  have  the  same  account 
taken  under  the  direction  of  a  court  {p);  to  have  that  elfect  an  ac- 
count must  not  only  have  been  sent  in  to  the  plaintiff,  but  also  have 
been  acquiesced  in  by  him.  {q)  It  is  further  to  be  observed,  that 
although  the  principle  on  which  accounts  have  been  kept  may  have 
been  acquiesced  in,  the  items  may  not.  (?■) 

Accounts  of  companies  laid  before  the  shareholders  at  a  general 
Adopted  ac-  meeting,  and  approved  and  adopted  by  them,  cannot  be 
counteoicom-    •  j^^^gj^^^i^gj  ]^y  absent  or  dissentient  shareholders,  except 

upon  the  ground  of  proved  error  or  of  fraud,  {s) 

A  stated  account  may  be  impeached  either  wholly  or  in  part  on 
Impeaching  an  the  ground  of  fraud  or  mistake.'  If  there  be  fraud,  or 
onX^ground  if  any  mistake  affects  the  whole  account,  the  whole  will 
mistake."'''^      be  Opened,  and  a  new  account  will  be  directed  to  be 


planation  or  corroboration,  and  the 
other  evidence  is  conclusive  that  no  set- 
tlement had  been  made,  the  instrument 
will  have  the  same  effect  to  establish 
plaintiff's  partnership  interest  as  if 
written  by  defendant  himself;  and  a 
verdict  for  plaintiff  will  be  sustained. 
Denton  v.  Erwin,  6  La.  Ann.  317. 

(«)  See  Hunter  v.  Belcher,  2  DeG.  J. 
&  Sm.  194;  Morris  v.  Harrison,  Colles, 
157;  Willis  v.  Jernigan,  2  Atk.  252. 
See  on  this  defense  in  general,  Beames' 
Pleas  m  Equity,  222,  and  Mitford,  302, 
edit.  5.  A  verbal  account  and  a  receipt 
in  full  is  not  equivalent  to  a  stated  ac- 
count, Walker  v.  Consett,  Forrest,  157. 

^To  constitute  a  settlement  of  ac- 
counts between  partners,  all  must  con- 
sent and  be  bound  by  it,  or  none  can  be 
bound.  Laraalere  ?'.  Gaze,  1  Wash. 
435.  Cooper  v.  Frederick,  4  G.  Greene, 
403. 

(o)  Sim  V.  Sim,  11  Ir.  Ch.  310. 

Ijj)  See  Clements  v.  Bowes,  1  Drew. 
692. 

(g)  Irvine  v.  Young,  1  Sim.  &  Stu.  333. 

1256 


(>•)  See  Mosse  v.  Salt,  32  Beav.  269; 
Clancarty  v.  Latouche,  1  Ball  &  Beatty, 
420.  Compare  Hunter  v.  Belcher,  2 
DeG.  J.  &  Sm.  194. 

(s)  See  Holmes'  case,  2  DeG.  M.  &  G. 
113;  StuparttJ.  Arrowsmith,  3  Sm.  &  G. 
176;  Kent  v.  Jackson,  2  DeG.  M.  &  G. 
49;  Ex  parte  Bignold,  22  Beav.  143. 
But  as  to  reports  without  any  accounts, 
see  Portsmouth  Banking  Co.  2  Eq.  167. 

'  See  Abrahams  v.  Hunt,  26  Pa.  St.  49; 
Silver  v.  St.  L.  Iron  Mt.  &  S.  R'w'y.  Co. 
5  Mo.  App.  381;  Gage  v.  Parmalee,  87 
111.  329. 

A  deed  of  final  settlement  between 
partners  will  not,  however,  be  disturbed, 
except  for  the  most  cogent  reasons. 
Murray  v.  Elston,  24  N.  J.  Eq.  310. 

Although  a  partner  at  and  before  the 
time  of  making  a  settlement  of  the  part- 
nership account,  and  selling  his  interest 
to  his  co-partner  may  have  been  under 
great  financial  embarrassment  and 
under  indictment  as  an  officer  for  em- 
bezzlement, yet  if  he  is  a  free  agent  and 
has  ample  time  to  deliberate,   and  pro- 


CHAP.  X.] 


ACTIONS    B:. 


EEN    I'AUTXLRS,    ETC. 


^968 


taken,  witliout  reference  to  tljat  wliicli  lias  been  ttateJ  (i!j;   but  if 
there  be  no  fraud,  and  if  no  mistake  affecting  tlie  whole  account  can 


cures  a  conipetont  accountant  to  exam- 
ine the  books  of  the  firm,  who  makes  a 
faithful  examination,  and  submits  the 
same,  and  the  party  objects  as  to 
certain  matters,  showing  that  he  un- 
derstands the  business  ;  and  the 
proof  also  shows  that  he  was  famUiar 
with  it,  and  he  finally  makes  a  lumping 
trade,  settling  the  business  and  disposing 
of  his  interest,  and  sometime  after 
ratifies  the  act  by  asking  time  to  pay  a 
balance,  a  court  of  equity  will  not  set 
aside  the  transaction,  even  though  the 
co-partner  pressed  him  for  a  dissolution 
and  settlement.  Gage  v.  Parmalee,  su- 
pra. 

Where  the  active  and  managing  part- 
ner was  by  the  articles  of  co-partnei'ship 
allowed  a  salary  of  $1,000  a  year  for  his 
services,  and  afterwards  one  partner 
sold  out  his  interest  and  retired,  and  no 
new  agreement  was  entered  into,  and, 
as  the  business  increased,  the  active 
partner  charged  on  the  books  from  time 
to  time  an  increase  in  his  salary,  to 
■which  no  objection  was  made  by  the 
other  partner,  although  he  often  exam- 
ined the  books  and  had  monthly  state- 
ments furnished  him.  It  was  held,  that 
after  dissolution  and  settlement,  on  the 
basis  of  the  increased  salary,  this  was 
no  ground  for  setting  the  settlement 
aside.  87  111.  329,  supra.  See,  also, 
Brewster  v.  Mott,  4  Scam.  378. 

A  settlement  of  partnership  accounts 
between  parties,  dealing  with  each  other 
at  arm's  length,  will  not  be  opened  in 
equity,  merely  on  the  ground  of  the 
impaired  health  and  depression  of  spirits 
of  one  of  the  parties  at  the  tim(>,  no  un- 
soundness of  mind  being  jiroved.  Biil- 
ingslea  v.  Ware,  32  Ala.  415. 


One  partner,  wh^^n  sued  Vjy  the  other, 
on  a  note  execut<^d  by  the  former  to  the 
latter  in  settlement  of  a  general  balance 
on  a  dissolution  of  their  partnership, 
may  impeach  its  validity  for  fraud,  with- 
out resorting  to  a  direct  action  to  annul 
the  settlement.  Powell  v.  Graves,  9  La. 
Ann.  435. 

Where  a  partner,  by  concealing  the 
profitable  result«i  of  his  outside  specula- 
tions and  rendering  a  false  balance  sheet, 
obtained  from  his  co-partner  a  bill  of 
sale  of  all  of  the  hitter's  interest  in  the 
iii-m:  Ilehl,  that  equity  would  apply 
the  rule  making  paiiners  each  other's 
agent  and  trustees,  and  would  grant 
appropriate  relief,  under  a  prayer  for  a 
re-opening  of  the  settlement  and  for 
general  relief.  The  complainant  was 
only  bound  to  ordinary  vigilance  to  pre- 
vent the  accomplishment  of  the  fraud. 
Pomeroy  r.  Benton,  57  Mo.  531. 

In  re-opening  a  settlement  between 
partnei-s  alleged  to  have  been  procured 
by  the  fraud  or  mistake  of  the  managing 
partner  trusted  as  such,  equity  will  allow 
more  latitude  than  where  no  confidence 
is  reposed.  Merriwether  v.  Hardeman, 
51  Tex.  436. 

Where  a  judgment  is  recovered  at 
law  by  one  piu-tner  against  another  in 
respect  of  the  partnership  dealings,  the 
defendant  may  still  file  a  bill  for  an  ac- 
count, and  if,  upon  a  statement  thereof' 
it  appi;ars  that  he  owes  the  defendant 
nothing,  the  Court  may  properly  enjoin 
the  collection  of  so  much  of  such  judg- 
ment as  is  shown  to  be  inequital)le  and 
unjust.     Gregg  v.  Brower,  67  111.  526. 

In  the  case  of  a  mistake  in  the  settle- 
ment of  a  partnership  account,  where 
both  parties  had  equal  oppoitunities  of 


{f)  As  in  Clarke  v.  Tipping,  9  Beav. 
284;  Wharton  v.  May,  5  Ves.  68;  Beau- 
mont V.  Boultbee,  ib.  485,  and  7  Ves. 


599;  Allfrey  v.  Allfrey,  1  Mac.  &  G.  87; 
Coleman  r.  Mellersh,  2  ib.  309. 

1257 


*9G9 


DEFENSES    TO    ACTIONS    FOR    AN    ACCOUNT,    ETC.        [boOK  III. 


be  shown,  but  the  correctness  of  some  of  the  items  in  it  is,  neverthe- 
less disputed,  the  account  already  stated  will  not  be  treated  as  non- 
existing,  but  will  be  acted  upon  as  correct,  save  so  iar  as  the  party 
dissatisfied  with  any  item  can  show  it  to  be  erroneous  (u).     In  a  case 

of  fraud,  an  account  will  be  opened  iti  toto,  even  after  the 
*9G9     lapse  of  a  considerable  time  (a?);  but  if  no  ■^•fraud  be  proved, 

an  account  which  has  been  long  settled  will  not  be  re-opened 
in  toto;  the  utmost  which  the  Court  will  then  do  will  be  to  give 
leave  to  surcharge  and  falsify  (y);  and  there  are  cases  in  which,  in 
consequence  of  lapse  of  time,  the  Court  will  do  no  more  than  itself 
rectify  particular  items,  [instead   of  giving  leave  to  surcharge  or 


knowing  the  mistake,  and  there  has 
been  no  fraud  or  conceahnent,  equity- 
will  not  correct  the  mistake.  Belt  v. 
Mehen,  2  Cal.  159.  See,  however,  Hertz 
V.  Clark,  ante,  p.  967,  note. 

A  court  of  equity  may  correct  errors 
in  the  settlement  of  partnership  affftirs 
when  they  arise  from  misrepresentations 
innocently  made  by  one  or  more  mem- 
bers of  the  firm.  Stephens  v.  Orman, 
10  Fla.  9. 

N.  and  J.  entered  into  an  agreement 
to  dissolve  partnership   in  December; 

1861 .  By  the  terms  of  the  agreement, 
the  books  were  to  be  balanced,  exclud- 
ing all  doubtul  debts,  and  the  amount 
due  N.  ascertained,  and  J.,  with  others, 
was  to  purchase  his  interest  and  con- 
tinue the  business.  The  cash  balance 
against  N.  was  found  to  be  $1,800,  by 
one  of  the  new  firm  who  had  charge  of 
the  books;  the  suspended  debts  amount- 
ing to  a  much  lai-ger  sum  than  was  ex- 
pected. This  was  not  disclosed  to  the 
complainant,  but  he  was  allowed  to  ex- 
ecute the  contract  under  the  belief  that 
there  would  be  a  balance  in  his  favor. 
N.  was  to  share  in  the  suspended  debts 
as  fast  as  they  were  collected.  N.  en- 
tered the  service  of  the  new  finn,  and 
continued  till  April,  1861.     In  October, 

1862,  he  filed  his  bill  to  set  aside  his 
agreement  and  be  reinstated  in  the 
firm:  Held,  this  was  not  such  a  mis- 
take as  would  entitle  the  complainant  to 

1258 


relief  in  equity.     Nicholson  v.  Janeway, 
16  N.  J.  Eq.  285. 

Plaintiff  proposed  to  purchase  the  in- 
terests of  his  co-partners  in  a  firm  busi- 
ness; the  book-keeper  made  out  a  state- 
ment of  accounts  in  which  the  private 
accounts  of  the  partners  were  included 
as  assets.  The  agent  acting  for  the 
other  partners  refused  to  sell  upon  that 
basis,  but  made  a  statement  in  which 
the  private  accounts  were  set  down  as 
profits,  and  offered  to  sell  with  that 
statement  as  a  basis.  Plaintiff,  with 
full  knowledge  of  the  difference  in  the 
statements,  accepted  the  proposition, 
and  the  sale  was  completed.  Plaintiff 
gave  notes  which  he  subsequently  paid 
as  they  became  due,  and  never  offered 
to  return  the  property.  In  an  action 
for  an  accounting:  Held,  that  these 
facts  authorized  a  finding  that  there  was 
no  material  mistake  of  fact,  and  that 
plaintiff  was  entitled  to  no  equitable  re- 
lief. Stittheimer  v.  Killip,  75  N.  Y. 
282. 

(h)  Pitt  t).  Cholmondeley,  2  Ves.  S. 
565;  Vernon  v.  Vawdry,  2  Atk.  119. 

{x)  Allfrey  v.  AUfrey,  1  Mac.  &  G.  87; 
Stainton  v.  the  Carron  Co.  24  Beav. 
346.  See  Vemon  v.  Vawdry,  2  Atk. 
119;  Beaumont  r.  Boultbee,  5  Ves.  485. 

{//)  See  Millar  v.  Craig,  6  Beav.  433; 
Brownell  v.  Brownell,  2  Bro.  C.  C.  61, 
and  1  Mac.  &  G.  94. 


CHAP.  X.]  ACTIONS    BDTWEEX    PAUTNKUS,    KTC.  ^OTO 

falsify  generally.  (2)'  Moreover,  the  mere  fact  that  items  are  treated 
in  an  improper  way,  or  are  improperly  omitted,  is  not  of  itself  suf- 
ficient to  induce  the  Court  to  open  a  settled  account;  for  if  the 
items  in  question  were  known  to  the  parties,  and  there  be  no  fraud 
or  undue  influence  4)roved,  the  Court  will  infer  that  the  ])artner8 
agreed  to  treat  the  items  as  they  in  fact  did  treat  them,  {a)  But 
an  item  omitted  by  mutual  mistake  will  be  set  right,  (b) 

If  a  settled  account  is  impeached  for  errors,  particular  errors 
muat  be  stated  and  proved  (c);  and  the  same  rule  holds  where  the 
account  is  settled,  "errors  excepted."  (d) 

In  surcharging  and  falsifying,  errors  of  law,  as  well  as  errors  of 
fact,  may  be  set  right  (<?);  and  where  leave  is  given  to  jnstakes 
one  party  to    surcliarge    and    falsify,    similar  leave  is   "f'''^^- 
thereby  also  accorded  to  his  opponent,  (y) 

On  the  retirement  or  death  of  a  partner,  it  is  usual  for  an  ac- 
count to  be  stated  between  him  or  his  representatives  Accounts statod 

,  1  T  1       1  •        •  ,         on  the  (Ktilh  of 

on  the  one  liand,  and   tlie  continuing  partners  on  the  a  partner. 
other,  and  for  mutual  releases  to   be  given.     Afterwards  attempts 
are  occasionally  made  to  open  the  accounts  thus  stated,  and  to  set 
aside  the  releases,  and  to  have  a  new  account  taken,  and  a  fresh  set- 
tlement of  the  partnership  affairs.     In  such  cases  as  these, 
before  the  settled  accounts  can  be  opened,  the  release  *must     *l»70 
be  set  aside,  (g)     Whether  this  can  be  done  or  not,  depends 
upon  circumstances  which  will  be  found  discussed  under  the  title 
rescission  of  contract.  (A) 

In  taking  accounts  under  an  ordinary  decree,  settled  accounts  are 
never  disturbed  unless  specially  directed  so  to  be.  (i) 

{z)  See  Twogood  v.  Swanston,  6  Ves.  Haylin,  2  Bro.  C.  C.  310;  Kinsman  r. 

485;  Maund  v.  AUies,  5  Jur.  860.  Barker,  14  Ves.  579. 

*A     settlement      between    partners,  [d)  Johnston  v.  Curtis,  2  Bro.  C.  C. 

which  does  not  appear  to  have  been  311,  note. 

unfair,  will  not  be  disturbed   at  the  in-  (<')  Roberts  v.  Cuffin,  2  Atk.  112. 

stance  of  one  who  has  not  within  a  rea-  (/)  1  Madd.  Ch.  144,  whore  it  is  said 

sonable  time  repudiated  its  terms  nor  to  have  been  so  held  by  V.-C.  Learii  in 

taken  any  steps  to  rescind  it.      McGunn  Anon,  6  March,  1821. 

V.  Hamlin,  29  Mich.  476.  (y)  See  Millar  v.  Craig,  6  Beav.  4*1; 

(n)  See  Maund  v.  Allies,  5  Jur.  860,  Fowler  v.  Wyatt,  24  Beav.  2:52,  and  see 

L.  C;  Laing  v.  Campbell,  36  Beav.  3,  Parker  v.  Bloxham,  20  Beav.  295. 

where  bad  debts  were  treated  as  good.  (/«)  Ante,  p.  927  et  seq. 

(b)  Pritt  V.  Clay,  6  Beav.  503.  (i)  Newen  v.  Wotten,  31  Beav.  315. 

(c)  Parkinson  r.  Hanbuiy  L.  R.  2  H.  L.  But  see  Milford  v.  Milford,  MacCl.  &  Y. 
1 ;  Dawson  v.  Dawson,  1  Atk.  1 ;  Tajdor  v.       150. 

1259 


■^971  DEFENSES    TO    ACTIONS    FOK    AN    ACCOUNT,    ETC.       [bOOK  III. 

4.  Awu/''L — Another  defenso   to  an  action   for  an   account  is, 

that  the  matters    in   difference   between  tlie   partners 

4.  Award.  i     /.  i  ,  .  . 

liave  been  disposed  oi   by  arbitration. 
A  mere  agreement  that  the  matters  in  question   should  be  re- 
AKreementR  to    ferrcd,  has  frequently  been  held  tQ  be  no  defense  to  an 

refer  to  arbitra-  ..  ■*•  ,  •  r>     -i 

tion.  action  in  respect  oi  them,  {ky     But  if  those  matters 

liave  actuallj'  been  disposed  of  hy  the  award  of  an  arbitrator,  tliey 
cannot  afterwards  be  made  the  foundation  of  any  action  between 
the  parties  on  whom  the  award  is  bindinj^.  (l)  But  an  award  will 
not  avail  as  a  defense  to  the  action  if  the  account 
sought  by  it  is  different  from  that  to  which  the  award 
applies,  (m)  So  an  award  on  a  reference  of  all  matters  in  differ- 
ence is  no.  defense  to  an  action  for  an  account  of  moneys  received 
after  the  making  of  the  award,  and  not  dealt  with  by  it,  owing  to 
a  mistake  on  the  part  of  the  arbitrator.  Thus  in  Spencer  v.  Spen- 
cer («),  the  partners  on  a  dissolution  referred  all  matters  in  differ- 
ence to  arbitration.  The  arbitrator  awarded  that  one  of  the  part- 
ners should  get  in  the  outstanding  debts,  which  were  estimated  by 
the  arbitrator  at  a  certain  amount.  The  award  was  acted  on,  but  it 
appeared  that  the  debts  ultimately  got  in  amounted  to  more  than 
the  sum  at  which  they  had  been  estimated.  One  of  the  partners 
claimed  a  share  of  the  difference  between  the  estimated  and  the 
actual  amount  of  these  debts,  and  as  it  was  plain  that  the  award 
had  proceeded  on  a  mistake,  an  account  was  directed,  notwithstand- 
ing all  matters  in  difference  had  been  referred. 
*971  *With  respect  to  agreements  to  refer,  an  important  enact- 
ment is  contained  in  the  Common  law  procedure  act,  1854, 
§  11,  as  has  been  already  pointed  out.  {o) 

5.  Payment,  and  accord  and  satisfaction. — Payment,  j9i?r  se,  is 

not  a  defense  to  an  action  for  an  account;  for  the  sub- 
ject of  such  an  action  is  to  ascertain  how  much  is  or 
was  payable.     But  payment  of  a  sum  of  money  and  acceptance  of 
it  in  lieu  of  all  demands,  is  equivalent  to  accord  and   satisfaction, 

(A;)  Thompson  v.  Charaock,  8  T.  R.  v.  Tarbell,  26  Vt.  416. 
139;  Michell  V.  Harris,  4  Bro.  C.  C.  312.  (I)  Tittenden  v.   Peat,    3  Atk.   529; 

See  ante,  p.  868.  Eouth  v.  Peach,  2  Anst.  519,  and  3  ib. 

1  Page  V.  Marshall,  6  Phila.  264.  637. 

Partners  are  not  precluded  from  mak-  («?)  As   in    Farrington   v.    Chute,    1 

ing'  a  partial  settlement  by  arbitration,  Vem.  72. 
because  the  partnership  concerns  are  not  («)  2  Y.  &  J.  249. 

in  a  state  to  be  finally  settled.  Kendrick  (o)  Ante,  p.  868. 

1260 


CHAP.  X  ]  ACTION'S    BETWEEN    I'AUT^EUS,    ETC.  "07:2 

wliicli  is  as  much  a  defense  to  an  action  for  an  account  as   is  a 
release,  (p) 

With  respect  to  accord  and  satisfaction,  it  is  to  be  observed  that 
there  must  be  no  uncertainty  in  tiie  a<(reement  relied  Accord  and 
on  as  an  answer  to  the  action  for  an  account,  and  tliat  ^"'^^  action, 
it  must  be  shown  tliat  such  a;^reement  has  been  performed;  for  in 
the  ]-)erformunce  lies  the  satisfaction,  (q)     On  these  grounds  the 
late  Yice-Chancellor  Wigram,  in  a  suit  for  an  account  ^rownr 
by  the  executors  of  a  deceased  partner  against  the  sur-   Perkins, 
viving  partner,  overruled  a  plea  that  it  was  agreed  between  the 
defendant  and  the  deceased  that  all  accounts  between  them,  and  all 
claims  of  the  deceased   in  respect  of  the  partnership,  should   be 
waived;  and  that  in  consideration  thereof  the  deceased  should  be 
permitted  to  carry  on  the  business  alone,  without  any  further  ques- 
tion or  dispute  by  the  defendant,  which  the  deceased  accordinglv 
did.  (r)     Ilcjwever,  if  an   agreement  to  waive  all   ac- 

1     .  i'    •       /•  11  n.    .  Waiver. 

counts  IS  entered   mto,  and   is   rounded  on  a  sutncient 
consideration,  and  is  free  from  all  taint  or  fraud  and  undue  influ- 
ence, the  parties  to  it  will  be  precluded   from  suing  each  other  in 
respect  of  the  accounts  so  agreed  to  be  waived,  (s) 

6.  Release. — A  release  is-  a  good  defense  to  an  action  for  an  ac- 
count, (t)     I>ut  wlioi-e  the  release  has  been  executed  on  ^  „  , 

_  ^  ''      _  ^  _  6.  Release. 

the  I'aitli  of  the  correctness  of  certain   accounts,  which 
are  afterwards  ascertained  to  be  incorrect,  the  release  will  be  set 
aside,  and  a  frc.-;h  account  will  be  decreed  (w),  unless  the 
parties  clearly  "'-intended  to  abide  by  the  accounts,  whether     *972 
correct  or  not.     A  release,  moreover,  can,  of  course,  be  set 
aside  for  traud.     A  release,  to  be  effectual  as  such,  must  be  under 
seal.     A  ]-eleaso  not  under  seal  is  regarded  as  a  stated  account,  {x) 

ip)  See  Bac.  Ab.  Accompt  E.;  Yin.  Eq.  361. 

Ab.  Account  N.;   Brown  v.  Perkins,  1  (m)  See,  for  example,  Pritt  v.  Clay,  6 

Ha.  5G4.     But  see  Com.  Dig.  Accompt  Beav.  503;  Weddorburn  r.  WocUl^rburn, 

E.  6.  pi.  8.  2  Keen,  722,  and  4  M.  &  Cr.  41 ;  Millar 

{q)  Cora.  Dig.  Accord  (B.  3)  and(B.  4).  v.  Craig,  6  Beav.  433.  and  see  Phelps  r. 

(r)  Brown  v.  Perkins,  1  Ha.  564.  Sproule,  1  M.  &  K.  231,  and  see  auti\ 

(s)  See  Sewell  r.  Bridge,  1  Ves.  Sen.  account  stated,  p.  967. 

297.    Compare  the  last  case.  {x)  Mitf.  PI.  307,  ed.  5.    See,  as  to 

{tj  See  Mitford,  PI.  304,  ed.  5.     As  to  agreements    to  waive    accounts,    ante, 

form  of  plea,  see  Brooks  v.  Sutton,  5  notes  {>■)  and  (s). 

1261 


*D72 


ACTIONS    BETWEEN    I'AUTNEKS,    ETC. 


[book  III. 


Decrees  for 
account. 


(c.)  Of  the  decree,  for  a  partnership  account. 

A  decree  for  a  partnersliip  account  in  its  simplest  form  is  to  this 
effect:  "Let  an  account  be  taken  of  the  partnership 
dealings  and  transactions  between  the  plaintiff  and  the 

defendant  from .     And  let  what  npon  taking  the  said  account 

shall  be  certified  to  be  due  from  either  of  the  said  parties  to  the 
other  of  them,  be  paid  bj  the  party  from  whom  to  the  party  to 
wdiom  the  same  shall  be  certified  to  be  due.'    Liberty  to  apply."  (y) 


'  A  decree  giving  to  an  alleged  part- 
ner a  share  in  the  avails  of  property- 
purchased  with  parthership  funds  can- 
not be  sustained,  when  there  is  no  ac- 
count taken  between  the  partners,  nor 
any  proof  of  the  state  of  accounts  be- 
tween them.  Bowman  v.  O'Reilly,  31 
Miss.  261. 

But  payment  of  a  dividend  of  profits 
may  be  decreed  before  the  final  distribu- 
tion of  the  assets,  where  such  dividend 
was  to  be  made  at  stated  periods. 
O'Conner  v.  Stark,  2  Cal.  153. 

In  a  bill  for  an  account  filed  by  one 
partner  against  his  co-partners,  after  the 
termination  of  the  partnership,  all  the 
partners,  as  well  defendant  as  complain- 
a|it,  are  regarded  as  actors,  and  the  ac- 


counts must  be  stated  by  the  auditor, 
and  the  concerns  of  the  partnership  and 
rights  of  the  several  partners  finally  ad- 
judicated upon  by  the  court,  as  if  each 
partner  was  a  complainant  filing  a  bill 
against  his  co-partners.  Grove  v.  Fresh, 
9  Gill  &  J.  280  ;  Raymond  v.  Caine,  45 
N.  H.  201;  Pratt  v.  McHatton,  11  La. 
Ann.  260. 

In  an  action  brought  by  one  partner 
against  his  co-partner  for  an  accounting, 
in  which  the  answer  while  admitting 
the  partnership  denies  the  tenns  as  al- 
leged in  the  petition,  and  as  a  second 
defense  claims  damages  for  certain 
breaches  by  the  plaintifl'  of  the  partner- 
ship contract,  it  is  not  error  for  the  court 
to  submit  to  one  jury  the  question  of  the 


(y)  Seton  on  decrees,  543,  ed.  8,  where 
eeveral  other  useful  forms  will  be  found 
given  and  refen-ed  to.  The  reports  of 
the  following  cases  also  contain  useful 
precedents: — Devaynes  v.  Noble,  1  Mer. 
530,  account  where  one  firm  succeeded 
another;  Wedderbum  v.  Wedderbum, 
2  Keen,  752,  account  where  one  firm 
succeeded  another,  and  the  capital  of  a 
deceased  partner  was  continued  in  trade; 
Cook  V.  Collingridge,  Jac.  623,  and  more 
fully  in  27  Beav.  456,  note,  sale  of  a  tes- 
tator's share  set  aside  and  account  of 
subsequent  profits  and  good-wQl;  Craw- 
shay  V.  Collins,  15  Ves.  230,  and  2  Russ. 
347,  account  of  subsequent  profits;  Mil- 
lar V.  Craig,  6  Beav.  442,  setting  aside  a 

1262 


release  and  opening  accounts;  Fereday 
r.  Wightwick,  Taml.  262,  declaration 
that  property  acquired  by  one  partner 
was  partnership  property,  and  an  ac- 
count accordingly;  Wilson  v.  Green- 
wood, 1  Swanst.  483,  sale,  receiver,  and 
account;  Blisset  v.  Daniel,  10  Ha.  538, 
decree  restoring  a  partner  wrongfully 
expelled;  England  v.  Curling,  8  Beav. 
140,  specific  performance  of  agreement 
for  a  partnership;  Pillans  v.  Harkness, 
Colles,  442,  decree  relieving  a  person 
who  had  been  induced  to  become  a  part- 
ner by  fraudulent  representations;  Ev- 
ans V.  Coventry,  8  DeG.  M.  &  G.  835, 
winding  up  insurance  society,  account 
against  directors  for  breach  of  trust. 


CHAP.  X.] 


ACTIONS  i:i:twi:ex  rAKrNi;Ks,  ktc. 


*972 


lu  actions  for  an  account  of  partnerslii])  dealinirs  and  transac- 
tions, tlie  ordinary  rule  is  to   f^ive  no  cost^   up  to  the   ^^^^^ 
decree  directin*'  the  account;  nor  will  this  rule  be  de- 


terms  and  dunition  of  the  partnership, 
then  to  refer  to  a  referee  to  state  and  re- 
port the  account  between  the  partners, 
and  finally  to  submit  to  a  second  jurj' 
the  claims  for  damages.  Carlin  r.  Don- 
egan,  15  Kan.  495. 

A  decree  in  the  settlement  of  a  part- 
nership should  settle  the  whole  matter, 
and  the  report  of  a  master  is  defective 
where  it  does  not  state  the  account  be- 
tween each  of  the  members  of  the  firm, 
as  well  as  between  the  plaintiff  and 
the  others.  Eaton's  Appeal,  66  Pa.  St. 
483.  '  See.  also.  Felder  v.  Wall,  26  Miss. 
595;  Raj-mond  v.  Caine.  supra;  Griggs 
V.  Clark,  23  Cal.  427;  Warren  r.  Wliee- 
lock,  21  Vt.  323;  Scott  I'.  Lalor,  18  N.J. 
Eq.  3Ul;  McRae  v.  McKenzie,  2  Dev.  & 
Bat.  Eq.  232;  Anderson  v.  Beebe,  22 
Kan.  768. 

In  a  suit  in  equity  between  partners 
for  a  settlement,  no  final  decree  can  be 
made  while  debts  due  from  the  firm  re- 
main unadjusted,  unless  the  plaintiffs 
will  deduct  the  amount  of  such  debts 
from  the  sum  which  they  seek  to  recover. 
Tyng  r.  Thayer,  8  Allen,  391;  Brinley  y. 
Kupfer.  6  Pick.  179. 

Where,  however,  a  court  of  equity 
has  made  a  final  decree,  dissolving  a 
partnership,  and  applying  its  effects  to 
the  payment  of  its  debts,  without  judi- 
cially ascertaining  the  joint  liabilities 
which  the  receiver  is  directed  to  pay, 
proceedings  may  be  taken  with  proper 
notice  to  the  respondents,  to  ascertain 
the  joint  debts  of  the  firm.  Hubbard  r. 
Curtis,  8  Iowa,  1. 

If  on  the  dissolution  of  a  partnership, 
certain  partners  receive  more  tlian  their 
share  of  the  assets,  the  e.xact  amount  so 
received  by  each  partner  should  be  as- 
certained, and  judgment  entered  ac- 
cordingly, in  an  action  by  a  partner 
who  has  been  wronged  in  the  distribu- 


tion against  his  former  co-partners.  A 
joint  judgment  in  such  a  ca.se  is  erro- 
neous.    Rhiner  r.  Sweet.  2  Lans.  :WG. 

In  a  suit  against  co-partners  for  a 
share  of  past  profits,  the  verdict  should 
be  against  those  only  who  have  received 
more  than  their  proportion,  unless  some 
reason  appears  why  the  others  should 
refund  or  contribute.  Wadley  v.  Jones, 
55  Ga.  329. 

In  a  suit  by  one  partner  against  an- 
other for  the  settlement  of  a  partneiship 
and  partnership  accounts,  after  dissolu- 
tion, where  it  appears  that  a  large 
amount  of  the  partnership  debts  and 
liabilities  are  unpaid,  and  for  some  of 
which  there  are  judgments  against  the 
partners,  and  that  one  of  the  partners 
has  collected  more  of  the  partnership 
funds  than  the  other,  ordinarily  it  is 
error  for  the  Court  to  decree  p^-rsonally 
for  the  money  so  collected,  or  any  part 
thereof,  in  favor  of  one  partner  against 
the  other,  until  the  payment  of  the  part- 
nership debts  are  first  provided  for. 
Carper  v.  Hawkins,  8  W.  Va.  291. 

The  report  of  a  referee,  stating  a  part- 
nership account,  showed  that  the  inter- 
est of  the  plaintiff  in  the  firm  exceeded 
that  of  the  defendant  by  a  certain  snni : 
JleJif,  that  it  was  error  to  enter  judg- 
ment for  the  plaintiff  in  that  amount, 
but  that  a  sale  of  the  entire  partnei-shi)) 
property  should  have  been  ordered,  with 
directions  to  pay  the  costs  of  court  out 
of  the  proceeds ;  then  to  pay  to  thi' 
plaintiff  the  amount  due  him  ;  and. 
lastly,  to  divide  the  residue  equally  be- 
tween the  parties.  Lannan  v.  Chivin.  3 
Kan.  17. 

Upon  a  bill  by  a  partner  against  his 
partner's  administrators  and  heirs, 
claiming  a  moiety  of  profits  from  the 
sale  of  certain  lands,  and  an  undivided 
half  of  lands  unsold,  a  decree  setting 

1263 


ACT.ON'3    BI^'nVKEN    I'AKTNEUS,    ETC. 


[cook  III. 


parted  from  except  in  cases  of  gross  niiscondiict  on  the  part  of  the 


apart  to  the  complainant  a  certain  por- 
tion of  the  land  in  severalty  erroneous. 
St.  Clair  v.  Smith,  3  Ohio,  355,  see^^os^ 
1015. 

Where  partnership  articles  provide 
that  one  of  the  partners  is  to  bear  all 
losses  arising  from  sales  to  irresponsible 
parties,  it  is  improper,  on  a  bill  for  an 
account,  to  render  a  decree  against  him 
personally  for  such  sums  a.s  he  has  been 
restrained  by  injunction  from  collecting, 
and  perhaps  may  never  collect.  But  a 
colorable  sale  on  credit  in  fraud  of  the 
other  partners'  rights  should,  in  stating 
the  account,  be  considered  as  a  sale  for 
cash.     Maher  v.  Bull,  44  111.  97. 

Upon  a  bill  by  a  partner  for  an  ac- 
count of  the  partnership,  if  a  balance  is 
reported  against  him,  the  defendant 
may  have  a  decree  therefor  upon  the 
plaintiff's  bill.  Scott  v.  Pinkerton,  3 
Edw.  Ch.  70. 

The  decree  of  a  court  of  equity,  on  a 
bill  charging  a  violation  of  a  partner- 
ship agreement,  may  fix  upon  a  previous 
time,  at  which  the  partnership  shall  be 
considered  as  having  determined  as  be- 
tween the  parties.  Durbin  r.  Barber, 
14  Ohio,  311. 

A  decree  recognizing  plaintiffs'  right 
to  an  interest  in  a  partnership  between 
their  ancestor  and  defendant  who  was 
ordered  to  account,  authorized  the 
former  to  exercise  aU  their  rights  as 
partners  to  protect  and  manage  that  in- 
terest, but,  without  passing  upon,  left 
the  mode  of  exercising  those  rights  to 
the  necessity  of  the  case  and  the  inter- 
pretation given  the  partnership  contract: 
Held,  that  plaintiffs  were  not  entitled  to 
a  writ  giving  them  the  unreserved  pos- 
session and  administration  of  the  part- 
nership property.  Junek  v.  Hezeau,  11 
La.  Ann.  731. 

An  assignee  of  one  co-pai-tner's  share 
in  the  property  and  assets  of  the  firm  is 
liable,  even  without  notice,    to   all   the 

1264 


equities  of  his  assignor  grovdng  out  of 
the  co-partnership;  but  a  decree  against 
the  assignee  on  account  of  such  equities 
is  a  decree  in  rem,  it  operating  upon  the 
property  assigned,  and  a  fi.  fa.  cannot 
be  issued  upon  it  against  the  assignee. 
Hunt  V.  Smith,  3  Rich.  Eq.  465. 

A  reference,  upon  agreement  of  par- 
ties, to  a  master  to  take  an  account  of  all 
the  assets  of  a  co-partnership  except  the 
W.  oil  works,  "  as  the  same  stood  on  and 
up  to  "  the  day  of  the  dissolution,  ex- 
cludes the  property  appertaining  to  the 
W.  oil  works  at  the  date  of  the  dissolu- 
tion, and  not  that  appertaining  to  them 
at  the  time  of  their  conveyance  to  the 
partnership,  as,  for  instance,  two  boats 
included  in  the  deed  thereof.  Blitfins 
V.  Wilson,  113  Mass.  248. 

A  bill  by  a  partner  filed  before  the 
end  of  the  term  the  partnership  was  to 
run,  alleged  violations  of  the  partner- 
ship contract,  and  asked  for  the  disso- 
lution of  the  partnership,  and  that  an 
account  be  taken.  During  the  pendency 
of  the  suit  the  term  of  the  partnership 
expired.  A  supplemental  bUl  was  filed 
by  leave,  stating  this  fact  and  charging 
a  misappropriation  of  the  partnership 
assets  by  the  defendant,  and  asking  for 
an  accounting  between  the  partners. 
Answers  to  both  bills  and  replications 
thereto  were  filed,  and  proofs  were  taken 
and  the  cause  referred  to  a  master,  who 
made  a  report  showing  there  was  due 
to  the  complainant  from  one  of  the 
other  partners  several  thousand  dollars, 
and  considerable  amounts  due  the  firm. 
The  court,  on  a  hearing,  and  wathout 
any  objection  to  the  report,  dismissed 
the  bills :  Held,  that  complainant  was 
entitled  to  a  decree  settling  the  accounts 
and  providing  for  disposition  of  firm  ef- 
fects, and  that  court  erred  in  dismiss- 
ing the  bills.  Curyea  v.  Beveridge,  94 
111.  425. 


CU.\.l' 


X.] 


DECRKK    FOK    ACCuLNT. 


*9: 


■^■defendants.  C^)  But  where  the  action  is  rtally  instituted  to  *9T3 
try  some  disputed  rii^lit,  the  nnsncce.-?sfnl  liti^^•lnt  will  he  or- 
dered to  ])ay  tlie  costs  u])  to  tlie  ti-ial  of  the  action,  (a)^  Tlie  costs 
of  taking  the  accounts  directed  at  the  hearing  are  usually  defrayed 
out  of  the  partnership  assets,  and,  if  necessary,  by  a  contribution 
between  the  ])artners.  (//) 

The  method  of  takin<^  a  partnership  account  under  such  a  decree 
is  as  follows  : —  ...    ,,  , . 

jrode  of  taking 

1.  Ascertain   how  the  firm  stands  as  regards    non-  ^^'^  accounts, 
partners. 

2.  Ascertain  what  each  partner  is  entitled  to  charge  in  account 
with  his  co-partners;  remembering,  in  the  words  of  Lord  Ilard- 
wicke,  that  "each  is  entitled  to  be  allowed  as  against  the  other, 
everything  he  has  advanced  or  brought  in  as  a  partnership  trans- 
action, and  to  charge  the  other  in  the  account  with  what  that  other 
has  not  brought  in,  or  has  taken  out  more  than  he  ought,  (c) 

3.  Apportion  between  the  partners  all  profits  to  be  divided  or 
losses  to  be 'made  good;  and  ascertain  what,  if  anything,  each  part- 
ner must  pay  to  the  others,  in  order  that  all  cross  claims  may  be 
settled.' 


(z)  See  Hawkins  r.  Parsons,  8-Jur.  N. 
S.  452;  Parsons  v.  Hayw.ard,  4  D.  G.  F. 
&  J.  474. 

(«)  Warner  t'.  Smith.  9  .Tiir.  N.  S.  169. 
See.  also,  Norton  v.  Russell,  19  Eq.  843, 
where  a  surviving  partner  refused  an 
account  to  the  executor  of  his  deceased 
co-partner.  See,  as  to  mutual  compa- 
nies, Harvey  r.  Beckwith,  10  Jur.  N.  S. 
577. 

'  The  question  as  to  which  of  the  par- 
ties has,  by  his  conduct,  caused  the  dis- 
cord between  them,  is  never  considered, 
with  a  view  to  an  adjustment  of  the 
I  osts  of  a  settlement  of  tlieir  partnership 
atfairs  in  court.  Stevens  r.  Yeatman, 
19  Md.  480. 

In  an  action  to  liquidate  a  partner- 
ship, all  are  plaintitFs,  and  all  defond- 
iuits;  and  where  the  decree  distributes 
anything  between  the  partners,  the  costs 
may  be  decreed  against  all,  to  be  borne 
by  them  equally.  Pratt  v.  McHatton, 
li  La.  Ann.  260. 


(h)  This  rule  was  followed  as  to  the 
whole  costs  whore  the  action  was  refer- 
red under  §  11  of  the  Com.  Law  Proc. 
Act.  1854;  Newton  v.  Taylor,  19  Eq.  14. 

(c)  West  r.  Skip,  1  Ves.  S.  242.  The 
"rule  in  Clayton's  case,  respecting  the 
appropriation  of  payments  apphe.s  to 
partners  inter  se  as  well  as  to  other  per- 
sons. See  Toulmin  r.  Copland,  3  Y.  & 
C.  Ex.  625,  and  7  CI.  &  Fin.  350. 

'The  method  of  taking  partnership 
accounts,  above  stated,  is  substantially 
followed  in  whole  or  in  part,  in  Neu- 
decker  v.  Kohlberg,  3  Daly,  407;  Lusk 
V.  Graham,  21  La.  Ann.  159;  Chambers 
V.  Crook,  42  Ala.  171;  CoUins  v.  Owens, 
34  Ala.  66;  Gaines  v.  Coney,  51  Miss. 
323;  Moore  v.  Wheeler,  10  W.  Va.  35; 
Stevens  v.  Yeatman,  19  Md.  480;  Schulte 
r.  Anderson,  13  Jones  &  Sp.  489.  See, 
also,  Frigerio  v.  Crottes,  20  La.  Ann. 
351;  Phehin  v.  Hutchinson,  PhUl.  Eq. 
116. 

An  accounting  between  co-partners  is 


*973 


DECREE    FOR    ACCOLXT. 


[book  III. 


In  order,  therefore,  to  take  a  partnership  acconnt,  it  is  necessary 
Matters  in  vol  V-  to  distiiiorviish  loiiit  estate  from  separate  estate;  ioint 

ed  in  takin;^  .    .  ^.  ^  ''  ,    ,  .^  '  ,  .  , 

the  account.       uebts   irom   separate  debts;     and   to  determine  what 


to  be  governed  by  the  special  provisions 
of  the  co-partnership  agreement;  Neu- 
decker  v.  Kohlberg,  S  Daly,  407;  Pearce 
r.  Pearce,  77  III.  284.  And  the  right  to 
return  of  capital  invested  by  each  part- 
ner is  only  to  be  destroyed  by  express 
stipuhxtion  to  the  contrary.  Unless 
waived  or  extinguished  by  express  agree- 
ment, the  return  of  capital  or  of  other 
means  furnished  by  each  party  for  use 
and  employment  in  the  business  for  their 
mutual  advantages,  although  a  debt  of 
a  secondary  character,  is,  as  between 
them,  an  obh'gation  of  the  partnership 
which  should  ba  discharged  before  any 
final  distribution  of  the  profits.  Neu- 
decker  v.  Kohlberg  supra. 

Thus,  where  by  a  co-partnership  agi-ee- 
ment,  R.  was  to  furnish  "capital, "  and 
M. "  skill  and  knowledge  of  business, '"  all 
gain  and  increase  to  be  equally  chvided 
on  the  termination  of  the  partnership; 
it  was  held  that,  on  dissolution.  R.  was 
a  creditor  to  the  extent  of  his  capital, 
and  M.  only  entitled  to  half  the  gain,  if 
any.     Rowland  r.  Miller,  7  Phil.  36'2. 

Partnership  accounts  should  be  so 
stated  where  one  partner  has  had  entire 
charge  of  the  business,  that  he  will  be 
debited  -with  the  whole  capital  placed  in 
his  hands,  as  well  as  with  the  proceeds  of 
sales  realizx'd  by  him.  And  where  part 
of  the  capital  was  composed  of  stock, 
which  has  been  used  in  the  business  or 
disposed  of,  and  the  proceeds  charged 
against  him  he  should  bo  credited  with 
such  stock  as  a  disbursement,  to  the 
amount  at  which  it  was  originally  charg- 
ed against  him.  Gunnell  v.  Bird,  10 
Wall.  304. 

Where  one  partner  puts  into  the  firm 


simply  the  use  of  machinery,  and  an- 
other a  patent  right,  and  another  ad- 
vances money  to  put  the  business  in 
operation,  and  agrees  to  convey  land, 
on  bill  for  an  accounting  and  for  a  sale 
of  the  property,  each  party  should  be  al- 
lowed for  aU  money  advanced,  a  fair 
and  reasonable  rent  for  his  property 
employed,  up  to  the  time  of  filing  the 
bill,  and  for  labor  performed  by  each 
during  that  period  and  the  balance 
struck  accordingly.  It  is  error  to  allow 
a  certain  per  cent,  for  the  use  of  ma- 
chinery. It  should  be  the  fair  value  of 
its  Vise  as  situated,  and  not  what  it 
might  have  been  worth  if  used  at  some 
other  place.  Flagg  v.  gtowe,  85  111. 
164. 

The  plaintiif  and  defendant,  being 
partners  in  the  lumbering  business,  thii 
former  conveyed  to  the  latter  the  un- 
divided '}'2  of  a  lot  of  land  which  he 
had  bought  for  a  trifling  sum,  at  a  tax 
sale,  upon  an  agreement  that  the  de- 
fendant should  let  him  have  |S00,  for 
one  year  without  interest,  and  furnish 
money  to  carry  on  the  partnership  busi- 
ness. From  this  land  the  parties  as  a 
firm  took  a  large  quantity  of  lumber. 
In  an  action  for  an  accounting  between 
the  parties,  the  referee  found  that  the 
land  was  worth  $1000.  and  he  credited 
the  plaintitf  that  amount:  Held,  that 
the  referee  eri'ed  in  giving  such  credit; 
the  proof  showing  that  the  land  had 
cost  the  plaintitf  only  a  trifle,  and  that 
he  was  willing  to  put  it  into  the  firm 
upon  the  terms  stated:  Held,  also, 
that  the  amount  reported  by  the  referee 
as  due  from  the  defendant  being  $2023.- 
22,  there  should  bo  deducted  from  that 


*  On  the  filing  of  a  bill  in  chancery  for 
the  settlement  of  partnership  accounts, 
the  parties  cannot  introduce  their  indi- 

1266 


vidual    accounts    into    the    statement. 
Hanks  v.  Baber,  53  111.  292. 


CHAP.  X.] 


DECREE    FOR    ACCOUNT. 


gains  and  wliat  losses  are  to  be  placed  to  tlie  joint  account  of  all  the 
partners,  or  to  the  separate  accounts  of  some  or  one  of  them  exclu- 


sum  tho  \i  of  $1000,  the  value  of  the 
whole  land  less  the  interest  for  one 
year  on  $800,  viz:  $56;  leaving  a  bal- 
ance of  $1579.22,  due  the  plaintiff. 
Leonard  r.  Martin,  52  Barb.  118. 

Where  in  an  action  of  account  between 
co-partner.«,  the  auditors  allowed  to  the 
defendant  the  sum  of  $2.2^^.6.42,  which 
was  the  full  amount  of  a  note  advanced 
by  him  as  a  part  of  the  capital  of  tlie 
firm;  it  was  held,  that  such  report 
ought  not  to  be  set  aside,  because  the 
defendant  in  an  action  of  account  pre- 
^^ously  brought  by  him  against  the 
present  plaintiff  had  alleged  that  he  had 
advanced  as  capital  to  said  co-partner- 
ship $2,000,  and  had  not  at  any  time 
before  the  hearing,  claimed  that  he  had 
advanced  a  gi-eater  sum.  Day  v.  Lock- 
wood,  24  Conn.  185. 

A  partner  who  has  paid  a  firm  debt  is 
not  entitled  to  subrogation  against  his 
co-partner  until  an  account  has  been 
settled  between  them.  Fes-sler  r.  Hick- 
ernell,  82  Ta.  St.  150. 

The  complaint  in  an  action  to  dissolve 
a  partnership,  and  settle  the  accounts, 
averred  a  loss,  borne  exclusively  by  the 
plaintiff,  and  asked  for  judgment  for 
defendant's  proportion;  and  the  evi- 
dence showed  a  profit  realized  by  plain- 
tiff in  one  transaction,  as  well  as  a  loss 
borne  by  him  in  another:  Held,  that 
the  account  taken  should  credit  the  de- 
fendant with  his  part  of  the  profits 
realized,  as  well  as  charge  him  with  his 
proportion  of  the  loss  sustained.  Clark 
r.  Gridley,  41  Cal.  119. 

If  one  partner  being  indebted  to  his 
co-partner,  discharges  the  debt  by  pay- 
ing a  debt  of  equ.d  amount  due  from 
his  co-partner  to  a  third  person,  but 
makes  the  payment  with  money  or 
property  belonging  to  the  partnership, 
he  can  only  claim,  on  settlement  of  the 
partnership  accounts,  a  credit  for  one- 


half  of  the  amount  paid.  Wolff  r. 
Shelton,  51  Ala.  425. 

A,  a  merchant,  being  largely  indebt- 
ed took  B  in  as  a  partner,  who  brought 
in  no  capital,  but  who  succeeded  in 
establishing  the  credit  of  the  firm,  and 
tlie  partnership  business  produced  im- 
mense profits.  It  was  agreed  that  the 
debts  of  A  should  be  undertaken  by  thp 
finn.  The  firm  failed,  and  A  died. 
One  of  the  debts  of  A  was  $800,000  to 
the  United  States,  which  was  compro- 
mised on  the  payment  of  $200,000.  The 
remaining  debts  of  A  were  paid  and 
compromised  by  the  finn:  Held,  that 
A  became  a  creditor  to  the  firm  to  the 
amount  of  A's  debts  paid  and  compro- 
mised by  the  firm,  but  only  to  tht' 
amount  at  which  they  were  compro- 
mised, and  that  as  the  partnership 
property,  after  the  pajToent  of  the  part- 
nei-ship  debts,  belonged  to  the  partners. 
B  was  to  be  credited  with  the  amount 
of  A's  debts  as  they  were  compromised, 
hidings  r.  Bruen,  4  Sandf.  Ch.  223. 

Where  a  retiring  partner  has  sold  his 
interest  to  the  others,  received  payment 
for  the  greater  part,  and  accepted  the 
managing  partner  as  his  exclusive  debtor 
for  the  balance,  the  latter  is  entitled  to 
nothing  more  than  such  credit  as  would 
follow  the  payment  of  an  ordinary  deljt 
of  the  new  concern.  One  nde  must 
govern  the  charging  of  each  member's 
account  with  the  firm,  unless  there  is  a 
special  agreement  to  the  contrary.  Clum- 
dlcr  V.  Sherman.  10  Fla.  99. 

Where,  in  an  accounting  between 
partners,  it  appears  that  one  of  them, 
durmg  the  continuance  of  the  partner- 
ship, had  immediate  charge  and  conti-ol 
of  the  film's  book  of  account,  and  the 
exclusive  management  of  its  finances, 
and  the  custody  and  control  of  its 
money,  and  the  moneys  received  in  the 
firm  business    exceed  the  moneys  dis- 

12G7 


DECREE    FOR    ACCOUNT. 


[book  III. 


sivel3\     Tlie  principles  upon  which  this  is  to  be  done  have  been 
exphiined  in  previous  chapters.     Referring  the  reader,  therefore, 


bursed  in  such  business,  and  it  does  not 
a])pear  that  the  excess  was  applied  to 
the  use  of  the  fimi  and  for  its  benefit, 
such  excess  is  presumed  to  remain  in  the 
hands  of  the  partner  so  having  the 
control  and  custody  of  the  firm  money, 
and  he  is  properly  chargeable  therewith 
in  the  accounting.  Johnson  v.  Garrett, 
23  Minn.  565. 

A  partner  sued  his  two  co-partners  for 
a  final  accounting  and  settlement  of  the 
co-partnership  affairs,  and  it  appeared 
that  the  two  partners  sued  had  previ- 
ously received  jointly  $1,281  more  than 
they  were  entitled  to,  and  the  plaintiff 
$1,281  less  than  he  was  entitled  to. 
While  the  action  was  pending,  the 
plaintiff  settled  with  and  discharged 
from  all  further  liabilty  one  of  the  de- 
fendants: iff W,  that  the  judgment  in 
favor  of  the  plaintiff  and  against  the 
other  defendant  should  be  for  one-  half 
of  11,281,  to- wit:  $640.50.  Lord  v. 
Anderson,  16  Kan.  185. 

Where  cattle  were  bought  by  the 
complainant  and  defendant  as  partners 
or  on  joint  account,  with  $1,100,  fm*- 
nished  by  the  complainant,  $1,000  of 
which  was  money  belonging  to  a  prior 
firm  of  complamant,  defendant  and  a 
thh-d  person,  and  $100  of  complainant's 
own  money,  and  the  third  person  dis- 
claimed being  interested  in  the  purchase 
or  the  money  used,  whose  answer  was 
found  to  be  true,  and  it  appeared  that 
the  cattle  had  been  sold  at  a  profit  of 
of  $120,  a  decree  on  bill  for  an  ac- 
count against  the  defendant,  who  re- 
ceived the  entire  proceeds,  giving  him 
one-third  of  the  $1,000  capital,  and 
giving  the  balance  to  the  complainant, 
was  held  proper  as  adopting  the  coiTect 
basis  for  stating  the  account  as  to  the 
sum  invested.  Bullock  v.  Ashley,  90 
III.  102. 

If  part  of  the    members  of  a  former 

12fiS 


co-partnership  sell  the  part  or  share  of 
another  partner  without  his  consent, 
they  must  account  to  him,  not  at  the 
value  fixed  by  themselvw,  but  at  the 
real  value.  Phillips  v.  RiHHler,  18  N. 
J.  Eq.  95. 

When  the  partners  invest  unequal 
amounts  in  the  capital  stock  of  the 
firm,  and  one  of  their  articles  provides 
that  all  profits  and  losses  shall  be  shared 
equally,  and  another  provides  that  at 
the  close  of  the  partnership  the  assets 
and  property  shall  be  divided  between 
them,  in  the  proportion  of  their  invest- 
ments, in  such  final  distribution  all 
losses  will  be  first  considered  and  equal- 
ized, though  no  profits  or  losses  have 
been  adjusted  or  declared  during  the  co- 
partnership. Raymond  v.  Putnam,  44 
N.  H.  160. 

In  making  a  final  settlement  and 
division  of  partnership  property,  the 
court  will  look  into  the  peculiar  circum- 
stances, and  where  there  is  real  estate 
which  has  been  improved  by  one  part- 
ner individually,  he  will,  if  possible,  be 
allowed  for  his  improvements,  and  on  a 
partition  of  the  real  estate  wiU  be  al- 
lowed to  retain  the  improved  portion. 
Cooper  V.  Frederick,  4  G.  Greene,  403. 

On  a  biU  by  the  representatives  of  a 
deceased  partner,  against  surviving 
partners,  for  an  account,  the  surviving 
partners  should  not  be  charged  with 
the  value  of  the  partnership  assets  at 
the  exact  date  of  the  deceased  partner's 
death,  but  only  with  such  sum  as,  by 
the  use  of  reasonable  diligence,  they 
might  have  obtained  for  them  in  closing 
the  partnership  business.  Moore  v. 
Huntington,  17  Wall.  417.  Nor  should 
they  be  charged  with  the  value  of  real 
estate  of  the  partnership,  the  title  to 
which  is  left  by  the  decree,  in  the  heu-s 
of  the  deceased  partner.  Moore  v. 
Huntington,  17  Wall.  417. 


CHAP.  X.] 


ACTIONS    BETWEEN    PARTNERS,    ETC. 


*974 


to  tliem,  and  rcinindini^  him  that,  in  taking  accounts  hctween  ])art- 
ners,  attention  must  be  ])aid,  not  only  to  tlie  terms  of  the 
partnersliip  articles,  but  also  to  the  manner  in  *\vhich  they  *974 
have  been  acted  on  by  the  partners  (</j,  there  remains  but 
little  to  add  on  the  present  subject,  except  as  re^^ards  just  allo«'anccs, 
the  period  over  which  the  account  is  to  extend,  and  the  evidence 
upon  which  it  is  to  be  taken. 


With  respect  to  just  (illoicanccs. 

Just  allowances  are  made,  although  the  decree  is  silent  as  to 
them  (g);  and  Mdien  a  partnership  account  is  decreed,  justaiiow- 
it  is  not  usual  for  the  Court  to  determine  beforehand  ^^^^ 
what  are,  and  what  are  not,  just  allowances.  That  is  determined 
on  taking  the  account;  and,  if  necessary,  the  decree  will  direct  the 
chief  clerk  to  state  the  facts  and  reasons  upon  which  he  shall  ad- 
judge au}^  allowances  to  be  just  allowances,  [f)  What  ought  to  be 
so  allowed  must  be  determined  by  the  articles  of  partnership,  and 
by  the  principles  discussed  in  a  preceding  chapter,  {g) 


In  stating  an  account  between  an  ex- 
ecutor and  the  surviving  pai-tner  of 
the  testator,  it  is  not  en-or  to  charge 
the  surviving  partner  with  the  value  of 
a  note  ckie  the  testator  of  the  plaintiff 
individuall}',  if  such  note  arose  from, 
or  grew  out  of  the  business  of  the 
co-partnership.  Royster  v.  Johnson, 
73  N.  C.  474. 

A  surviving  partner  can  claim  only 
one-half  the  balance  due  the  firm  by  a 
deceased  partner,  as  the  remaining  half 
was  at  his  death  due  to  himself.  McCor- 
mick's  appeal,  55  Pa.  St.  252. 

Where  a  pai'tner  having  charge  of  the 
business  and  keeping  the  books  of  the 
firm,  refuses  to  account  and  show  what 
the  profits  were,  it  is  proper,  in  stating 
the  account,  to  decree  the  payment  of 
the  capital  advanced  by  his  co-partnor, 
with  interest  thereon,  the  latter  being 
willing  to  accept  that.      If  the  profits 


were  less  than  the  interest  the  defendant 
should  have  rendered  an  account  show- 
ing such  fact,  Pearce  v.  Pearce,  77  111. 
284. 

{d)  See  ante,  pp.  820,  850,  and  Wat- 
ney  v.  WeUs,  2  Ch.  250.  It  is  said  a 
partner  is  not  to  be  charged  as  such  with 
what  he  might  have  received,  without 
his  willful  default,  Rowe  v.  Wood,  2  J. 
it  W.  556,  but  quicre  whether  a  surviv- 
ing partner  could  not  be  made  so  to  ac- 
count, as  he  alone  can  get  in  the  assets  of 
the  finn.  See,  also.  Bury  v.  Allen,  1 
Coll.  604. 

(c)  See  Gons.  Orders  26,  rule  16. 

(/)  See  Crawshay  r.  Collins,  2  Russ. 
347;  Brown  v.  DeTastet.  J.xc.  294.  29S. 
and  299;  Cook  r.  CoUingridge.  Jac.  623. 
625,  Wedderburn  v.  Weddei-buru,  2 
Keen,  753. 

{g)  Ante  p.  774  et  seq, 

1209 


*975  DECREE    FOR    ACCOUNT.  [boO::  III. 


With  respect  to  the  period  over  uhich  aii  account  Is  to  extend. 

This  can  only  be  determined  by  ascertain inuj  (1)  the  time  from 
which  it  is  to  begin,  and  (2)  the  time  at  which  it  is  to  cease. 

The  time  from  which  the  account  is  to  bei^-in,  will,  in  a  general  ac- 
1.  Time  from  count  of  partnership  dealings  and  transactions,  be  the 
iMmut^is'tobe  Commencement  of  the  partnership,  unless  some  account 
taken.  j_^^g  sincc  that  time  been  settled    b}^  the  partners,  in 

which  case  the  last  settled  account  will  be  the  point  of  depar- 
*975  ture.  (A)  *If  there  has  been  an  account  settled  so  as  to  be 
binding  on  the  parties,  such  account  will  not  be  re-opened,  {i) 
This  used  to  be  provided  for  in  the  decree  by  the  insertion  of  the 
clause,  "And  if,  in  taking  the  said  account,  it  shall  appear  that  any 
account  has  been  settled  and  agreed  upon  between  the  parties  up  to 
any  given  time,  the  same  is  not  to  be  disturbed. "(^)'  It  is  not,  how- 
ever, now  usual  to  insert  these  words,  it  not  being  the  practice  to 
disturb  settled  accounts,  unless  there  is  some  special  direction  to 
that  effect.  (?) 

Where  partners  have  had  dealings  together  preparatory  to  the 
commencement    of  tlieir   partnership,    these  dealings 

Dealings  ante-  ^  ,  .         .  ,  .  P 

riortocom-       cannot  be  excluded  from  consideration  in  taking  the 

mencement  of  ° 

partnership.       partnership  accounts.     As  observed  by  Lord  Langdale 
in  Cruikshank  v.  McYicar  :  (m) 

"  Some  things  must  be  done  by  way  of  preparation  for  or  introduction  to  the 
real  transactions  of  the  partnership  business.  Again,  when  the  partnership  busi- 
ness is,*in  one  sense,  at  an  end,  still  you  have  not  therefore  put  an  end  to  the  joint 
transactions;  they  must  necessarily  be  carried  on  for  the  pur^wse  of  winding  up  the 
concern  and  everything  belonging  to  it.  So  that  when  you  speak  of  partnership 
dealings  and  transactions,  you  are  not  to  exclude  from  your  consideration  those 
transactions  and  matters  which  are  necessary  by  way  of  introduction  or  prepara- 
tion for  a  partnership  dealing,  nor  are  you  to  exclude  those  which  afterwards  fol- 
low for  the  purpose  of  winding  up  the  concerns  of  the  partnership." 

{h)  See  Cook  v.  Collingridge,  Jac.  624;  a  land  speculation  and  state  the  account, 

Beak  v.  Beak.  Kep.  Temp.  Finch.  190.  where  the  parties  have  had   a  previous 

An  incoming  partner  has  no  right  to  settlement,   the  court  will  adopt  such 

profits  made  before  he  became  a  part-  settlement  as  the  basis  upon  which  to 

ner,  unless  there  is  an  agreement  to  adjust  the  subsequent  dealings.  Colehour 

that  effect.     Gordon  v.  Rutherford,  T.  v.  Coolbaugh,  81  111.  29. 

&  R.  373.     See,  as  to  the  statute  of  lim-  [l]  Newen  v.  Wetten,  31  Beav.  315. 

itations,  ante,  p.  963  tt  seq.  Compare  Milford  v.  Milford,  MacCl.  & 

(0  See  mtte,  p.  967.  Y.  150. 

(A-)  Seton,  276,  ed.  2.  ("0  8  Beav.  116. 

1  On  a  bill  to  settle  a  partnership  in 

1270 


CliAl'.   X.j  ACTIONS    BETWEEN    J'AKTNEKS,     ETC.  ^UTG 

The  time  at  which  an  account  of  ])ai-tnership  dealings  and  trans- 
actions is  to  stop  will,  naturally,  be  the  date  of  the  dis-  ^  Time  up  to 
solution  of  the  firm,  (n)     Not  that  no  account  is  to  be  counfi^^U)b°e 
taken  of  what  occurs  after  that  date;  ibr  some  time  or  '^^''*-'"- 
other  must  elai)se  between  the  dissolution  and  the  final  winding  up 
of  the  afi'airs  of  the  concern,  and  such  time  cannot  in  fairness  to 
any  one  be  excluded  fi-oni  consideration,  (o)     Kotwithstanding dis- 
solution, a])ai'tnei-ship  is  deemed  to  continue  so  far  as  may  be  neces- 
sary for  the  winding  up  c>f  its  atiairs  (jj)  ;  and  an  account 
of  *partnership  dealings  and  trans.ictions,  although   in  one     ''•[)'*> 
sense  it  stops  at  the  date  at  which  the  partnership   is  dis- 
solved, must  still   be  kept  open   for  the  purpose  of  debiting  and 
crediting  the  projier  parties  with  the  moneys  paj'able  by  or  to  them 
in  respect  of  fresh  transactions   incidental  to  the  winding  up,  as 
well  as  in  respect  of  old  transactions  engaged  in  prior  to  the  disso- 
lution, {q) 

Moreover,  upon  the  retirement,  bankruptcy  or  death  of  a  part- 
ner, it  often  hapiiens  that  the  continuing  or  surviving  subsequent 

'  '  '  .   ,  profits  when  a 

partner  carries  on   the    partnership  business  with-out  doa.i  or  retired 

I  1  •  partners  capi- 

comins:  to  any  settlement  of  the  partnership  accounts,  taihasbeeu 

and  without  paying  out  the  share  of  the  late  partner,  concern. 

When  this  is  done,  questions  of  great  difficulty  arise,  which  it  is 
now  proposed  to  investigate. 


Account  of  profits  subsequent  to  dissolution. 

Before  adverting-  to  the  decisions  which  define  and  illustrate  the 
right  of  a  late  partner,  or  of  his  representatives,  to  an  Qcncrai 
account  of  the  profits  made  by  his  continuing  or  sur-   pr-^'^ipies- 
viving  partners  by  the  use  of  his  capital  in  their  business,  it  will 
be  useful  to  consider  the  principles  applicable  to  a  more  abstract 
(question,  which  may  be  put  thus:     If  a  person   trades  with  prop- 

(h)  See,  accordingly,  Beak  v.   Beak,  (j))  See,    as  to  this,   ante,   pp.   411 

Finch    191,    a    case    of  dissolution  by  et  seq. 

death;  Jones  v.   Noy,  2  M.  &  K.  125,  {q)  See  Willett  v.    Blanford,    1  Ha. 

a  case  of  dissolution  by  decree  on  the  270;  and  as  to  the  difference  between 

ground  of  lunacy.  the  accounts  before   and  after  the  date 

(o)  See /)er  Lord  Eldon   in  Crawshay  of  dissolution,  see  Watney  r.  Wells,  2 

r.  Collins,  2  Russ.  345;  Hale  i.  Halo,  4  Ch.  250.     See,  also.  Booth  v.  Parks.  1 

Beav.  376.  Moll.  465,  and  ante,  pp.  ^06,  8;j9. 

]-271 


*977  ACCOUNT — PEOFITS    SINCE    DISSOLUTION.  [bOOK  III. 

ertj  which  does  not  belong  to  him,  what  are  the  rights  of  tlie 
owner  against  liim  in  respect  of  the  profit  he  has  made? 

First,  let  us  suppose  that  the  property  is  used  in  ti-ade  b}--  agree- 
1.  Where  capi-    merit  with  the  owner;  then  the  agreement  will  regnlate 

tal  is  kilt  iit  ,  .    ,  .     ,  ^,  ,         .  .  ' 

interest.  the  rights   ot  the  owner.     Consequently,  it  a  partner 

agrees  that  when  he  dies  or  retires  his  capital  shall  remain  in  the 
business  at  interest,  those  who  carry  on  that  business  will  be  ac- 
countable for  tlie  capital  and  interest,  and  nothing  more.  (7')  Fur- 
ther, if  executors  or  trustees  lend  trust  money  to  a  stranger  at  in- 
terest,   the    obligation    of  the   borrower    is   limited  to  repayment 

of  the  money  lent,  with  interest  ;  and  it  is  immaterial 
*977     ^whether  he  has  employed  the  money  in  trade  or  not,  and 

whether  the  money  was  lent  to  him  properly  or  improp- 
erly, (s)  But  a  loan  by  A  toB  must  not  be  confounded  with  capi- 
tal brought  by  A  into  a  firm  of  A  and  B.  {f) 

Next,  let  us  suppose  that  the  property  is  wrongfully  used  in 
"  Where  ca  i-  trade,  witliout  any  agreement  express  or  tacit  with  the 
iuUy  en^'iOTed  owucr;  and  let  us  suppose  that  there  is  no  trust  rela- 
sons''who'a/r"  tioiisliip  between  the  trader  and  the  owner.  The  tra- 
nottrusiees.  dev's  liability  in  this  case  M'ill  be  to  restore  the  prop- 
erty, and  to  make  to  the  owner  proper  compensation  for  its  deten- 
tion. But  what  is  proper  compensation  ?  Is  it  interest,  or  the 
profits  made  by  the  trader  by  the  use  of  the  pi-operty  in  question  ? 
or  the  profits  which  the  owner  would  (probably)  have  made  if  he 
had  had  tlie  property  itself  ?  The  profits  which  the  owner  might 
have  made  can  only  be  guessed  at,  and  this  is  a  sufiicient  reason  for 
rejecting  these  profits  as  a  measure  of  compensation.  On  the  other 
hand,  to  limit  the  compensation  to  interest  (at  the  accustomed  rate) 
would  frequently  enable  the  wrongdoer  to  profit  by  his  own  wrong, 
and  be  an  inadequate  compensation  to  the  owner.  It  may,  there- 
fore, be  necessary  to  give  him  the  profits  made  by  the  trader  by  the 
use  of  the  ])roperty  in  question.  To  do  so  may  moreover  be  justi- 
fied upon  the  ground  that  the  profits  are  accretions  to  the  property 
which  has  yielded  them,  and  ought  to  belong  to  the  owner  of  such 
proper t}^,  in   accordance   with   the   maxim,  accessorium  sequitur 

(r)  Vyse  v.  Foster,  L.  R.  7H.  L.  318,  approved  in  Vyse  v.  Foster,   8  Ch.  309, 

and  8  Ch.  309,  where  one  of  the  sm-viv-  infra,  989. 

ing  partners  was  an  executor  of  the  de-  (t)  See  Travis  r.  Milne,  9  Ha.  141,  and 

ceased.  Flockton  v.  Bunning,  8  Ch.  323,  note, 

(s)  See  Stroud  r.  Gwyer,  28  Beav.  130,  infra,  p.  985. 

1272 


CHAP 


X.] 


ACCOUNT — PROFITS    SINCE    DISSOLUTION. 


"Ji 


suuf/i princ/'jjale.  (u)  At  the  same  time  it  may  not  be  alway- 
rijL^ht  to  restrict  the  owner's  compensation  to  the  profits  made  hy 
tiie  use  of  his  property  ;  for  it  may  happen  that  it  has  maJe  no 
]>rufir,  or  less  profit  than  interest  at  tlie  current  rate,  (x)  ComjK'u- 
sation  to  tlie  owner  bein^  the  object  in  view,  it  would  be  only  fail- 
to  give  him  the  option  to  take  interest  or  tlie  profits  made  by  tin- 
use  of  his  property,  (y)' 


(h)  See  Sir  Sam.  Romilly's  ari^ument 
in  15  Ves.  224;  Sir  T.  Plumer  in  1  Jac. 
(t  W.  ]:52  and  l:^>3.  See,  also,  per 
Romilly,  Af.  R.  in  15  Beav.  392,  and  22 
Beav.  100. 

{x)  As  in  Booth  v.  Parkes,  Beatty 
444. 

(//)  See  ace.  iufra,  p.  982;  but  he  can- 
not have  both.  See  Heathcote  v.  Hulme, 

1  Jac.  &  W.  122.     See  Beniie  v.  Van- 
dever,  16  Ark.  616. 

1  If,  after  the  dissolution  of  a  partner- 
ship, either  pai-ty  continues  the  use  of 
the  partnership  property,  he  may  bo  re- 
quired to  account  for  such  use,  although 
it  was  only  a  partnership  in  proceeds, 
and  not  in  the  stock.     Pine  v.  Ormsbee, 

2  Abb.  Pr.  N.  S.  375. 

A  partner  who  has  expelled  his  co- 
partner, and,  under  the  permission  of 
the  chancellor,  carried  on  the  business, 
retaining  the  stock  and  assets  in  prefer- 
ence to  having  a  sale  and  division,  must 
render  an  account,  and  pay  to  his  co- 
partner his  share  of  the' profits.  Shid- 
dell  v.  Messick,  4  B.  Mon.  157. 

Where  a  partnership  consists  of  three 
persons,  and  the  whole  capital  is  fur- 
nished by  two,  and  these  two  have  a 
right  to  dissolve  the  partnership,  and  do 
dissolve  it,  and  transfer  the  whole  stock 
to  a  new  partnership  and  business,  the 
other  partner,  he  being  indebted  to  the 
firm  to  a  greater  amount  than  his  share 
of  the  profits,  cannot  follow  the  old  cap- 
ital stock  into  the  new  concern,  and 
claim  a  share  of  the  profits.  Hyde  v. 
Ea.ster,  4  Md.  Ch.  80. 

Though  it  is  a  general  rule  that  when 
upon  a  ihssolution  of  a  partnership  the 


continuing  partner  can'ies  on  the  busi- 
ness witli  partnership  stock,  he  is  liable 
to  the  outgonig  partner  for  his  full  share 
of  the  profits;  yet  this  rule  do3s  not  ap- 
ply, where,  at  the  date  of  the  dissrolu- 
tion,  the  outgoing  partner  has  drawn 
out  his  capital  and  has  no  property  in 
the  concern,  but  is  indebted  to  it.  Tay- 
lor V.  Hutchison,  25  Gratt.  536. 

The  rights  of  parties  in  relation  to 
the  i-cnts  and  profits  of  property  which 
had  belonged  to  a  partnership,  but 
which  had  accmed  intermediate  to  the 
entry  of  a  decree  of  dissolution  in  the 
lower  court,  and  the  decision  of  an  ap- 
peal to  the  Supreme  Court,  must  be  de- 
termined in  the  same  manner  and  by 
the  same  rule  by  which  they  would  have 
been  detcrmhu'd  had  they  accrued  prior 
to  the  decree  of  dissolution.  Clark  r. 
Jones,  50  Cal.  425. 

If,  upon  the  dissolution  of  a  partner- 
ship, it  is  agreed  that  the  partners  who 
remain  shall  take  the  property,  and  close 
up  the  business  of  the  firm,  and  a  final 
settlement  between  the  outgoing  and 
remaining  partners  is  postponed  until 
the  adjustment  of  the  outstanding  ac- 
counts, and  the  remaining  partners  sub- 
sequently receive  upon  a  pai-ticular  ad- 
venture of  the  firm  an  advance  whicli 
proves  to  be  more  than  is  realized  from 
the  adventure,  and  do  not  repay  the  ex- 
cess, such  advance  is  to  be  treated,  in  a 
suit  in  equity  against  the  outgoing  part- 
ner for  a  settlement,  a.s  having  been 
made  for  the  benefit  of  aU  the  partners. 
Tyngr.  Thayer,  8  Allen,  391. 

In  the  ca.se  of  a  partu'^rship  in  a  com- 
mission and  warehouse  business,  where 

1273 


•978 


ACTIONS    BETWEEN    PARTNERS,    ETC. 


[book  III. 


:i.  Where  capi-    *97S         *Now   let   US    siippose    that   the    trader  is  a 

till  is  wrong-  111  1  • 

1  liny  employed  trustce  01  tlie  propertv,  and  tliat  he  employs  it 

in  trarle  by  a         .  i  •  '        mi  j  ^" 

uustee.  Ill  trade  contrary  to  his  trust,     ine  reasons  lor  ciiarir- 

ing  him  witli  interest,  or  the  profits  made  by  the  property  at  the 
option  of  its  ownei",  are  as  applicable  to  this  case  as  to  that  hist  in- 
vestigated; but  there  is  in  this  case  an  additional  reason  tor  so 
charging  him,  for  it  is  a  well-established  rule  that  no  trustee  shall 
himself  derive  profit  IVum  the  use  of  the  trust  property,  {z) 

There  remains  for  consideration  the  mixed  and  difficalt  case  in 
,  ,,.     ,  whicli  a  trustee  has    improperly    employed   the  trust 

4.  Mixed  cases  ^       ^         •'  .  . 

-constructive    pi-oi)ci"tv  in  a  trade  carried  on   by   himself  in  ijartner- 

trujts.  r       1         .  i/  1 

((.  Liability  of  ship  with  others  who  are  not  trustees.  The  liability 
simrfug"'''  of  the  trustee  in  this  case  to  be  charged  (at  the  option 
protiis.  ^^^.  |-}^e(,gc;tui  que  trust)  with  interest  or  with  the  profits 

which  he  (the  trustee)  has  derived  from  the  use  of  the  trust  prop- 
erty is  well  established  (a);  but  it  has  sometimes  been  considered 
that  he  ought  to  be  charged  w'itli  all  the  profits  made  by  the  firm 
by  means  of  the  trust  property.  This  view  is  apparently  based 
upon  the  ground  that  the  profits  are  accretions  to  the  trust  prop- 
erty; and  that  the  trustee  is  as  much  liable  for  them  as  for  the 
property  itself;  and  that  he  is  not  discharged  from  this  liability  by 
the  circumstance  that  he  has  divided  the  profits  with  his  co-partners. 
But,  plausible  as  this  view  is,  it  must  be  remembered  that  in  the 
cise  now  supposed  the  profits  have  not  all  been  earned  or  received 
]jy  the  trustee,  but  by  himself  and  others,  and  that  he  is  not  in  a 
])Ositioii  to  make  them  refund  their  shares  of  the  profits  3'ielded  by 
the  trust  property.  It  w-ould  therefore  be  highly  unjust  to  make 
the  trustee  accountable  for  more  than  his  own  share  of  such  profits; 
and  this  view  has  been  adopted  by  the  courts  of  appeal  both  in 
England  and  Scotland,  (h) 


one  partner  engages  to  fumisli  the 
buildings  and  the  other  to  superintend 
the  business,  if  the  latter  partner  dies, 
his  estate  will  be  entitled  to  share  in 
profits  from  the  storage  of  cotton  stored 
in  his  life-time,  though  not  realized  by 
the  disposal  of  the  cotton  till  after  his 
death;  after  deducting  the  actual  ex- 
pense of  the  delivery  of  the  cotton  to 
the  bailors,  or  of  its  sale,  including  the 
keeping  of  the  accounts  thereof ;  also  to 

1274 


share  in  any  proceeds  realized  by  sale  of 
unclaimed  cotton  remaining  on  storage. 
Pamell  v.  Robinson,  58  Ga.  26. 

(z)  See,  as  to  the  liability  of  the  trus- 
tee, Docker  v.  Somes,  2  M.  &  K.  655. 

{a)  See  Jones  v.  Foxall,  15  Beav.  388, 
where  the  trustee  was  charged  with 
compound  interest  at  5  per  cent.  See 
Lord  Selborne's  observations  on  this  case 
in  Vyse  v.  Foster,  L.  R.  7  H.  L.  346. 

(fc)  See  Vyse  v.  Foster,  L.  R.  7  H.  L. 


CHAP.   X.]  ACCOUNT I'KOFITS    SlUVli.    DIS60LUTI"X.  '•1»7'.« 

■"The  same  considerations  lead  to  the  conchisiun  that  a     *'J7l» 
co-trustee  who  is  not  himself  a  member  of  the  lirm  deriving 
ijrolit  from  the  use  uf  tlie  trust  money   and  who  conse-  b.  Liability  of 

I  -^  trustee  not 

.£uently  does  not  liimself  derive  any  profit  from  that  simdng iprofits. 
use,  is  not  accountable  fur  any  of  the  protits  yielded  by  the  trust 
property,  (c) 

Lastly,  we  have  to  consider  the  position  of  the  partners  who  are 
not  trustees,  but  who  have  shared  the  protits  derived  c.  Liability  of 

'  "^  partners  who 

from  the  use  of  the  trust  property.  AVith  respect  to  are  not  trustees, 
them,  the  first  thino^  to  ascertain  is  whether  they  are  pecsonally  im- 
])licated  in  any  breach  of  trust;  for  if  not^  they  are  under  no  lia- 
bility in  respect  of  the  profits  in  question — indeed  they  may  not 
even  be  liable  to  make  <^ood  the  trust  money,  {d)  But  if  they  have 
traded  with  the  trust  money  knowiuf^  that  its  employment  in  trade 
was  a  breach  of  trust,  they  incur  the  same  liabilities  in  respect  of 
it  as  if  they  were  themselves  trustees.  Consequently  they  become 
jointly  and  severally  liable  as  well  for  the  trust  property  itself  as 
for  the  profits  which  they  have  made  by  it.  (e)  But  this  liability 
cannot  be  enforced  except  in  an  actioa  to  which  they  are  all  par- 
ties. (/*)  It  has,  indeed,  been  doubted  whether  there  is  any  joint 
and  several  liability  as  reo^ards  profits,  and  whether  the  non-trustee 
partners  are  liable  for  more  than  the  trust  property  and  interest,  (g) 
Assuminoj  that  a  pci'son  is  entitled  to  an  account  of  profits  made 
by  the  use  of  his  property  in  trade,  it  isobviouslv  often   Practical  diffi- 

«/  .         ,  ij  m'  1         culty  in  carry- 

extremelv  difficult  to  ascertain  these  profits.      lo   take  inf^out  the 

*  •  ,     _  r  ,.        .  loregoing 

tlie  ordinary  case   oi  surviving  partners  continuing  to   principles, 
trade  with  the  capital  of  a  deceased  partner,  great  difticulty  will  be 
found  in  arriving  at  the  share  of  profits  to  which  the  executors  of 
the  deceased  are  entitled. 

:-)18,  and  8  Ch.(309)  ;  Laird  v.  Chisholm,  Chisholm,  ubi  SKpra;  Simpson  v.  Chap- 

;>0  Scottish  Jur.  582.      In  both  of  these  man,  4  DeG.  M.  &  G.  174,  per  Turner, 

cases  the  trustees  only  were  sued.    See,  L.  J.     Compare  Brown  r.  De  Tastet, 

also,  Jones  v.   Foxall,  15  Beav.  388,  p.  Jac.  284;    Macdonald  i\  Richardson,  1 

:59r);  Palmer  r.  Mitchell,  2M.  &  K.672.  Giff.  81;    Bowes  r.  City  of  Toronto,  11 

Whether  the  case  would  be  ditferent  if  Moore,  P.  C.  463. 

all  the  other  partners  were  parties  is  iff)    See    Vyse  v.   Foster,    infra,    p. 

doubtful.  See  Vyse  I'.  Foster,  »ti\s((y)/-rt.  989;  Stroud  v.  Gwyor.   28  Beav.   13(); 

(c)  See  Vyse  r.  Foster,  infra,  989.  Macdonald  v.   Richardson,  1  GifF.  S8. 

(ff)  Ante,  p.  311.  But  in  Flockton  r.  Bunning,  8  Ch.  32->. 

{e)  See,  accordmgly,  Flockton  c.  Bun-  note,   infra,    p.  985,  the  lialiility    wa.s 

ning,  8  Ch.  -323,  note,  infra,  985.  treated  as  perfectly  clear. 


(/)  See  Vyse  v.  Foster,  and  Laird  i'. 


1275 


*990  ACTIONS    BETWEEN    PAin  NEKS,  '  ETC.  [bOOK  III. 

It  is  very  easy  to  say  they  can  be  calculated  by  the  rule  of 
*980  *three — as  tlie  whole  capital  is  to  the  whole  profits, 
so  is  the  late  partner's  share  in  the  capital  to  his  share  of 
the  profits — but  this  assumes  that  the  profits  in  question  have  been 
made  by  capital  only.'  Profits,  and  very  large  profits,  may  be 
made  by  skill,  and  an  extensive  connection,  with  little  or  no  capital; 
and  even  if  there  be  capital,  the  profits  may  be  attributable  less  to 
it  than  to  other  matters,  and  it  may  be  impossible  to  determine 
with  any  precision  tlie  extent  to  which  the  capital  has  contributed 
to  the  realization  of  the  profits  obtained.  (Ji)  Special  inquiries  on 
this  subject,  tlierefore,  are  almost  always  necessary,  and  if  it  can 
be  shown  that,  having  regard  to  the  nature  of  the  business  or  other 
circumstances,  the  profits  which  have  been  made  cannot  be  justly 
attributed  to  the  use  of  the  capital  or  assets  of  the  late  partner, 
his  prima  facie  right  to  share  such  profits  will  be  eflfectually 
rebutted. 

The  extent  of  the  liability  to  account  for  subsequent  profits  was 
wiiiettv.  elaborateh^    discussed   by    the  late  V.-C.    Wigram    in 

Bianford.  Willett  V.  Blanford  {i\  and  the  conclusion  arrived  at 

by  him  was,  tliat  no  general  rule  could  be  laid  down  upon  the  sub- 
ject, and  that  every  case  must  depend  on  its  own  circumstances. 
''  The  nature  of  the  trade,  the  manner  of  carrying  it  on,  the  capi- 
tal employed,  the  state  of  the  account  between  the  late  partnershij) 
and  the  deceased  partner  at  the  time  of  his  death,  and  the  conduct 
of  the  parties  after  his  death,  may  materially  affect  the  rights  «f 
the  parties."  This  conclusion  of  the  Vice-Chancellor  was  entirely 
in  accordance  with  previous  decisions  (A;),  and  has  been  approA^ed 
by  subsequent  judges;  and  in  conformity  therewith  several  cases 
have  since  been  decided,  in  which  profits  acquired  after  the  death 
of  a  partner  were  held  to  belong  wholly  to  those  by  whose  labor 
they  had  been  made.  An  element  of  uncertainty  is  thus  intro- 
duced into  an  already  difficult  and  complicated  branch  of  law,  and 

{h)  This  diiRculty  was  felt  very  shall  be  considered  as  having  deter- 
strongly  in  FeatherstonhaughiJ.  Turner,  mined,  and  it  appear  that  the  capital  of 
25  Beav.  382,  noticed  infra,  p.  991.  one  partner  was  subsequently  employed 

(i)  Ha.  253.  by  another,  who  continued  to  carry  on 

{k)  See  in   particular    Lord   Eldon's  the  business,  the  fonner  is  entitled  to 

obsei-vations  on  Crawshay  v.  Collins,  in  such  a  proportion  of  the  profits  as  his 

Jac.  pp.  622  and  297,  and  2  Russ.  330.  capital  thus  retained  bears  to  the  wliolt" 

'  If  a  court  of  equity  fix  upon  an  an-  capital.      Durbin  v.   Barber,   14   Ohio, 

tecedent  time,  at  which  a  partnership  311. 

1276 


CHAP.  X.]  ACCOUNT PROFITS    SINCK    DISSOLL'TIOX.  '"981 

riMiders  it  extremely  eii)l):ii'i-;i-s!ii<^;  l)ut  it  is  liojied  that  the  t'ore^o- 
iii<j^  iitteiiipt  to  explain  its  ])riii(',i|)les  may  tend  to  introduce  more 
certainty  in  their  future  a])j)lication. 

^Passing  now  to  the  decisions,  to  which  the  foresj^olng  oh-     *9S1 
6ervations  are  intended  to  serve  as  an  introduction,  the  right 
to  an  account  of  profits  subsequent  to  a  dissolution  will    be   found 
distinctly  laid  down  in  the  following  cases. 

The  first  case  of  importance  on  the  subject  is  Crawsliay  v.  Col- 
lins. {I)  There  one  partner  had  become  bankrupt,  and  Bankruptcy. 
the  solvent  partners  had  carried  on  the  business  with-  crawshayy. 
out  paying  out  the  bankrupt's  share  of  the  assets,  and  ^'^'^"^^• 
an  inquiry  was  directed  with  a  view  to  ascertain  whether  profits 
made  subsequently  to  the  baidcrnptcy  were  made  by  the  applica- 
tion of  the  funds  which  then  constituted  the  capital  of  the  con- 
cern (w),  or  by  the  application  of  any  other,  and  what  funds;  and 
the  master  was  directed  to  distinguish  between  capital  and  stock 
in  trade,  {n)  The  object  of  this  inquiry  was  to  ascertain  whether 
the  profits  made  after  the  dissolution  were  actually  made  by  the 
ap})lication  of  the  funds  that  belonged  to  the  bankru])t  as  a  mem- 
ber of  the  partnership,  (o)  And  it  appearing  that  such  profits 
were  made,  it  was  held  by  Loixl  Eldon,  and  afterwards  by  Lord 
Lyndhurst  (on  a  re  hearing),  that  the  assignees  had  a  right  to  a 
share  of  these  profits,  and  that  the  account  could  not  stop  until  the 
claims  of  the  assignees  were  satisfied.  The  bankrupt  was  origin- 
ally entitled  to  three-eighths  of  the  pai-tnersliip  assets,  and  although 
he  was  indebted  to  the  firm,  so  that  the  sum  actually  payable  to 
him  was  less  than  three-eighths  of  the  net  assets  of  the  firm,  and 
although  the  continuing  partners  had  brought  in  a  large  additional 
capital  since  the  bankruptcy,  still  the  assignees  were  held  entitled 
to  be  credited  throughout  with  three-eighths  of  the  profits,  bein'>' 
debited  with  what  the  bankrupt  owed.  The  decree  in  this  import- 
ant case  declared  that  the  three-eighth  ])arts  or  shares  of  the  bank- 
rupt in  the  partnership  ought  to  be  considered  as  continuing  not- 
withstanding, and   after,  his  bankru})tcy;    and  that  the  assignees 

{I)  15  Ves.  218;  1  J.  &  W.  267;  and  2  case  in  point.     See,  too,  Brown  r.  Lit- 
Russ.  325.    The  decision  in  15  Ves.  218,  ton,  1  P.  W.  141,  and  10  Mod.  20;  Ham- 
was  afterwards  said  by  Lord  Eldon  not  mond  r.  Douglas,  5  "Ves.  539. 
to   have  gone  to  the  extent  ordinarily  (m)  15  Ves.  218. 
supposed.     See  Jac.  29G  and  622,  and  2  (//)  1  J.  &  W.  267. 
Russ.  330.     Brown  t'.  Vidler,  cited  in  15  (o)  2  Russ.  337. 
Ves.  223,  and  2  Russ.  3-40,  is  an  earlier 

1277 


*9S3  ACCOUNT PROFITS    SINX'E    DISSOLUTION.  [bOOK  III. 

*9S2  were  entitled  to  three-eiglitli  parts  of  the  ^profits  which  had 
been  already  reported  to  have  been  made;  and  three-eighth 
parts  of  such  further  profits  as  (on  taking  the  further  accounts 
thereby  directed)  should  appear  to  have  been  made,  {p) 

So,  in  Brown  v.  De  Tastet  {q\  where  one  partner  died  and  the 
Death.  survivor  carried  on  the  partnership  business,  without 

DeTa"tIt.  accounting  for  the  share  of  the  deceased  to  his  admin- 

istratrix, an  account  was  directed  at  the  snit  of  the  administratrix, 
not  only  of  the  dealings  and  transactions  of  the  partners  up  to  the 
death  of  the  deceased  partner,  but  also  of  the  property  of  the  de- 
ceased in  the  hands  of  the  surviving  partner,  and  of  all  profits  and 
gains  made  by  him  by  means  of  such  property. 

The  rule  established  in  these  cases  has  been  since  applied  in  a 
other  variety  of  instances;  e.g.,  where  a  managing  partner 

instances.  jj^rj  continued  the  business  after  the  period  fixed  for 

the  dissolution  and  winding  up  of  the  partnership  (r);  where  a 
partner  had  become  lunatic  and  the  firm  had  been  dissolved,  but 
the  business  had  been  continued  by  the  other  partners,  and  tliey 
liad  not  paid  out  the  capital  of  the  lunatic  partner  (s);  where  part- 
ners had  agreed  to  dissolve  and  to  have  the  partnership  business 
wound  up,  and  its  assets  got  in  and  converted  by  a  third  person, 
and  one  of  the  partners  nevertheless  carried  on  the  business  in  the 
meantime  for  his  own  benefit (2^);  where  a  mining  partnership  had 
been  dissolved,  but  one  of  the  partners  had  obtained  a  renewed 
lease  of  the  mine,  and  had  continued  to  work  it  for  his  own 
benefit,  {u) 

In  the  foregoing  cases  it  will  be  observed  there  was  no  relation- 
option  to  take  ship  of  trustee  and  cestui  que  ^rws^  (as  distinguished 
profits.  from  that  of  late  partnership),  subsisting  between  the 

persons  who  made  the  profits  and  tliose  who  were  held  entitled  to 
share  them.  But  even  where  there  is  no  true  relationship 
*983     of  trustee   *and  cestui  que  trusty    partners    continuing   to 

{p)  2  Russ.  347.     It  is  said  in  2  M.  &  Moll.  465,  and  Beatty,  444. 

K.  658,  that  this  case  was  affirmed  by  (r)   Parsons   v.    Hayward,    31  Beav. 

the  House  of  Lords,   and  after  all  to  199,  affirmed  on  appeal,  4  DeG.  F.  &  J. 

have  been  abandoned  by  the  plaintiff,  474. 

who  found  it  impossible  to  work  out  the  (s)  Mellersh  v.  Keen,  27  Beav.  236. 

decree.  (0  Turner  v.  Major,  3  Giff.  442. 

{q)  Jac.  284.     See,  too,  Fca'herston-  {»)  Featherstonhaugh  v.  Fenwick,  17 

haugh  r.  Turner,  25  Beav.  382;  Smith  Ves.  298.      See,  too,  Clements  v.  Hall, 

V.  Everltt,  27  ib.  446;  Booth  f.  Parks,  1  2  DeG.  &  J.  173. 

1278 


CUAP.  X.]  ACTIONS    BETWEEN    rAinNI-:US,    I:TC.  *\)^4: 

carry  on  business  witliont  coming  to  an  account  with  tlicir  late 
jiartner,  or  those  who  represent  him,  are  liable  to  be  charged  either 
M-itli  the  profits  made  by  the  use  of  his  capital,  or  with  interest  un 
it  at  51.  per  cent.,  at  the  option  of  tliose  to  whom  such  cajiital  be- 
longs (a?);  but  in  taking  an  account  of  subsequent  profits,  the  part- 
ner by  whose  exertions  they  have  been  made  is  usually  allowed 
com])ensation  for  his  trouble  (y),  unless  he  is,  in  the  proper  sense  of 
the  word,  a  trustee,  and  guilty  of  a  breach  of  trust,  when  no  such 
compensation  is  allowed,  [s) 

The  rights  of  legatees  and  next  of  kin  of  a  deceased   Acnonnt  of  sub- 
partner  against  his  executors  where  they   are  them-  ^^'rliiwi  J'xeca- 
selves  surviving  partners  or  have  themselves  become  su'rvivi'ng"pait- 
partners    since  his   death,  are  illustrated    by  the  fol-  ^*^^' 
lowing  decisions. 

InCook-y.  Collingridge  (a),  the  executors  of  a  deceased  partner  sold 
their  testator's  share  to  the  surviving  partners,  who  re-   cook  v. 
sold  it  to  one  of  the  executors.     The  sale  was  set  aside  at  ^""iii^s'-^'s'^- 
the  instance  of  a  legatee,  and  an  account  of  profits  made  subsequently 
to  the  death  of  the  deceased  partner  was  decreed,  although  the  money 
paid  for  the  testator's  share  was  not  continued  in  the  business. 

In  Townend  v.  Town  end  (5),  three  In-others,   A.,  B.,  C,  were  in 
partnership  nnder  articles  by  which  it  was  provided   Townend  v. 
that  the  capital  of  the  partners  should  not  be  with-    ^"""^-'^d- 
drawn  until  the  expiration  of  seven  years  from  that  date;  that  in 
case  of  the  death  of  one  of  the  partners  within  that  term,  a  valua- 
tion of  his  share  should  be  made,  and  that  the  surviving  partners 
should  pay  to  his  representatives  the  amount  of   such  valuation 
within  three  years  from  the  said  term   of  seven   years,  and  in  the 
meantime    give    sufficient    security    for     the    same   by  a 
*mortgage  of  a  competent  part  of  the  partnership  property.     *0S-4: 
It  was  also  provided  that  it  should  not  be  lawful  for  the  rep- 
resentatives to  commence  any  action  for  recovering  payment  of  th(> 

{x)  Booth  V.  Parks,  1  Moll.  465.  an.l  iind  9  ib.  247;  Burden  r.  Burden.  1  V. 

Beatty  444.    See  also  Clements  v.  Ilall,  it  B.  170.    See,   however,  Cook  r.  ( 'ol- 

2  DoG.  &  J.  186;  Touhnin  r.  Cophind,  lin^-idge,  Jac.  622,  623. 

2  Ph.  711,  reversing  S.  C.  4  Ha.  41.  (a)  Jac.  607,     See  the  decree   in  27 

(ij)  Browi  P.  DeTastet,  .Jac.  284.  See  Beav.  4.J6.     Stocken  v.  Dawson.  9  Beav. 

also,     ib.    628;     Feathcrstonhaugh    r.  289.  and   on   appeal   17   L.  J.  Ch.  2sj. 

Turner,  25  Beav.  382;  Mcllersh  r.  Keen,  was  a  somewhat  similar  case. 

27  ib.  2t2.  (/')  1  Giff,  201. 

(~)  S;ojk»n  V.  Dawson,  6  Beav.  371, 

i::to 


"'985  ACCOUNT PROFITS    SINCE    DISSOLUTION.  [uOOK  III. 

^liare  of  the  deceased,  until  the  end  of  three  years  after  tlie  expira- 
tion of  tlie  term  of  ten  years,  nor  to  claim  any  participation  in  tlie 
jtrofits  made  after  the  day  up  to  which  the  vahiation  was  made;  the 
expressed  intention  being  that  the  representatives  of  the    partner 
dying  should  take  51.  per  cent,  on  the  value  of  the  share  in  lieu  of 
jirofits.     It  was  further  provided  that  notliing  should  prejudice  the 
right  of  the  representatives  within  tlie  term  of  seven  years,  to  take 
any  proceedings  in  order  to  obtain  a  fair  valuation,  or  to  obtain  and 
enforce  the  mortgage  security.     In  April,  1841,  A.  died,  having  by 
will  devised  his  real  and  personal  estate  to  B.,  C,  and  D.  upon 
trust  to  raise   the  sum   of  12,000^.  and  invest  the  same  in  govern- 
ment  or  real  security,  and  apply  the  proceeds  towards  the  mainte- 
nance and  education  of  the  plaintiff,  his  then  infant  daughter,  and 
accumulate  the  surplus  at  compound  interest;  and  upon  his  daugh- 
ter attaining  twenty-one,  to  pay  the  accumulations  to  her,  and  to 
stand  possessed  of  the  capital  on  trust  to  pay  her  the  ])roceeds 
during  her  life.     The  testator's  estate  consisted  almost  entii-ely  of 
liis  share  in  the  partnership.     In  December,  1844,  a  valuation  was 
made,  by  which  the  testator's  share  was  ascertained  to  be  20,000^. 
and  upwards.     In  June,  1853,  being  more  than  ten  years  from  the 
date  of  the  articles,  certain  hereditaments,  consisting  of  freeholds, 
leaseholds,  and  machinery  (part  of  the  partnership  assets),    were 
mortgaged  by  B.  to  C.  and  D.,  as  a  security  for  the  12,000^.  (c)   The 
plaintiff  came  of  age  in  1857,  and   in  1858,  B.  and  C.  rendered  to 
her  an  account  of  the  trust  funds,  in  whicli   they  debited   her  with 
various   items  for  maintenance  and  education,  with    51.  per   cent, 
interest  thereon,  and  credited  her  with  the  sum  of  12,000^.  and  in- 
terest at  51.  per  cent,  with  yearly   i-ests,  np   to  the  1st   May,  1853, 
and  thenceforth  with  interest  at  4^.  per  cent,  witli  yearly  rests.  Tlie 
plaintiff,  however,  insisted  that  the  12,000^.  had  been  continued  in 
the  partnership  business,  and  she  filed  a  bill  against  B.,  C, 
^985     and  D.  for  an  account  of  the  '^profits   made  in  the  partner- 
ship business  on  the   sum   of    12,000^.  from   the  testator's 
death,  and  for  payment  of  what  should  be  found  due  to  the  plain- 
tiff, alleging  that  the  mortgage  was  an   improper  security.     The 
Court  held,  1,  that  the  plaintiff  was  entitled  to  an  account  of  the 
legacy  of  12,000?.,  with  interest  at  51.  per  cent,  from  one  year  after 
the  testator's  death  up  to  the  1st  January,  1849  (ten  years  from  the 

(c)  The  property,  so  far  as  it  could  be      not  an  adequate  security  for  12,000/. 
regarded  as  an  authorized  security,  was 
1280 


Cll.Vr.  X.]  ACTIONS    KKTWEEN    PARTNERS,    ETC.  *0SO 

(late  of  tlic  articles),  ami  with  compound  interest  on  the  Rnr].ln«. 
after  allowiiif^  for  sums  expended  for  her  maintenance  and  educa- 
tion; 2,  that  the  plaintift'  was  entitled  to  an  account  of  the  ])rofits 
made  hy  the  partners  from  the  1st  January,  1849,  on  the  balance 
found  due  for  the  principal  at  that  date,  with  interest  at  U.  per  . 
cent,  and  annual  rests;  3,  that  she  was  entitled  to  a  decree  for  pay- 
ment or  what  should  bo  so  found  due;  and,  4,  that  the  entry  of  the 
sum  of  r2,<M)0^.  in  the  account  furnished  by  B.  and  C.  must  be 
taken  as  conclusive  a«,miiist  them  that  they  had  such  a  sum  in  their 
hands.  It  was  considere<i  tliat  the  mort<,rage  had  not  t!ie  etlect  of 
withdrawiiii;^  the  12.000/.  from  the  business:  it  was  part  of  a 
plan  for  keei)ing  the  money  in  the  business;  and  the  12,000Z.  ought 
not  to  have  been  left  on  the  security  of  property  from  which  the 
trustees  ought  to  have  recovered  it. 

Iii  Maedonald  v.  liichardson  (//),  a  partner  died,  leaving  his 
co-j)artner  and  another  pers(.n  his  executors,  and  the  Maodnnaidr. 
co-partiier  executor  afterwards  took  other  ])ersons  into  R"har.isou. 
partnership  with  him.  The  testator's  assets  having  been  kept  in 
the  business,  the  legatees  filed  a  bill  against  the  executors,  and 
them  oidy,  claiming  an  account  of  proiits  since  their  testator's 
death,  and  a  decree  was  made  in  their  favor,  {e) 

In  Flockton  v.  Bunning  (/),  a  partner  died,  leaving  his  wife  his 
executrix,  and  having  directed  her  to  get  in  his  estate  F,op,,,onr. 
and  invest  it  for  the  beneiit  of  herself  and  children.   Bunning. 
She  vvourtd  up  the  partnership  in  which  her  husband  was  engaged, 
but  continued  to  carry  on  the  business  with  his  capital,  in  partner- 
ship with  other  persons,  who  knew  that  in  so  doing  she  and 
*they  were  committing  a  breach  of  trust,  {g)     A  bill   was     *9Sn 
filed  by  some   of  the  children  against  her  and  her  co-part- 
ners, seeking  to  make  them  jointly  and  severally  liable  for  the  trust 
estate  employed  in  the  business,    and  for  the  profits    made  by  its 
use;  and  a  decree  to  that  effect  was  made,  and  was   aftirmed  on  an 
appeal  by  the  wife's  partners.     This  case  was  decided  on  the  prin- 
ciple that  the  wife's  partners  were  clearly  implicated  in  the  br;>ach 

{d)  1  Giff.  81.     See,  also,  Docker  r.  counsel   for  the   apppllants,    and    this 

Somes,  2M.  &  K.655.  st:it<:'ment  of  the  case  was  written  from 

(p)  It  is  not  quite  clear  wli(>thcr  the  the    sliort-hanJ    writer's  notes  of  the 

executor,  who  was  a  partner,  was  or-  judj^ment. 

dered  to  account  for  more  profits  than  [q)  In  fact,  she  agreed  to  indemnify 

he  received  or  not.  tht-m  against  the  consequences. 


(/)  8  Ch.   323,note.     The  writer  was 


1281 


*9S7  ACCOUNT PKOFITS    SINCE    DISSOLUTION.  [bOOK  III. 

of  trust  cotmnitted  by  her,  and  were  jointly  and  severally  respon- 
sible with  her  for  the  trust  estate  and  all  the  profits  made  thereby. 
The  widow's  capital  was  trust  property;  there  was  no  loan,  as  in 
Stroud  V.  Gwyer  (A),  but  the  widow's  capital  became  part  of  the 
capital  of  the  firm;  and  she  and  her  co-partners  wrongfully  traded 
with  it.  (^)  Both  L.  J.  Wood  and  the  L.  J.  Selwyn  agreed  that  a 
mere  loan,  although  in  breach  of  trust,  would  not  involve  liability 
to  account  for  profits,  but  that  trust  property  which  was  tradetl 
with  by  a  trustee  in  partnership  with  others  could  not  be  regarded 
as  a  loan.  (A") 

The  right  of  the  cestui  que  trust  against  his  trustee  in  these  cases 
o  Hon  in  ^^  '^^  ^^  account  of  profits  made  by  him  by  the  use  of 

these  cases.  ^j^g  trust  property,  or  at  the  option  of  the  cestui  que, 
trust  to  simple  interest  at  bl.  per  cent.  (Z);  or  in  special  cases  to 
compound  interest,  {m) 

The  next  class  of  cases  which  it  is  necessary  to  notice  is  that  in 
which  surviving  or  continuing  partners  were  held  not  liable  to  ac- 
count for  profits  made  after  dissolution. 

Simpson w  '^^'^  ^^^^  of  tlicse  was  Simpson  v.  Chapman,  {n)  There 

Chapman.  three   pcrsous  wcrc  partners  as  bankers.     The  bank  was 

in  such  good  credit  as  to  render  no  capital  necessary  for  the 
*987  purpose  *of  carrying  it  on.  One  of  the  partners  died,  leav- 
ing his  son,  one  of  the  surviving  partners,  and  a  third  person, 
his  executors.  At  the  time  of  his  death  the  assets  of  the  bank  ex- 
ceeded its  liabilities.  The  estate  of  the  deceased  was  a  creditor  of 
the  bank  to  the  extent  of  his  share,  viz.,  one-third  of  its  net  assets, 
but  there  was  a  much  larger  sum  owing  from  his  estate  to  the  bank 
on  his  overdrawn  private  account.  The  son,  being  also  an  executoi- 
of  the  deceased,  was  admitted  as  a  partner  in  the  bank,  and  the 
business  was  carried  on  by  the  son  and  surviving  ])artners,  but  the 

[h)  28  Beav.  130,  ante,  p.  977.  terest;    there  may    pcssibly    be    other 

(t)  Compare  this  case  with   Vyse  v.  grounds  for  so  charging  him .     See  Jones 

Foster,  L.  R.  7   H.    L.  318,    and  8  Ch.  r.  Foxatl,   15  Beav.   388;  Williams  r. 

309,  noticed  infra,  p.  989.  Powell,  ib.  461,  and  Lord  Selborne's  o!»- 

{k)  See,  also,    as  to  this,   Travis  ?>.  servations  in  Vyse  r.  Foster,  L.  R.  7  H. 

Milne,  9  Ha.  141,    where,   however,  in-  L.  346. 
terest  only  was  ordered  to  be  paid.  (h)  4  DeG.  M.  &   G.  154.     Tliis  case 

{I)  Heathcote  v.  Hulme,  1  Jac.  &  W.  is  the^more  important  as  the  non-lia- 

122.  bility  to  account  for  subsequent  profits 

[m)  If  the  trustee's  duty  is  to  call  in  was    decided    on    the  hearing  of   the 

the  money  and  accumulate  the  income,  cause, 
he  will  be  charged  with  compound  in- 

1282 


CriAP.   X.]  ACTIONS    BETWEEN    TARTNERS,    ETC.  *9S8 

amount  of  the  deceased's  share  in  the  business  was  never  paid  out. 
or  separated  from  tlie  moneys  of  the  bank.  Considerable  profits 
were  made  by  the  new  partnersliip,  and  of  these  the  son,  as  partner, 
received  his  share.  A  suit  was  instituted  for  the  administration  of 
the  estate  of  the  deceased,  but  to  such  suit  tlie  executors  alone  were 
defendants,  and  a  decree  was  made  charging  the  son,  and  tlie  sur- 
viving partner,  who  was  an  executor,  in  respect  of  the  profits  of  the 
bank  from  the  death  of  deceased,  i>aid  to  the  son,  so  far  as  such 
profits  had  accrued  from  tlie  assets  of  the  deceased  employed  in  the 
partnership.  This  part  of  the  decree  was  appealed  from  and  re- 
versed, and  one  of  the  grounds  for  the  reversal  was,  that  the  profits 
acquired  after  the  death  of  the  deceased  could  not  be  attributed  to 
the  use  made  of  his  capital.  If  the  debt  due  from  him  to  the  bank 
were  omitted  from  its  assets,  the  bank  was  at  his  death  insolvent 
The  deceased  had  no  capital  in  it  in  the  ordinary  sense  of  the  word, 
and  all  the  profits  which  had  accrued  were  attributable  to  the  con- 
nection and  reputation  of  the  bank.  It  was  urged  that  the  son, 
who  had  received  one-third  of  the  profits,  and  who  could  not  distin- 
guish how  much  of  them  was  attributable  to  his  character  of  execu- 
tor, and  how  much  belonged  to  him  in  his  individual  character  as 
partner,  ought  to  be  charged  with  the  whole.  But  it  was  held  that 
this  principle  did  not  apply,  inasmuch  as  he  did  not  carry  on  the 
business  as  an  executor,  but  in  his  own  separate  and  individual 
right,  conceiving  that  he  was  entitled  so  to  carry  it  on. 

Another  case  of  the  same  class  was  Wedderburn  v.  Wedderburn  (o  i. 
There   three    persons    were   partners    as    mer-  wedderbum  v. 

'  ^  ,  Wedderburn. 

chants;  '*one  died,  leaving  the  other  two  and  his  *988 
widow  his  executors.  The  surviving  partners 
alone  proved  the  will,  and  they  drew  up  an  account  of  the  partner- 
ship assets  and  credited  the  estate  of  the  deceased  with  a  certain 
sum  as  his  share  in  the  concern,  but  this  share  was  never  sej^arated 
from  the  assets  of  the  continuing  firm.  Several  changes  afterwards 
took  place  in  the  new  firm,  and  then  a  suit  was  instituted  by  per- 
sons interested  in  the  estate  of  the  deceased  ])artner,  against  the 
executors  and  surviving  partners  of  the  deceased,  ])raying  for  an 
account  of  his  estate,  and  for  an  account  of  the  gains  and  profits 
made  by  carrying  on  the  partnership  after  his  death.  A  decree  was 
made  directing  an  account  of  the  personal  estate  of  the  deceased 
partner;  and  of  the  dealings  and  transactions  of  the  firm  up  to  his 

(o)  2  Keen,  722;  4  M.  &  Cr.  41;  and  22  Beav.  84. 

1 283 


*J,S()  ACCOUNT — niOFITS    SINCE    DISSOLUTION.  [bOOK  III. 

death;  and  of  what  at  that  time  was  the  value  of  his  interest  in  the 
concern;  and  of  the  profits  of  the  trade  carried  on  by  the  succeeding 
firms;  and  of  the  moneys  which  were  from  time  to  time  taken  out 
of  the  concern,  and  applied  on  account  of  the  estate  of  the  deceased; 
and  of  the  amount  of  capital  from  time  to  time  employed  in  the 
said  firms  respectively  (^>).     It  appeared  that  at  the  death  of  the 
deceased  tlie  assets  of  the  firm  consisted  almost  entirely  of  debts  due 
to  it;  that  it  was  impossible,  except  at  a  great  sacrifice,  to  get  in 
these  debts  in  a  short  time;  that  if  an  attempt  had  been  made  to 
wind  up  the  affiiirs  of  the  concern  at  the  death  of  the  deceased,  the 
assets  of  the  firm  would  not  have  sufficed  to  discharge  its  liabilities; 
and  that  the  ultimate  solvency  of  the  firm  was  attributable  to  the 
cautious  and  prudent  conduct  of  the  surviving  partners,  and  to 
their  having,  from  time  to  time,  provided  large  sums  of  money  to 
meet  pressing  liabilities  {q).     It  thus,  in  fact,  appeared  that   the 
profits  made  since  the  death  of  the  deceased  were  made  by  the  credit 
and  connection  of  the  house,  and  by  the  reputation,  skill,  and  abil- 
ity of  the  surviving  and  later  partners,  and  were  not  attributable  to 
the  surplus  assets  of  the  firm  in  which  the  deceased  had  a  share.    It 
further  appeared  that  the  share  of  the  deceased  had  been  preserved 
entirely  by  the  prudent  management  of  the  executors,  and  would 
have  been  certainly  reduced  to  nothing  if  they  had  wound  up 
*9S9     the  aff'airs  of  the  *house  in  the  ordinary  way,  or  had  thrown 
the  estate  of  the  deceased  into  Chancery.     Under  all  the  cir- 
cumstances of  the  case  it  was  therefore  held  that  as  by  the  partner- 
ship articles  the  plaintiff's  had  no  interest  in  the  good-will  of  the 
concern,  they  were  not  entitled  to  participate  in  the  profits  made  by 
tlie  successive  firms,  so  far  as  those  profits  were  attributable  to  the 
good- will  and  connection  in  trade  of  the  old  firm;    and  that  their 
share  in  any  profits  attributable  to  any  other  source  was  covered  by 
interest  on  the  amount  at  which  the  share  of  the  deceased  had  been 
valued. 

Lastl.y,  in  Yyse  v.  Foster,  (r)  the  partnership  articles  provided 

that  on  the  death  of  a  partner  the  amount  of  his  share 

Foster:        :      ghould  be  ascertained  and  be  paid  out  with  interest,  by 

installments  running  over  two  years.     A  partner  died  leaving  three 

(p)  2  Keen,  752.  court  as  to  the  mode  of  ascertaining  the 

(q)  See  22  Beav.  84.  amount  due  to  the  deceased,  see  10  Ch. 

(r)  8  Ch.  309,  and  L.  R.  7  H.  L.  Ca.  236. 
318.    The  case  came  again  before  the 

l-.>8'4 


CHAP.   X.]  ACTIONS    BKTWEEN    l-AHTNEUS,    ETC.  *090 

executors,  one  of  whom  was  a  surviving  partner.     The  share  of  the 
deceased  was  ascertained;  it  was  not,  however,  paid  out  at  the  end 
of  two  years,  but  was  kept  in  the  business,  which  was  carried  on 
for  many  years,  first  by  one  and  then  by  two  of  tlie  e\ecut<»r&,  with 
other  persons.      The  continuing  firms  paid  interest  on  tlie  cai>ital 
of  the  deceased  partner,  and  all  the  persons  beneficially  interested 
in  his  estate,  except  the  plaintiff,  ac([uiesced  in    this  arrangement. 
The  plaintiff,  soon  after  coming  of  age,  demanded  her  share  of  the 
estate  of  the  deceased,  and  also  the  profits  made  by  its  employment 
in  the  business.      The  firm  paid  her  the  principal  sum  due  to  her, 
with  compound  interest  at  5l.  percent,  but  declined  to  account  to 
her  for  any  profits.    She  thereupon  filed  a  bill  against  the  executors, 
and  them  alone,  for  an  account  of  the  profits.     A  decree  was  made 
in  her  favor,  and  the  defendants  were  declared  liable  for  all  the 
profits  made  by  the  successive  firms,  by  the  use  of  her  sliare  of  the 
deceased  partner's  estate.     The  court  of  appeal,  however,  reversed 
this  decision,  and  held  that  although  there  had  been  technically  a 
breach  of  trust  in  not  paying  out  the  capital  of  the  deceased  partner 
as  provided  by  the  })artnership  articles,  still  the  plaintiff  could  not 
possibly  be  entitled  to  charge  the  defendants  in  the  suit,  as 
constituted,    *vvith   more  profits  than   they   had   themselves     *090 
received;  and  as  the  evidence  showed  that  they  had  acted 
throughout  with  perfect  fairness,  the  coui-t  of  appeal  refused  even 
an  account  of  these  profits,  and  held  that  under  all   the  circum- 
stances of  the  case  the  plaintiff  was  only  entitled  to   her  share  of 
the  testator's  estate,  with  the  compound  interest  at  dL  per  cent. 
which  had  been  offered  to  her.      The  decision  in  this  case  is  ex- 
tremely important,  as  it  decided,  1,  that  the  clause  in   the  partner- 
ship articles  was  binding  both  on  the  executors  of  the  deceased  part- 
ner and  on  the  surviving  partners,  although  one  of  them  was  also  an 
executor;  2,  that  the  amount  due  to  the  estate  of  the  deceased  was 
in  effect  a  loan  to  the  survivors,  and  its  non-payment  at  the  time 
and  in  manner  prescribed  by  the  articles  of  partnership  did  not  en- 
title the  plaintifi'  to  any  profits,  but  only  to  interest;  8,  that  even  if 
the  plaintiff's  claim  to  profits  could  have  been  sustained,  the  executor 
who  was  not  a  ])artner  would  not  have  been  liable  for  such  ]u-ofits; 
and  4,  that  the  executors  who  were  partners  would  not  have  been 
liable  for  more  profits  than  they  respectively  themselves  received,  (a-) 

{ft)  See  as  tothisFlocktont'.  Bunninor,       observations  of  Lord  Cairns,  in  L.  R.  7 
8  Ch.  323,  note,   ante,  p.  985,  and  the      H.  L.  3:3:3,  4. 

1285 


*991  ■  ACCOUNT — EVIDENCE.    -  [HOOK  III. 

The  law  iij)on  the  subject  under  consideration  is  still  in  an  un- 
observations      Settled  State.     Undoubtedly  a  person  oii<^ht  not  to  be 

on  the  fore-  ,         ,  .      j,       ,  .  .    '  ■       i  i 

going  cases.  permitted  to  retain  tor  his  own  use,  gains  acquired  by 
the  unlawful  emplo^'inent  of  another's  property  ;  and  it  would  cer- 
tainly not  be  conducive  to  justice  if  there  were  no  power  to. compel 
a  discovery  of  the  amount  of  the  gains  so  made,  and  payment  of 
that  amount  by  the  wrong-doer,  {t)  At  the  same  time,  owing  to  the 
extreme  difficulty  of  taking  an  account  of  subsequent  profits,  so  far 
as  they  are  attributable  only  to  one  particular  source,  the  tendency 
of  the  courts  in  modern  times  appears  to  be  rather  in  favor  of  not 
exei'cising  than  of  exercising  the  power  alluded  to,  except  in  cases  of 

gross  fraud  or  breach  of  trust,  (n)  In  such  cases,  howev^er,  the 
*991     Court  will  *exert  itself  to  the  utmost,  and  the  efforts  which  it 

will  make  in  order  to  prevent  persons  from  deriving  adv^antage 
from  their  own  wrong,  cannot  be  better  illustrated  than  by  the  case 
Featherston-  of  Fcatherstonhaugli  V.  Turner,  (x)  The  profits  of  the 
^luug  V.  ur-  partnership  business  there  arose  entirely  from  the  skill 
and  reputation  of  the  partners,  who  were  medical  gentlemen.  In 
order  to  ascertain  the  share  of  the  deceased  in  the  profits  made 
after  his  death  by  the  surviving  partner,  an  inquiry  was  directed 
whether  any  and  what  profits  made  since  the  death  of  the  deceased 
were  attributable  to  or  derived  from  persons  who  had  become  cus- 
tomers by  reason  of  the  deceased  having  been  a  partner,  and  it  was 
considered  that  the  surviving  partner  was  liable  to  pay  what  might 
be  found  due  on  taking  tliat  account,  after  deducting  a  liberal 
allowance  to  him  for  his  time,  knowledge,  and  expenses  in  realiz- 
ing the  profits  in  question. 


Wifh  respect  to  the  evidence  upon  which  the  accounts  are  to  he  tal-en. 

As  regards  the  partnership  books.     These  being  accessible  to  all 
Evidence  on       the  partners,  and  being  kept  more  or  less  under  the 

which  accounts    „  ■^■^  i^xi  ii  •/</..  ., 

are  taken.  survcillauce  01   them   all,  are  prima  facie   evidence 

against  each  of  them,  and,  therefore,  also  for  any  of  them  against 

(0  See  the  admirable  judgment  of  any  instance  in  whicli  sucli  a  decree  has 

Lord  Brougham  in  Docker  v.  Somes,  2  been  worked  out  and  has  resulted  ben- 

M.  &  K.  672.  eficially  to  the  person  in  whose  favor  it 

{u)    Judgments   for    an    account   of  was  made, 

profits  after  dissolution  are  fearfully  op-  (_x)  25  Beav.  382. 
prjssive;  and  the  writer  is  not  aware  of 
128G 


CHAP.  X.] 


ACCOUXT — EVIDENCE. 


^991 


the  otlicrs.  (y)  ^     But   entries  made    by  one  partner  without  tlie 
knowled"-e  of  tlie  other  do  not  prejudice  the  latter  as  between  hini- 


(//)  See  Lo(l{,'e  t'.  Pricliard,  3  DeG.  M. 
&  G.  906,  and  Smith  v.  The  Duke  of 
Chanclos,  2  Atk.  158,  and  Bam.  412. 
But  see  the  observations  of  L.  J.  Turner, 
in  Stewart's  case,  1  Ch.  587. 

'  Heartt  v.  Corning,  3  Paige  5G6; 
Fletcher  v.  Pollard,  2  Hen.&Munf. 
544;  Brickhouse  r.  Hunter,  4  id.  3G3; 
Richardson  r.  Wyatt,  2  Dessaus.  471; 
Dunneli  v.  Henderson  23  N.  J.  Eq.  174; 
Stewart  v.  McKichan,  74  111.  122;  Albe 
V.  Wachter,  id.  173;  Boise  v.  McGinn, 
8  Oreg.  4G6;  Cheever  v.  Lamar,  19 
Hun,  130:  Routen  v.  Bostwick,  59  Ala. 
360;  Cunningham  v.  Smith,  11  B.  Mon. 
.325;  Myers  v.  Bennett,  3  Lea,  184. 
See,  Ferguson  v.  Wright,  61  Penn.  St. 
258;  Sutton  v.  Mandeville,  1  Cranuh 
C.  C.  2. 

The  rule  is  the  same,  though  the 
books  are  kept  by  a  clerk.  O'Brien  v. 
Hanley,  86  lU.  278;  Allen  v.  Coit,  6 
Hill,  318. 

One  of  the  members  of  the  firm  kept 
the  time  of  the  men  employed,  in  a 
pass  or  time  book,  and  reported  the 
time  of  each  man,  weekly  to  the  book- 
keeper, who  entered  it  on  the  books  of 
the  firm  and  when  the  men  were  paid, 
if  they  claimed  more  time  than  had 
been  reported  to  the  bookkeeper,  the 
partner  ki-eping  the  time  was  called  in 
and  the  books  corrected  in  accordance 
with  the  facts.  Sometimes  the  partner 
keeping  time  was  sick  or  absent  and 
then  the  book  keeper  got  the  men's 
time  from  other  sources.  On  a  settle- 
naent  of  the  partmn-ship  atfairs,  the 
partner  who  had  kept  the  time  of  the 
men  claimed  that  the  books  of  the  firm 
were  incon-ect,  because  there  was  more 
time  shown  by  them  than  his  time  book 
showed:  Held,  that  under  the  circum- 
stances, the  books  jvs  kept  by  the  clerk 
were  binding  on  both  i^artners.  O'Brien 
V.  Hanley,  sup. 


The  ordinary  presumption  ia,  that  all 
the  partners  have  access  to  the  partner- 
ship books,  and  know  the  entries  therein ; 
but  this  is  a  mere  presumption  from  the 
ordinary  course  of  business,  and  may 
be  repelled  by  any  circumstances  which 
tend  to  a  contraiy  presumption.  United 
States  Bank  v.  Binney,  5  Mason,  176; 
Shoemaker  Piano  Co.  v.  Bcmard,  2 
Lea,  359. 

Entries  in  partnership  books  are  not 
evidence  for  one  partner  against  another 
on  an  accounting  between  them,  unless 
it  appears,  or  may  be  presumed,  that 
the  latter  not  only  had  access  to  the 
Ijooks,  but  actually  inspected  them. 
Taylor  r.  Herring,  10  Bosw.  447;  Saun- 
ders r.  Uuval,  19  Tex.  467. 

The  rule  that  entries  in  the  books  of 
a  firm  are  evidence  against  all  of  tlie 
parties,  is  true  only  of  those  made 
whilst  the  firm  is  doing  business.  En- 
tries so  made  by  a  partner  who  is  wind- 
ing up  the  partnership  under  a  transfer 
to  him  for  that  purpose,  are  not,  ^;e/-  se, 
evidence  for  him  against  a  co-partner. 
Clements  v.  Mikhell,  Phill.  Eq.  3. 

Entries,  however,  made  after  a  disso- 
lution, by  the  partner  who  closes  the 
concern,  in  the  partnership  books  which 
are  open  to  the  examination  of  the 
other  partner,  and  are  in  fact  examined 
by  him,  and  trom  which,  by  agreement 
of  the  partners,  an  accountai.t  has 
made  up  an  account  between  them,  are 
competent  evidence  for  or  again.st  either 
partner.  Cajneron  v.  Watson,  10  Rich. 
Eq.  64. 

Where  a  surviving  partner  and  liqui- 
dator sutfers  several  j'ears  to  elapse  be- 
fore rendering  an  account,  and  he  has 
kept  the  books  so  carelessly  that  it  is 
impossible  to  determine  from  them  with 
any  certainty  how  the  firm  stood  at  its 
close,  his  account  will  be  rejected,  and 
he  charged  with  all  entries  against  him- 

1287 


*991 


ACCO  L"  N  T —  KVl  DEN  C  E. 


[dOOK  III. 


self  and  his  co-partner  (z);  and  wliere  a  surviving  partner  di'ew  up 
an  account  which  he  furnished  to  the  executors  of  his  hite  partner, 


self,  and  allowed  credit  only  for  such 
liabilities  as  he  proves  he  has  paid. 
Leftwitch  11.  Leftwitch,    La.    Ann.  346. 

Partnership  books  to  which  each  party 
has  had  access  are  primdfacie  evidence 
as  between  the  partners,  but  the  part- 
ners cannot,  in  lieu  of  the  statement  re- 
quired, put  in  their  general  books  of 
accounts,  consisting  often  of  immense 
folios,  which  neither  the  clerk  nor  the 
court  can  be  required  to  examine.  It  is 
the  duty  of  the  parties  to  have  them 
examined  by  experts,  to  ascertain  what 
they  do  show,  and  to  extract  from 
them  in  the  form  of  balance-sheets  and 
schedules,  such  general  statements,  and 
such  specific  facts  as  may  tend  to 
elucidate  contested  matters  of  charge 
and  discharge.  Meyers  v.  Bennet,  3 
Lea,  184. 

Where  a  partnership  account  is  or- 
dered, each  partner  is  an  actor,  and, 
unless  all  the  parties  join  m  employing 
a  competent  accountant  to  make  out  a 
balance-sheet  of  the  business  withprop:jr 
schedules,  each  should  be  required  to  fur- 
nish his  own  statement  of  the  account. 
Meyers  v.  Bennet,  3  Lea,  184. 

The  books  of  paiinership  are  compe- 
tent evidence  to  show  what  are  debts  of 
the  partnership  as  against  the  partner 
who,  upon  the  dissolution  of  the  partner- 
ship, has  purchased  the  assets  of  the 
partnership,  and  has  undertaken  to  pay 
its  debts.  Shackleford  v.  Shackleford, 
32  Grat.  481. 

Books  of  firm  are  evidence  that  one 
of  two  partners,  joint  makers  of  a  note, 
was  surety  for  the  other.  Strong  v. 
Baker,  25  Minn.  442. 

(z)  Hutcheson  v.  Smith,  5  Ir.  Eq. 
117.  See,  also,  Reeve  v.  Whitmore,  2 
Dr.  &  Sm.  446,  where  it  was  held  that 
although  books  kept  by  a  person  may 
be  used  against  him  as  showing  what 
1288 


Where  a  partner  was  familiar  with 
the  books  of  the  concern,  he  may  testify 
from  his  own  recollection,  so  invigorat- 
ed by  the  books,  as  to  the  amount  of 
the  advance  of  his  co-partner  beyond 
himself  in  the  payment  of  the  debts  of 
the  firm,  without  producing  the  books. 
Bank  v.  Donaldson,  6  Pa.  St.  179. 

Li  an  action  for  the  settlement  of  part- 
nership accounts,  where  it  appears  that 
the  parties  have  kept  books  of  their 
daily  aflairs,  they  should  be  shown  to 
be  clearly  erroneous,  before  a  party 
should  be  permitted  to  recover  beyond 
the  same,  for  a  matter  which  ought  to 
have  been  entered  regularly  every  day. 
Parker  v.  Jont^,  1.5  La.  Ann. 

The  best  evidence  and  data  of  the 
losses  and  profits  of  the  partnership  are 
the  books  of  the  firm,  and  the  opinions 
and  experience  of  other  merchants  in 
the  same  town  were  not  admissible  to 
.  dr-termine  the  amount  of  profits.  Cun- 
ningham V.  Smith,  11  B.  Mon.  325. 

Wliere,  however,  the  books  of  a  part- 
nership fail  to  show  the  true  state  of  its 
business,  resort  may  be  had  to  a  calcu- 
lation of  the  profits  from  the  amount  of 
merchandize  proved  to  have  been  sold 
by  said  firm,  at  the  rate  per  cent,  profit 
proved  to  have  been  made  on  said  mer- 
chandize in  that  particular  business, 
but  not  to  expert  testimony  of  witnesses 
engaged  in  a  smiilar  business  to  prove 
that  profit  was  made  by  this  firm  in 
their  business,  for  the  pui-pose  of  charg- 
ing one  of  the  partners  therewith.  Boire 
V.  McGuhe,  8  Oreg.  466. 

On  the  trial  of  an  action  between 
partners  in   a  mill  and  ferry,  in  which 

he  has  received,  he  is  not  entitled  to  use 
them  in  his  own  favor  to  show  what  he 
has  paid.  See,  as  to  how  far  the  books 
of  companies  are  evidence  against  their 
shareholders,  ante,  p.  650. 


ciiAr. 


X.J 


ACCO  J  NT — E  V I DENXE. 


-091 


it  was  held  that  such  account  was  aJuiissible  ai^alust  the  j>artner 
who  i'urnislieJ  it,  and  tliat  the  executors  were  not  bound,  by  using 
it  against  him,  to  admit  its  correctness  throughout,  [a) 


the  issues  are  as  to  the  state  of  accounts, 
and  whether  there  have  Vjeen  any  pro- 
iits,  the  testimony  of  a  witness  who  had 
run  the  rnlll  and  ferry  previously,  in 
partnership  with  one  of  the  parties,  to 
the  effect  tliat  the  expenses  at  tliat  time 
were  greater  than  the  receipts,  is  iiTele- 
vant  and  inadmissible.  Saunders  v. 
Duval,  19  Tex.  467. 

Where  a  partner  had  collected  ac- 
counts in  favor  of  the  firm,  without 
making  any  entry  of  the  amounts  so 
■collected,  it  was  held,  that  where  the 
amount  of  such  collections  was  ascer- 
tained he  was  properly  chargeable  tliere- 
with.  Evans  v.  Montgomery,  50  Iowa, 
325. 

While  the  failure  to  keep  accounts  by 
the  partner  in  charge  of  the  partnership 
concerns  might  render  an  adjustment 
difticult.  yet  it  could  not  be  taken  ad- 
vantage of  by  a  co-partner  who  had  com- 
menced an  action  and  asked  an  ac- 
counting. Evans  v.  Montgomery,  supra. 
As  to  the  effect  of  keeping  no  books  or 
of  destroying  them,  see  ante,  808. 

As  to  the  onus  lyrohcoidi  in  suits  for 
an  account,  a  partner  who,  upon  the 
settlement  of  a  partnership  account, 
claims  a  balance  due  him  from  the  firm, 
which  is  denied  by  the  other,  has  the 
burden  of  pi'oof,  in  the  absence  of  en- 
tries of  account  made  at  the  time  of 
the  alleged  transaction.  McCabe  t-. 
Franks,  44  Iowa,  208;  Camblat  v.  Tup- 
ery,  2  La.  Ann.  10;  Maupin  r.  Daniel, 
;}Tenn.  Ch.  223;  McMichael  v.  Ravul, 
14  La.  Ann.  307. 

A  partner  who  complains  of  error  in 
the  settlement  of  a  partnership  account, 
approved  by  the  signature  of  the  part- 
ners, should  make  it  appear  by  proof. 
Bry  I".  Cook,  15  La.  Ann.  493. 


In  a  suit  by  one  partner  n gainst  an- 
other to  recover  contribution  to  a  loss 
in  the  concern,  a  statement  in  the  de- 
fendant's haul  writing  of  an  account 
showing  a  balance  due  to  the  plaintiff 
from  the  finn,  is  evidence  for  the  i)lain- 
tiff.     Yohe  V.  Bamet,  3  Watts  de  S.  81. 

In  an  action  of  account  between  part- 
ners, in  wiiich  the  plaintiff  claims  that 
the  defendant  account  for  money  re- 
ceived by  him  from  the  avails  of  the 
business  during  the  partnership,  an 
agreement,  executed  by  the  plaintiff  and 
delivered  to  the  defendant,  previous  to 
the  commencement  of  the  action,  in 
which  it  is  recited,  that  the  defendant 
has  relinquished  to  the  plaintiff  all  claim 
to  the  demands  duo  to  the  firm,  and  to 
the  stock  of  the  firm,  m  consideration  of 
which  the  plaintiff  promises  to  pay  the 
debts  due  from  the  firm,  and  to  indem- 
nify the  defendant  against  them,  has  no 
legal  tendency  to  sustain  a  plea  by  the 
defendant,  that  he  has  fully  accounted 
for  the  money  claimed  in  the  declara- 
tion. Woodward  v.  Francis,  19  Vt. 
434. 

In  an  action  to  wind  up  a  partnership 
between  A  and  B,  evidence  that  A  put 
into  the  concern  money  belonging  to  a 
third  person  which  he  held  as  agi'iit,  is 
irrelevant.  Harper  r.  Lamping,  o-]  Cal. 
C41. 

A  decree  that  one  partner  shall  pay 
money  to  his  co-partner  without  any 
proof  of  its  actual  or  constructive  re- 
ceipt by  the  former,  or  that  it  hiis  been 
lost  by  his  negligence  or  misconduct,  is 
erroneous;  and  where  the  only  evidence 
given  was  that  the  defendant  had  re- 
ceived "  a  certificate  of  debt  from  the 
Chesapeake  &  Ohio  Canal  Company," 
in  December,  18:>3,  or  January,  1S34, 


(a)  Morehouse  v.  Newton,  3  DeG.  &Sm.  307. 


1289 


*992  ACTIONS    BETWEEN    TARTNEKS,    ETC.  [UOOK  III. 

*992  *Whcre,  in  confiequence  of  the  loss  of  books  and  documents, 
an  account  cannot  be  taken  in  the  usual  way,  special  direc- 
spcciai  direc-  tions  wiU  bc  givcn  as  to  the  mode  in  which  the  accounts 
subjec " '^'^^'^  shall  be  taken  and  vouched.  The  power  to  f^ive  such* 
a  direction  is  expressly  conferred  by  15  &  16  Vict.  c.  80,  §  54,  by 
which  it  is  enacted  that, — 

"  It  shall  be  lawful  for  the  court,  in  any  case  where  any  account  is  required  to  be 
15  &  16  Vict.  c.  taken,  to  give  such  special  directions,  if  any,  as  it  may  think  fit 
^^'  i  '^-  with  respect  to  the  mode  in  which  the  account  should  be  taken  or 

vouched,  and  such  special  directions  may  be  given,  either  by  the  decree  or  order 
directing  such  account,  or  by  any  subsequent  order  or  orders,  upon  its  appearing  to 
the  court  that  the  circumstances  of  the  case  are  such  as  to  require  such  special 
directions;  and  particularly  it  shall  be  lawful  for  the  court,  in  cases  where  it  shall 
think  fit  so  to  do,  to  direct  that  in  takmg  the  account,  the  books  of  account  in 
which  the  accounts  required  to  be  taken  have  been  kept,  or  any  of  them,  shall  be 
taken  as  prima  facie  evidence  of  the  truth  of  the  matters  therein  contained,  with 
liberty  to  the  parties  interested  to  take  such  objections  thereto  as  they  may  be 
advised." 

Prior  to  the  above  enactment  the  court  would,  if  necessary, 
Old  practice  clii'^ct  the  master  to  make  a  special  report  in  case  he 
should  be  unable  to  take  an  account  by  reason  of  the 
non-production  of  books,  or  other  circumstances  {h)\  and  the  court 
would,  it  seems,  declare  that,  for  cei'tain  purposes  vouchers  should 
not  be  required,  {c)  Since  the  enactment,  it  has  been  decided  that 
no  special  directions  will  be  given,  except  in  cases  of  necessity,  and 
where,  unless  such  directions  are  given,  the  accounts  required  can- 
not be  arrived  at.  {d) 

The  judgment  for  an  account  usually  directs  that  all  parties  shall 
Productions  of  P^'^^^iuce  ou  oatli  all  books  and  papers  in  their  custody 
books, &c.  relating  to  the  taking  of  the  accounts.     If  any  partner 

has  kept  accounts  relating  to  the  partnership  in  private  books  of 
his  own,  he  must  produce  such  books;  for  he  should  have  kept 
his    private   accounts    elsewhere,  if  he   did     not    want    them    to 

after  a  settlement  with  the  company,  {h)  See  Rowley  «.  Adams,  7  Beav.  395; 

and  the  bill  which  assumed  its  payment  Millar  t'.   Craig,   6  ib.   444;  Turner   y. 

to  him  was  filed  in  June,  1835:     Held,  Corney,  5  ib.  515. 

that  it  was  too  short  a  time  to  authorize  (c)  Adley  v.  The  Whitstable  Co.,  17 

a  presumption  of  payment  sufficient  to  Ves.  327.     See  the  decree  in  Stainton  v. 

charge  him  personally,  where  there  was  The  Carron  Co.  24  Beav.  363. 

nothing  in  the  nature  of  the  settlement  [d)  See   Lodge  r.   Prichard,  3   DeG. 

to  inipose  such  responsibility.     Grove  r.  Mac.  &  G.   906;  Ewart   y.  Williams,  7 

Fresh,  9  Gill  &  J.  280.  ib.  68. 

1290 


CHAT.  X.] 


INJUXCnON. 


*993 


be  seen,  (e)  After  a  dissolution  new  books  are  generally 
*opcncd;  but  if  they  relate  to  the  accounts  which  have  to  *003 
be  taken,  they  must  be  ])roduced  (  f);  and  even  if  a  j)artner 
not  before  the  court,  objects  to  their  pruduction,  it  is  by  no  means 
clear  that  his  objection  will  prevail.  {</)  As  between  partners  and 
their  representatives,  material  documents  must  be  produced,  though 
they  may  be  privileged  as  between  them  and  other  })eroons.  (h) 

If  a  partner  has  books  or  accounts  in  his  possession,  and  he  will 
not  produce  them,  an  account  may,  nevertheless,  be  consequence  of 
arnved  at  by  presummg  every thmg  against  him.  tion. 
Thus  in  a  case  where  an  account  was  directed  at  the  suit  of  the 
representatives  of  a  deceased  partner  against  the  surviving  part- 
ner, and  the  latter  would  not  produce  the  books  necessary  to  ena- 
ble the  Master  to  take  the  accounts,  the  Master  estimated  the  net 
profits  at  101.  per  cent,  on  the  capital  employed,  and  the  Court,  on 
exceptions  to  his  report,  confirmed  it,  adding  that  if  lie  had  set  the 
net  profits  down  at  20^.  per  cent,  his  report  would  have  been  ec^ually 
confirmed,  (l) 

The  Court  has  power  to  emi)loy  professional  account- 

.     ...  11        /^  Accountants. 

ants  to  assist  it  in  taking  accounts,  and  the  Court  may 
act  on  their  report,  {k)^ 


(e)  Toulrain  v.  Copland,  3  Y.  &  C. 
Ex.  655  ;  Freeman  i'.  Fairlie,  3  Mer.  43. 
Liberty  will  bo  given  to  seal  up  those 
parts  which  are  sworn  not  to  relate  to 
matters  in  question  in  the  suit,  ante,  p. 
962. 
(/)  Hue  V.  Richards,  2  Beav.  305. 
{g)  See  Freeman  v.  Fairlie,  3  Mer- 
43.     But  see  ante,  p.  958. 

{h)  See  Brown  v.  Perkins,  2  Ha.  540, 
where  the  excuse  of  professional  confi- 
dence was  set  up. 

1  See  ante  808  and  note. 
(/)  Walmsey  v.   Walrasey,  3  Jo.  & 
Lat.  556  ;  and   see  Gray  v.   Haig,   20 
Beav.  219. 

(k)  See  Jud.  Act,  1873,  §  56,  57,  and 
Ord.xxxiii.  and  xl.  r,  10,  and  15  and  16 
Vict.  c.  80,  §  42,  and  see  on  it,  Hill  r. 
King,  1  N.  R.  341,  L.  C. ;  Ford  v.  Tynte, 
2  DeG.  J.  &  Sm.  127  ;  London,  Bir- 
mingham, and  Buck's  Rail.  Co.  6  W. 


R.  141. 

*  The  Court  has  power  to  perform  the 
duties  ordinarily  performed  by  its  mas- 
ter, in  stating  a  partnership  account  be 
tween  the  parties;  and  in  such  case, 
each  party  has  the  same  rights  before 
the  Court  in  regard  to  the  production  of 
books,  examination  of  interrogatories, 
etc.,  that  he  could  have  before  the  mas- 
ter.    Montanye  r.  Hatch,  34  111.  394. 

A  complex  and  intricate  account  is, 
however,  an  unfit  subject  for  examina- 
tion in  court,  and  ought  always  to  be 
referred  to  a  master  to  be  examined  by 
him,  and  reported,  in  order  to  a  final 
decree.  Patten  v.  Patten,  75  111.  446  ; 
S.  C.  14  Am.  Law  Reg.  N.  S.  733;  Moss 
V.  McCall,  75  111.  190;  St<.v<re  t'.  Hoag- 
land,  39  111.  264;  Bressler  r.  McCune, 
56  111.  475;  Riner  v.  Tousle,  62  111.  266; 
Grouch  r.  Stonger,  65  I11.4'^l;  Dubourg 
V.  United  States,  7  Pet.  625. 

1291 


*994 


INJUNCTION. 


[book   III. 


2     Of  Injunctions. 

In  order  to  prevent  a  partner  from  acting  contrary  to  the  ao-ree- 
injunctions  ^^^^^  "^^^  wliicli  lie  may  have  entered  with  his  co- 
hud  receivers,  partners,  or  contrary  to  the  good  faith  which,  inde- 
pendently of  any  agreement,  is  to  be  observed  by  one  pai-tner 
towards  his  co-partner,  it  is  sometimes  necessary  for  a  Court  to 
interfere  either  by  granting  an  injunction  against  the  partner  com- 

phained  of,  or  by  taking  the  afiairs  of  the  partnersiiip  out 
*994:     of  tlie  hands  *of  all  the  partners,  and   entrusting  them   to  a 

receiver  or  receiver  and  manager  of  its  own  appointment.' 


*  The  g'eneral  rule  respecting-  the  ex- 
ercise of  the  jurisdiction  to  issue  injunc- 
tions in  partnership  matters,  and  in  con- 
nection with  receivers,  is  thus  stated  by 
Mr.  High  (Vol.  2,  §§  1330, 1350, 1351),  in 
his  valuable  work  on  injunctions:  "Courts 
of  equity  will  entertain  jurisdiction  to 
prevent  by  injunction  members  of  a  co- 
partnership from  the  commission  of  acts 
inconsistent  with  the  terms  of  their 
agreement,  and  from  violating  the  rights 
of  their  co-partners.  The  jurisdiction  is 
founded  upon  well-established  princi- 
ples of  I  quity,  and  is  exercised  irrespec- 
tive of  whether  a  dissolution  of  the  part- 
nership is  sought.  Thus,  where  several 
partners  are  engaged  in  trade,  one 
of  their  number  may  be  injoined  from 
using  force  to  the  obstruction  or  inter- 
ruption of  the  trade,  and  from  removing 
or  displacing  servants  employed  by  the 
other  partners,  and  from  removing  the 
books  and  papers  relating  to  the  busi- 
ness. And  where  one  of  the  members 
of  a  firm  has  been  temporarily  insane, 
and  on  his  recoveiy  his  co-partners  ex- 
clude him  from  the  management  of  the 
finn  business,  an  injunction  will  be  al- 
lowed to  restrain  them  from  thus  ex- 
cluding him  from  the  business.  So, 
where  a  partnership  is  foimed  for  a 
tcnn  of  years,  to  be  terminated  on  no- 

1292 


tice  by  either  party  for  a  given  length 
of  time,  an  injunction  will  be  granted  to 
prevent  one  partner  from  obstructing 
the  other  in  the  enjoyment  of  his  part- 
nership rights,  and  from  any  improper 
use  of  the  partnership  funds  or  effects. 
And  the  use  by  one  partner  of  firm  prop- 
erty for  purposes  foreign  to  the  partner- 
ship, and  in  violation  of  the  articles  and 
without  the  consent  of  his  co-partner, 
affords  sufficient  ground  for  an  injunc- 
tion. But  mere  temptation  to  dishon- 
esty and  to  the  abuse  or  improper  use  of 
partnership  property,  will  not  of  itself 
induce  a  court  of  equity  to  interfere. 
And  where  all  the  partners  save  one 
engaged  in  the  publication  of  a  news- 
paper are  also  partners  in  a  rival  publi- 
cation, an  injunction  will  not  be  granted 
to  restrain  one  of  the  papers  from  using 
the  material  of  the  other  under  a  con- 
tract which  has  been  long  acted  on. 
But  an  injunction  is  proper  in  such  a 
case  to  prevent  one  of  the  papers  from 
publishing  any  information  obtained  ex- 
clusively at  the  expense  of  the  other, 
until  published  in  the  paper  thus  ob- 
taining it. 

"  The  extraordinary  remedy  of  equity 
by  injunction  in  partnership  matters 
is  frequently  invoked  in  connection 
with    the    appointment    of    receivers 


CHAP. 


X.] 


INJUNCTION. 


*904: 


These  two  modes  of  interference  require  to  Ije  considered  separately; 
for  the}'  are  not  had  recourse  to  indiscriminately.  The  appointment 
of  a  receiver,  it  is  true,  always  operates  as  an  injunction,  for  the 
Court  will  not  suffer  its  officer  to  be  interfered  with  by  any  one  (Z); 
but  it  by  no  means  follows  that  because  the  Court  will  not  take  the 
affairs  of  a  partnership  into  its  own  hands,  it  will  not  restrain^some  one 
or  more  of  the  partners  from  doinp^  what  may  be  complained  of.  {m) 

although  the  two  remedies  are  not 
necessai-ily  or  always  invoked  or 
g'ranted  at  the  same  time.  In  fron- 
eral  it  may  be  said  that  when  upon  the 

*  dissolution  of  a  partnership  the  mem- 
bers of  the  firm  are  unable  to  A'^iv.e  up- 
on the  mann'ir  of  closing  up  its  af- 
fairs, it  is  the  usual  practice  of  courts  of 

■  equity,  with  a  view  to  protect  the  rif,'hts 
of  all  parties  in  interest,  to  exclude  al 
the  partners  from  participating  in  the 
business  of  closing  up  the  finn,  and  to 
appoint  a  receiver  for  that  purpose,  and 
in  that  event  an  injunction  is  proper  to 
prevent  one  partner  from  participating 
in  the  winding  up  of  the  firm.  But  to 
warrant  a  reciever  ;uul  an  injunction  in 
partnership  cases  such  a  state  of  facts 
must  be  shown  by  the  plaintiff,  as,  if 
proved  at  the  hearing,  will  entitle  him 
to  a  di;cree  for  a  dissolution  of  the  finn. 
And  in  determining  whether  the  con- 
duct of  one  partner  has  been  such  as  to 
entitle  the  other  to  a  dissolution,  in 
passing  upon  an  application  for  an  in- 
junction and  a  receiver,  the  court  will 
consider  not  merely  the  specific  terms 
of  the  contract  of  partnership,  but  also 
the  duties  and  obligations  which  are  im- 
plied in  every  such  undertaking,  and  if 
it  is  manifest  that  the  conduct  of  the  de- 
fendant partner  has  been  so  injurious  to 
the  finn  and  so  inconsistent  with  liis  du- 
ties as  a  partner  as  to  entitle  planititf  to  a 
dissolution,  a  receiver  and  an  injimction 
will  be  allowed.  But  although  an  in- 
terlocutory injunction  has  been  granted, 
ex  parte,  upon  a  bill  by  one  partner 
seeking  a  dissolution,  it  does  not  neces- 
sarily follow  that  a  receiver  will  be 
appointed  over  the  affairs  of  the  firm, 


and  if  the  court  is  satisfied  that  such  a 
case  is  not  presented  as  to  entitle  plaintiff 
to  a  final  dissolution,  it  will  refuse  to  ap- 
point a  receiver,  notwithstanding  such 
injunction,  leaving  the  injunction  to  be 
dissolved  in  due  time  and  upon  proper 
motion." 

"  The  fact  that  the  conduct  of  the  de- 
fendant partner  has  been  such  as  to  de- 
stroy the  mutual  confidence  whicli 
ought  to  subsist  between  partners,  is  an 
important  element  influencing  the  court 
in  granting  relief  by  mjunction  and  a 
receiver  in  partnership  cases.  And 
when  the  pleadings  disclose  a  serious 
and  apparently  irreconcilable  disagree- 
ment between  the  partners,  as  to  the 
control  and  disposition  of  their  property 
and  effects  and  as  to  their  respective 
demands  against  each  other,  the  ap- 
pointing of  a  receiver  and  allowing  an 
injunction  are  regarded  as  a  provident 
exercise  of  the  powei-s  of  a  court  of 
equity,  sanctioned  alike  by  authority 
and  by  the  exigencies  of  the  case.  So, 
when  it  is  apparent  that  the  defendant 
partner  has  deliberately  resolved  to 
break  up  and  ruin  the  firm  business, 
and  the  personal  relations  of  the  part- 
ners are  such  that  they  cannot  carry  on 
business  with  advantage  to  each  other. 
sufficient  cause  is  presented  for  an  in- 
junction and  a  receiver." 

(Z)  Although  the  appointment  of  a 
a  receiver  operates  as  an  injunction,  the 
Court  will  often  grant  an  injunction  as 
well  as  a  receiver,  to  mark  its  sense  of 
the  impropriety  of  the  conduct  of  those 
it  specially  restrains :  see  per  V.  C.  Kin- 
dersley,  in  Evans  r.Coventr}',  3  Drew,  82. 

{,„)  See  Hall  r.  Hall,  3  Mac.  &  G.85. 
1293 


^■994 


ACTIONS    BETWEEN    I'ARTNEUS,    P:TC. 


[book  iir^ 


1. — Against  partners} 

"Whatever  doubt  there  may  formerly  have  been  upon  the  subject,  ifc 
Injunction  ^^  ^^^^''  ^^^^  ^"  injunction  will  not  be  refused  simply  be- 
KlsoiuS^  cause  no  dissolution  of  partnership  is  sought.  Where  a 
IS  sought.  partner  who  had  been  sn/fering  from  temporary  insan- 


'  See  post,  Receivers. 

An  injunction  at  the  suit  of  one  part- 
ner will  be  refused  where  there  is  a  mere 
apprehension  of  loss,  and  there  does 
not  appear  any  breach  of  contract  or 
duty,  nor  any  misconduct  amounting  to 
fraud,  in  the  remaining  partners. 
Walker  v.  Trott,  4  Edw.  38. 

Where  the  representatives  of  a  de- 
ceased partner  had  enjoined  the  sur- 
viving partner  from  selling  the  joint 
property  at  public  sale:  Held,  that  it 
should  be  dissolved,  there  being  no 
charge  of  fraud,  insolvency,  or  miscon- 
duct against  the  survivor,  but  a  mere 
allegation  of  a  refusal  to  account,  and 
no  proof  that  the  account  had  been 
witheld  an  unreasonable  time.  Shad  v. 
Fuller,  R.  M.  Charlt.  501. 

An  injunction  will  be  retained  against 
a  partner  defendant,  where  he  may  get 
possession  of  funds  of  the  partnership 
before  the  settlement  of  his  rights  by 
the  final  decree.  Randall  v.  Morrell, 
17  N.  J.  Eq.  343. 

Where  articles  of  partnership  pro- 
vide that,  in  case  of  the  dissolution  of 
the  partnership,  by  the  death  or  with- 
drawal of  any  of  the  partners  a  general 
account  shall  be  taken,  and  prescribe 
the  manner  in  which  the  concem  shall 
be  settled  and  its  assets  be  distributed, 
an  injunction  will  not  lie,  at  the  in- 
stance of  the  outgoing  partners,  against 
the  remaining  partner,  until  the  latter 
has  had  an  opportunity  of  closing  up  the 
concem  under  the  articles  of  partner- 
Bhip.     Quinlivan  v.  English,  44  Mo.  46. 

Where  one  partner,  holding  notes  for 
the  benefit  of  the  firm,  attempts  to  pawn 

1294 


or  pledge  them  for  his  own  private 
debts,  the  court  will  interfere  to  re- 
strain it.  Stockdale  v.  Ullery,  37  Pa. 
St.  486. 

A  partner  may  by  injunction  hold  h!s 
associates  to  the  specified  purposes  of 
the  partnership,  whUe  the  partnership 
continues.  Kean  v.  Johnson,  9  N.  J. 
Eq.  401. 

Equity  will  enjoin  one  of  several 
partners,  who.  by  the  partnership  con- 
tract, has  undertaken  to  superintend 
and  manage  the  busijaess,  from  carrying 
on  the  same  business,  at  the  same 
place,  in  a  separate  establishment,  for 
his  sole  benefit,  even  though  there  be 
no  express  covenant  restraining  him 
from  so  doing.  Marshall  v.  Jolinson, 
33  Ga.  500. 

After  dissolution  of  a  firm  equity 
will  restrain  one  partner  from  publishing 
the  letters  of  another  concerning  the 
business  of  the  firm,  unless  the  purposes 
of  justice,  civil  or  criminal,  require 
their  publication.  Roberts  v.  McKee, 
29  Ga.  161. 

Where  the  conditions  of  dissolution 
of  a  partnership  were  such  that  the  re- 
tiring partner  had  the  right  to  open  and 
attend  to,  for  his  own  benefit,  letters 
thereafter  addressed  to  the  late  firm, 
upon  certain  subjects  of  business :  Held, 
that  the  mere  fact  that  he  opened,  and 
answered,  in  his  own  name,  and  for  his 
own  benefit,  two  fictitious  or  "decoy" 
letters,  addressed  to  the  late  firm  at  the 
instance  of  the  plaintiff,  their  successor, 
and  purporting  to  be  upon  business 
which  the  former  had  not  the  right  to 
attend  to,  did  not  authorize  the  court  to 


CHAP.  X.J 


IX.JU.VCTION'    AGAINST    I'ARTNKHS. 


^9lt: 


ity  had  recovered,  but  was  excluded   ])y  his   co-])artner5   from  the 
management   of    the    affairs  of   the    partnership,    the   Kcstonn|; 
Court  restored  him  to  liis  position  in  tlie  linn  by  grant-  purtuur 
ing  an  injunction  restraining  the  other   partners  from  preventing 
him  from  transacting  the  business  of  the  partnersliip.  (n) 

Again,  in  England  v.  Curling  (o),  a  partnership  liad  been  en- 
tered into,  for  a  term  of  years  which  had  not  expired.   Restraining 
One  of  the  partners  insisted  on  a  dissohition  and  retired  i'ni-'-'^t^cr  uets. 
from  the  partnership,  and  entered  into  another  partnership,  which 
assumed  the  name  of  the  old  firm,  opened  the  letters   F.nKbm.i  v. 
addressed  to  it,  and  circulated  notices  of  its  dissolution,   c^^''"'- 
But  on  a  bill  filed  by  the  continuing  partners  of  the  old  firm  against 
their  co-partner  and  the  other  members  of  the  new  firm,  the  Court 
granted  an  injunction  resti-aining  the  retired  co-partner  from  carry- 
ing on  business  with  his  new  partners  or  any  other  persons 
except  his  old  co-partners,  until  the  expiration  of  the  *term;     *905 
and  restraining  his  new  partners  from  carrying  on  business 
with  him,  or  otherwise,  in  the  name  of  the  old  firm,  and  from  re- 
ceiving or  opening  letters  addressed  to  it,'  and  from  interfering  with 
its  property;  and  restraining  the  retired  partner  from  publishing  or 
circulating  any  notice  of  the  dissolution  of  the  old  firm,  before  the 


interfere  by  action  and  injunction.  White 
r.  Jones,  1  Abb.  Pr.  N.  S.  328. 

An  injunction  restraining  interference 
with  the  complainant  in  tlie  exorcise  of 
his  rijfhts  as  a  partner  of  the  defendants, 
will  be  dissolved  on  the  clear  averment 
in  the  answer  that  the  partnership  was 
dissolved  bj*  mutual  consent.  Van  Kuren 
r.  Trenton,  &c.  Co.  13  N.  J.  Eq.  302. 

The  principles  that  an  injunction 
should  not  be  granted  unless  there  is 
dang'^r  of  irreparable  loss,  and  that  a 
prayer  for  equitable  relief  comes  too  late 
aft<^r  a  judgment  at  law,  have  no  appli- 
cation to  a  bill  in  equity  for  an  account 
and  settlement  of  a  co-pai-tnership, 
brought  by  one  of  the  partners,  who  al- 
leges that  he  was  the  lessee  of  the  part- 
nership property,  and  had  paid  out  more 
than  he  had  received;  and  that  another 
partner,  who  held  the  legal  title  to  the 
property,  which  equitably  belonged  to 


the  company,  had  recovered  judgment 
in  ejectment  against  the  complainant, 
both  for  the  premises  and  for  mesuf' 
profits.     Wells  r.  Strange,  -5  C4a.  22. 

In  a  suit  seeking  an  equitable  off-set 
upon  an  account  between  former  part- 
ners, and  an  injuction  to  restrain  a  suit 
at  law  by  the  defendant  against  th.' 
complainant  upon  notes  given  in  course 
of  partnership  transactions,  the  men' 
assertion  of  a  counter-demand  will  not 
warrant  the  retaining  of  the  injunction 
issued  upon  filing  the  bill.  Some  facts 
must  be  alleged,  or  account  given 
whence  the  court  can  judge  whether  the 
complainant  would  probably  be  able  to 
estabhsh  his  claim.  Hewitt  v.  Kuhl,  2'> 
N.  J.  Eq.  24. 

(>i)  Anon.  Z.  v.  Z.   2  K.  &   J.  441. 

(o)  ■«  Beav.  129.  Si^c,  too.  Warder 
f .  Stilwell,  3  Jur.  N.  S.  9. 

'  See  ante,  994,  note. 

1295 


*096  ACTIOXo    BKTWKKX    I'AUTXKKS,    ETC.  [I'.OOK  III. 

expiration  of  the  term  for  which  it  had  been  entered  into.     So  in 
tlie  subsequent  case  of  Hall  v.  Hall  ( »),  a  partnership 

Ilallt'.  HaU.  ^  ^  -  .       ,  ,  1  1     , 

tor  t\A'entj-one  years,  determinable  on  twelve  months 
notice  by  either  party  {q),  was  entered  into  by  the  plaintiff  and  the 
defendant:  dispntes  arose,  and  the  defendant  wliolly  excluded  the 
plaintiff  from  tlie  ])artnership  business.  The  plaintiff  filed  a  bill  pray- 
ing tliat  the  articles  might  be  performed,  and,  amongst  other  things, 
for  an  injunction,  but  not  for  a  dissolution.  An  injunction  was 
granted,  restraining  the  defendant  from  applying  any  of  the  moneys 
and  effects  of  the  co-partnership,  otherwise  than  in  the  ordinar}'  course 
of  business,  and  from  obstructing  or  interfering  with  the  plaintiff  in 
the  exercise  or  enjoyment  of  his  rights  under  the  partnership  articles. 
These  authorities  show  that  where  a  partnership  is  not  determin- 

whcreone  able  at  will,  those  partners  who  are  desirous  of  carry- 
partner  seeks  .  i  i  •  •  i  •  1 1  i  '  i 
to  drive  the        mg  on  the  Dusmess  lu  tlie  proper  way  will  be  protected 

others  to  a  ^  ^  i        i  ./  i 

dissolution.  by  the  Court  from  the  unwarranted  acts  of  a  co-])art- 
ner,  whose  only  object  may  be,  by  grossly  misconducting  himself, 
to  force  the  others  to  agree  to  a  dissolution.  (/■) 

Where  the  partnership  is  determinable  at  will,  there  is,  it  is  said. 
Injunction         iiiore  difficulty  in   interfering  if  a   dissolution    is  not 

wiieretlie  "^  ,  ~ 

partnership  is     sougliti  for,  supposiiig  the  Court  to  interfere,  the  de- 

(ielemnnable  n       »  '         1  I  :^  '      ^ 

'"  "iii-  fendant   may  immediately  dissolve  the  partnership,  (s) 

Dut  supposing  him  to  do  so,  an  injunction  will  not  necessarily  be 
futile,  inasmuch  as  so  long  as  it  continues  in  force,  the  defendant  is 
rendered  powerless  for  evil,  and  a  notice  by  him  to  dissolve  the 
]):irtiiersliip  cannot,  per  se,  operate  as  a  dissolution  of  the  injunc- 
tion. In  Glassington  v.  Thwaites(^),  the  plain- 
Thwaites?'^ *'  *D96  tiff,  wlio  *was  OTie  of  the  proprietors  of  the 
Morning  Herald,  obtained  an  injunction  re- 
straining his  co-partners,  who  were  also  proprietors  of  the  English 
Chronicle  (in  wdiich,  however,  the  plaintiff  had  no  interest),  from 
publishing  in  the  latter  paper,  any  information  obtained  at  the  ex- 
Morrisv.  pcuse  of  the  former,  until   it   should   have  been  first 

coiman.  published   in   the  Morning  Herald.     So    in  Morris  v- 

Colman  (?^),  one  of  the  proprietors  of  the  Haymarket  Theater  was 

(p)  12  Beav.  414,  20  ib.   139,  and  3  Hare,  387. 

Mac.  &  G.  79.      See,  also,  Blisset  v.  {s)  See  Peacock  v.  Peacock,  IG  Ves, 

Daniel,  10  Ha.  493.  49;  Miles  v.  Thomas,  9  Sim.  606. 

iq)  See  20  Beav.  139.  {t)  1  Sim.  &  Stu.  124. 

(r)  See,  too,  Faii-thome  v.  Weston,  3  (»)  IS  Ves.  437. 

1296 


CIIAI'.  X.]  INJUNCTION    AGAINST    PARTNKKS.  *i>'t>T 

restrained  from  acting  contrary  to  tlie  articles  of  partnership,  In- 
writing  plays  for  other  theaters.  Again,  where  a  part-  ii„n,f„iyr. 
Tier  had  agreed  not  to  sell  his  share  without  first  offer-  i'""""^'-g'"- 
irig  it  to  the  other  partners,  an  injunction  to  restrain  a  pale  was 
granted.  (;r)  It  does  not  appear  fruni  the  reports  of  these  cases 
whether  the  partnerships  were  partnerships  at  will  or  not;  hut  sup- 
posing them  to  have  been  merely  partnerships  at  will,  it  is  clear 
that  the  injunctions  were  far  from  valueless. 

In  an  action   instituted  for  the  purpose  of  having  a  ].:irtnorship 
dissolved,  or  of  having  an  account  taken  after  a  part-   injunction  iu 
nership  has  been  dissolved,  it  has  never  been  doubted  disioiuiian. 
that  an   injunction  will  l)e  granted   to  restrain  one  of  the  partners 
from  doing  anv  act  which  will   impede  the  winding  up  of  the  con- 
cern.    For  example,  one  partner  will  be  restrained  from  carrying  on 
the  concern  for  any  other  purpose  than  winding  up(y);  from  dam- 
ao-ing  the  value  of  the  good  will  if  it  ought  to  be  sold  for  the  benefit 
of  all  (5)  ;    from  getting  in  the  assets  if  he  is  likely  to  misapply 
them(«);    a   surviving  partner   will  be  restrained   from    improp- 
erly ejecting   the  representatives   of  his  deceased   co-partner  (Z»)  ; 
and    they,  on    the    other    hand,  will    be   restrained    from   making 
any  improper  use  of  ])artner6hip  property,  the  legal  estate  of  which 
may  happen  to  be  in  them,  (d     So  a  surviving  partner  will 
be  restrained  from  disposing  of  or  ''-getting  in  the  partner-     *99T 
ship  assets,  if  he  has  already  been  guilty  of  breaches  of  trust 
with  reference  to  them,  {d)      But  a  surviving  ])artncr  will  not  be 
restrained  from  continuing  to  carry  on  business  in  the  name  of  hiu)- 
self  and  his  deceased  co-partner  unless  so  to  do  is  contrary  to  his  own 
ao-reemcnt,  or   the  good-will    is    a   saleable  asset   of  the  iirm.  {e) 
Again,  in  an  action  for  a  dissolution,  a  partner  will  be  rcstraint'd 
from  improperly  interfering  with  01/obstructing  the  partnership 
business  (/);  from  drawing,  accepting,  or  endorsing  bills  of  ex- 

(x)  Honifray  r.  Fothergill,  1  Eq.  567.  ant  a^^ainst  costs,  etc. 

(y)  See  De  Tastet  r.  Bordonavo,  Jac.  (?*)  Elliot  r.  rn-own,   3  Swanst.   4S0, 

51(3  11.;  Hawkins  f.  Hawkins,  4  Jur.   N.  S. 

[z)  Tamer  r.  Major.  ?>  Giff.  442;  ■Brad-  1045. 

bury  t'.  Dickens,   27  Beav.  53.     In  the  (r)  Alder  r.  Fouracre,  3  Swanst.  489. 

last  case  the  defendant  was  advertising  (c/)  Hartz  r.  Schrailer,  8  Ves.  317.  ^ 

the  discontinuance  of  a  partnei-ship  pe-  (c)  See  on  this  suVyect,  ante.  pp.  854, 

•  riodical  of  which  he  was  the  editor.  865. 

((t)  O'Brien  v.  Cocke,  Ir.  L.  R.  5  Eq.  (/)   Smith  v.   Jeyes,   4   Beav.    503  ; 
51;  there  the  plaintift'  was  allowed  to  Charlton  v.  Poultcr,  19  Ves.  148,  n. 
get  them  in,  indemiiifving  the  defend- 
er 129T 


*993  ACTIONS    BETWEEN    PAKTNEES,    ETC.  [boOK  III. 

chan:::^e  in  tlie  partnership  name  for  other  tlian  partnership  pur- 
poses {g)\  from  trotting  in  debts  owing  to  the  firm  {h)\  from  with- 
iiolding  the  partnership  books  (i),  and  generally  on  a  dissolution  one 
partner  will  be  restrained  from  injuring  the  property  of  the  firm.  (A) 
Injunction  So  the  Court  wlll  interfere  by  injunction  to  ])rotect 

p°inners  crom     pnrtuers  from  the  interference  of  pcrsous  claiming  the 

the  representa-      ,  x>  i    i.  i.  i  i>  i   •       i       ^i 

tivesofaco-  sliare  of  a  late  co-partner,  by  reason  oi  his  death,  or 
par  ner.  bankruptcy,  or  under  an  execution.  {V) 

So  after  a  dissolution  the  Court  constantly  interferes  by  injunc- 
injunction  to     tiou  to  restrain  breaches  of  Special  agreements  entered 

enforce  special     .  ^      •  ^ 

agreements  mto  between  the  partners;  such  for  example  as  agree- 
ments not  to  carry  on   business  [m),  not  to  get  in  debts  of  the 

firm  {n),  not  to  divulge  a  trade  secret,  [o)  So,  if  a  partner 
*998     retires,  and  ^assigns  his  interest  in  the  partnership,  'and  in 

the  good-will  thereof,  to  the  continuing  partners,  he  will  be 
restrained  from  recommencing  or  carrying  on  business  in  such  a 
way  as  to  lead  people  to  suppose  that  he  is  the  successor  of  or  still 
connected  with  the  old  firm,  {p) 

Although  injunctions  to  restrain  actions   are   now  abolished,   it 
Injunction  to      mav  be  uscful  to  observe  that  where  surviving  partners 

restrain  actions  "  /•    i      •      i  i  i 

on  the  ground     gavc  the  cxccutors  of  their  late  partner  a  bond  for  the 

of  unsettled  ^  i  .        i  .1.11 

accounts.  ainount  of  his  share,  the  amount  of  which  had  not  been 

ascertained,  an  action  on  the  bond  was  stayed  on  its  being  sliown 
that  if  the  partnership  accounts  were  taken  it  would  appear  that 
the  surviving  partners  had  already  paid  too  much,  {q)  But  an  ac- 
tion  for  the   balance  of  a  settled  account  would  not  be  restrained 

(^r)  Williams  v.  Bingley,  2  Vern.  278,  Allen  r.  Kilhre,  4  Madrl.  4G4;  Fraser  v. 

note,    and   Coll.    Part.   233  ;    Jervis   v.  Kershaw,  2  K.  &  J.  496;    Davidson  r. 

White,  7  Ves.  412;    Hood  v.  Aston,  1  Napier,  1  Sim.  297;  Fraeland  v.  Stans- 

Russ.  412.     In  the  two  last  cases,  the  feld,  2  Sm.  &  G.  479.     As  to  sheriffs, 

injunction  restrained  »!«/ayjc?e  indorsees  Bevan  v.  Lewis,  1  Sim.  376;    Newell  *•. 

for  value  from  parting  with  or  negotiat-  Townsend,  6  ib.  419.     As  to  executors, 

ing  the  securities.  Phillips  v.  Atkinson,  2  Bro.  C.  C.  272. 

{h)  Read  v.  Bowers,  4  Bro.  C.  C.  441.  [m)  Whittaker  v.  Howe,  3  Beav.  38:5. 

(y)  Taylor  v.  Davis,  3  Beav.  388,  note;  (n)  Davis  v.  Amer,  3  Drew,  64. 

Greatrex  v.  Greatrex,  1  DeG.  &  Sm.  692;  (0)  Morison  v.  Moat,  9  Ha.  241. 

Charlton  V.  Poulter,  19  Ves.  148,  n.  (/>)  Churton  v.  Douglas,  Johns.  174, 

(k)  See  Marshall  v.  Watson,  25  Beav.  ante,  p.  855.     See,    also,  Hookham   r. 

501,  where  an  injunction  to  restrain  a  Pottage,  8  Ch.  91. 
partner  from  publishing  the  accoimts  of  [q)  Jackson  v.  Sedgwick,  1  Swan^t. 

the  firm,  was  under  pppcial  circtimstan-  460.     See,  also,  Gold  v.  Canham,  1  Ch. 

ces  refused.  Ca.  311,  and  2  Swanst.  325,  note. 

(?)  See  as  to  assignees  m  oankruptcy, 
1298 


CHAP.  X.]  INJUNCTION    AGAINST    PARTNKRS.  *90'J 

merely  because  there  were  otlier  unsettled  accounts  between  the 
parties  (r);  nor  would  a  court  of  equity  interfere  to  prevent  a  share- 
liolder  of  a  company  who  was  a  creditor  of  that  company  from  exe- 
cuting a  judgment  obtained  against  it  by  him  as  creditor.  (.?) 

Before  leaving  this  subject,  it  is  necessary  to  make  a  few  observa- 
tions on  the  kind  of  misconduct  which  will  induce  the  injunction 

/^         .    .  .  .     .  , .  .  ,        in  case  of 

Court  to  grant  an  injunction  against  one  partner  at  the  misconduct, 
suit  of  another.  Mere  squabbles  and  improprieties,  arising  from 
intirmi ties  of  temper,  are  not  considered  sufficient  ground  for  an 
injunction  (t);  but  if  one  partner  excludes  his  co-partner  from  his 
rightful  interference  in  the  management  of  the  partnershij)  affairs, 
or  if  he  persists  in  acting  in  violation  of  the  partnership  articles  on 
any  point  of  importance,  or  so  grossly  misconducts  himself  as  to 
render  it  impossible  for  the  business  to  be  carried  on  in  a  proper 
manner,  the  Court  will  interfere  for  the  protection  of  the 
other  partners,  (w)  Where,  however,  *the  j^artner  com-  *990 
plained  of  lias  by  agreement  been  constituted  the  active  man- 
aging partner,  the  Court  will  not  interfere  with  him  unless  a  strong 
case  be  made  out  against  him  (»);  nor  will  the  Court  restrain  a  part- 
ner from  acting  as  such,  merely  because  if  he  is  known  so  to  do, 
the  confidence  placed  in  the  firm  b}'  the  public  will  be  shaken,  (y) 
It  need  scarcely  be  observed  that  a  partner  who  seeks  an  injunc- 
tion against  his  co-partner  must  himself  be  able  and  Partner appiv- 

.,,.  ,  n  1  .  ,        x»  ^    inslorinjuni- 

willing   to   perform   his   own    part  of   anv  aijreement  t ion  must  come 

I'll  1      .L  i      •       1  •  "-.     ^     1         1       ^*^'''^  clean 

wnich  he  seeks  to  restrain  his  co-partner  from  break-  bauds, 
ing  {s);  and  the  plaintiff's  own  misconduct  may  be  a  complete  bar 
to  his  application,  however  wrong  the  defendant's  conduct  may  have 
been,  {a)     As  stated  by  Lord  Eldon  in  Const  v.  Harris,  a  partner 
who  complains  that  his  co-partners  do  not  do  their  dutv  to  him, 

(r)  See  Preston  t'.  Strutton,  1  Ans.  50,  partners  who  horsed  a  mail  coach,  was 

and  Rawson  v.  Samuel,  Cr.  &  Ph.  172.  restrained  from  horsing  it  on  the  ground 

(«)  Rheam  v.  Smith,  2  Ph.  726;  Hard-  that  he  did  it  so  badly  as  to  imperil  the 

inge  V.  Webster,  1  Dr.  &  Sm.  101;  and  business  of  the  concern, 

see  Hammond  v.  Ward,  3  Drew,   103.  (j-)  See  Lawson  v.   Morgan,  1  Price, 

See,  also,  ante,  p.  892.  303;  Waters  r.  Taylor,  15  Yes.  10. 

(<)  See  Marshall  v.  Colman,  2  J.  &  W.  (//)  Anon.  2  K.  it  J.  441. 
266;  Smith  v.  Jeyes,  4  Beav.  503;  Law-  {:)  Smith  r.  Fromont.  2  Swanst.  330. 
son  I'.  Morgan,  1  Price,  307;  Cofton  v.  {a)  Littlewood  r.  Caldwell.  11  Price, 
Homer,  5  Price,  537;  Warder  v.  Slil-  97,  where  an  injunction  was  refused  be- 
well,  3  Jur.  N.  S.  9.  cause  the  plaintiff  had  taken  away  the 

(m)  See  ante,  p.  227.     In  Anderson  v.  partnership  books. 
Walla. e,  2  Moll.   540,   one  of  several 

1299 


*1000  ACTIONS    BETWEEN    PARTNERS,    ETC.  [bOOK  III. 

must  be  ready  at  all  times,  and  offer  to  do  his  duty  to  them,  (h) 

In  consequence  of  the  liability  which  attaches  to  a  person  who 

Injunction        liolds  himsclf  out  as  a  partner  with  others,  and  of  the 

to  restrain  i       •     i     i  i 

holding  out.  danger  run  by  a  person  who  is  held  out  as  a  partner  witii 
others,  even  althougli  it  may  not  be  with  his  consent,  a  Court  will,  it 
seems,  interfere  and  restrain  a  person  from  holding  out  another  as 
partner  with  him,  without  the  authority  of  that  other,  (c)  And  if  a 
person  is,  without  his  authority,  advertised  by  the  promoters  of  a 
company  as  a  trustee  of  the  company,  an  injunction  against  them 
M'ill  be  granted,  (d)  Upon  the  same  principle  if  a  person's  name 
is  wrongfully  placed  on  a  company's  register  of  shareholders,  he  is 
entitled  to  an  injunction  to  restrain  its  continuance  there,  (e) 


*1000  *2.     Against  directors,  (te. 

"With  respect  to  injunctions  against  companies  and  their  direc- 
^  ,     ,.  tors,  little  remains  to  be  added  to  what  was  said  when 

Injunctions  ' 

against  compa-  cousiderinor  the  principles  by  which  Courts  are  guided 

nies  and  their  i^  i  r  J  => 

directors.  in  interfering  in  matters  of  internal  management  {/)■, 

and  in  controlling  majorities,  {g)  In  order,  however,  to  facilitate 
reference,  it  will  be  convenient  to  collect  those  cases  in  which  an 
injunction  has  been  granted  or  refused,  although  they  may  have 
been  noticed  in  previous  pagos. 

In  relying  upon  the  authorities  here  collected,  it  is  to  be  borne 
,  .     ,.  in  mind  that,  before  the  hearing  or  trial  of  a  cause,  the 

Injunctions  '  »  ' 

hefore  the         Court  will  uot   restrain  the  exercise  of  a  clear  leo-ai 

hearing  of  o 

the  cause.  right,  unless  it  is  satisfied  that  it  will  be  compelled  to 
do  so  at  the  hearing  or  trial  (A);  nor  will  it  interfere,  if  it  is  not  in 
the  possession  of  all  the  material  facts,  and  convinced  that  an  im- 
mediate injunction  is  imperatively  required,  {i) 

{h)  Const  V.  Harris,  T.  &  R.  524.  &  Sm.  211,  where  however,  no  injiinc- 

{c)  See  Routh  v.  Webster,  10  Beav.  tion  was  granted.      Under  the  Compa- 

561;  Bullock  v.   Chapman,    2  DeG.  &  nies  Act,    1862,    the  remedy  would  be 

Sm.  211 ;  Troughton  v.  Hunter,  18  Beav.  under  §  35. 

470.   Compare  Banks  v.  Gibson,  34  Beav.  (/)  Ante,  p.  895,  et  seq. 

566.     In  Dixon  v.  Holden,  7  Eq.  488,  an  {g)  Ante,  p.  598  et  seq. 

injunction  was  granted  to  restrain  the  [h)  Playfair  v.  Bu-mingham,  &c.  Rail^ 

publication  of  a  statement  that  the  plain-  Co.  1  Ra.  Ca.  640. 

tiff  was  a  member  of  a  bankrupt  firm.  (i)  Fielden  v.  Lancashire,  etc.  Rail.  Co. 

{(1)  Routh  r.  Webster,   10  Beav.  561.  2  DeG.  &  S.  531. 

(e)  See  Bullock  v.  Chapman,  2  DeG. 

LSOO 


CHAP.  X.] 


INJUNCTIONS   AGAINST   DIKLCTOKS,    ETC. 


nooi 


I. — An  inj unction  Jias  leen  granted  to  restrai 


Injunctions 
grautud. 


1.  The  improper  insertion  or  continuance  of  a  person's  name  on  a  company "b 
prospectus  (A-)  or  on  the  register  of  sharehokleVs  (/); 

2.  The  registrj'  of  an  improper  transfer  of  shares  (m); 
o.     The  making  of  calls  for  illegal  purposes  {»); 

4.  The  mo  king  of  calls  on  a  shareholder  induced  to  become  such  by 
fraud  (o); 

*5.  The  illegal  issue  of  shares  {p);  e.g.,  preference  shares  issued  pur-  *1001 
suant  to  a  special  resolution  {q); 

6.  The  illegal  forfeiture  of  shares  (r); 

7.  The  unfair  use  by  a  company  of  a  creditor's  name  in  an  action  against  a  share- 
holder (s) ; 

8.  The  illegal  suspension  of  a  shareholder  from  his  rights  {t)\ 

9.  The  illegal  payment  of  dividends  not  actually  declared  (w),  e.g.,  payment  of 
dividends  out  of  capital  or  borrowed  money  {x); 

10.  The  payment  of  dividends  in  shares  {y); 

11.  The  making  of  loans  to  directors  {z); 

12.  The  departure  by  a  company  from  the  objects  to  attain  which  it  was  fonned; 
viz.  to  restrain 

A  fire  and  Kfe  insurance  company  from  engaging  in  marine  insurances  (a); 
A  railway  company  from   dealing  extensively   in  the  purchase  and  sale  of 
coals  {h); 


(A-)  Routh  V.  Webster,  10  Beav.  561. 

(/)  Taylor  v.  Hughes,  2  Jo.  &  Lat.  24; 
Shortridge  v.  Bosanquet,  16  Beav.  84. 
Compare  Bullock  v.  Chapman,  2  DeG.  & 
S.  211.  This  is  now  usually  done  by  an 
application  to  rectify  the  register,  as  to 
which  see  ante,  p.  142. 

(w)  Fife  V.  Swaby,  16  Jur.  49. 

(n)  See  as  to  this,  Preston  v.  Grand 
Collier  Dock  Co.  11  Sim.  327,  and 
Hodgkinson  v.  National  Live  Stock  In- 
sur.  Co.  26  Beav.  473,  and  4  DeG.  &  J. 
422,  both  of  which,  however,  were  de- 
cided on  demurrer.  See  further  on  this 
subject,  Orr  v.  Glasgow  Rail.  Co.  3 
MacQu.  799,  and  the  other  cases  cited 
infra,  under  the  next  head,  Nos.  2  to  6. 

(o)  Smith  r.  Reese  River  Co.  2  Eq. 
2184,  and  L.  R.  4  H.  L.  64;  Bloxam  r. 
Metrop.  Cab  Co.  4  N.  R.  51. 

(j))  Fraser  v.  Whalley,  2  Hem.  &  M. 
10.  See  infra,  under  second  head. 
No.  8. 

{q)  Hutton  V.  Scarboro'  Cliff  Co.  2 


Dr.  &  Sm.  514  and  521. 

(r)  Watson  r.  Eales,  23  Beav.  294; 
Norman  v.  Mitchell,  5  DeG.  M.  A-  (i. 
648;  Naylor  r.  South  Devon  Rail.  Co.  1 
DeG.  &  Sm.  32. 

(s)  Taylor  v.  Hughes,  2  Jo.  &  Lat. 
24,  and  other  cases  cited  ante,  p.  875. 

(0  Adley  v.  Whitstable  Co.  17  Ves. 
315;  19  ib.  304;  1  Mer.  107. 

()()  Fawcett  v.  Laurie,  1  Dr.  &  Sm. 
192;  Carlisle  r.  South-Eastern  Rail. 
Co.  IMixc.  &  G.  089;  Henrj'  r.  Great 
Northern  Rail.  Co.  4  K.  &  J.  1,  and  1 
DeG.  &  J.  606,  and  other  cases  cited 
ante,  p.  797. 

{x)  Bloxam  v.  Metrop.  Rail.  Co.  3 
Ch.  337;  McDougall  v.  Jersey  Hotel  Co. 

2  Hem.  &  M.  528. 

(//)  Hoole  V.  Great  Western  Rail.  Co. 

3  Ch.  262. 

(z)  Bluck  V.  Mallalue,  27  Beav.  30?. 

(a)  Natusch  v.  Irving,  a)itc,  p.  601. 

(b)  A.-G.  r.  Great  Northern  Rail.  Co. 
1  Dr.  &  Sm.  154. 

1301 


*.1002 


ACTIONS    BETWEEN    PARTNERS,    ETC. 


[book  III. 


A  railway  company  from  guaranteeing  the  payment  of  dividends  by  a  steam 

packet  company  (c); 
From  taking  an  unauthorized  number  of  shares  in  another  railway  company  {(I) ; 
From  making  a  difforent  railway  from  that  which  it  was  mcorporated  to 

make  (e);  , 

Or  part  only  of  such  railway  (/); 

Or    one    only    out    of    several    railways     which    it    had    been    fomied    to 
make  (y); 
*i002         *13.  The  transfer,  by  one  company,  of  its  business  to  another  com- 
pany (h)  otharwise  than  under  §  161  of  the  Companies  Act,  1862  [i); 

14.  Tlie  amalgamation  of  two  companies  having  similar  objects  (A-); 

15.  A  company  and  its  directors  from  applying  to  Parliament  at  the  expense  of 
the  company,  for  power  to  do  what  it  was  not  formed  to  do  [l); 

16.  A  chartered  company  from  surrendering  its  charter  (>n); 

17.  The  publication  of  the  contents  of  books  and  documents  inspected  under  an 
order  (n); 

18.  The  payment  out  of  the  funds  of  a  company  of  money  borrowed  by  its 
promoters,  to  enable  them  to  comply  with  the  standing  orders  of  the  House  of 
Lords  (o); 

19.  Proceeding  to  arbitration  under  an  ultra  vires  agreement  (p); 

20.  Prosecuting  a  suit  instituted  by  a  stranger,  but  alleged  to  be  for  the  benefit 
of  the  company  {q); 

21.  Prosecuting  jjroceedings  for  a  libel  on  the  directors,  (r) 

22.  The  purchase  by  a  company  of  its  own  shares,  (s) 


(c)  Colman  r.  Eastern  Counties  Rail. 
Co.  lOBeav.  1. 

(f/)  Salomons  v.  Laing,  12  Beav.  377. 

(e)  Bagshaw  v.  Eastern  Union  Rail. 
Co.  7  Ha.  114,  and  2  Mac.  &  G.  389; 
Simpson  v.  Denison,  10  Ha.  51. 

(/)  Cohen  V.  Wilkinson,  12  Beav. 
125,  and  1  Mac.  &  G.  481;  Logan  v. 
Courtown,  13  Beav.  22. 

ig)  Hodgson  v.  Powis,  12  Beav.  392 
and  529,  and  1  DeG.  M.  &  G.  6. 

{h)  Charlton  v.  Newcastle  and  Car- 
lisle Rail.  Co.  5  Jur.  N.  S.  1096;  Be- 
man  r.  Rufford,  1  Sim.  N.  S.  550; 
Winch  V.  Birkenhead,  &c.  Rail.  Co.  5 
DeG.  &  S.  562.  See,  too,  Salomons  v. 
Laing,  12  Beav.  377;  Hattersley  v.  Shel- 
Imrne,  10  W.  R.  801,  where  it  was  in- 
tended to  obtain  an  act  to  legalize  the 
transfer. 

(?)  See,  as  to  this,  Southall  v.  British 
Mutual  Life  Ass.  Soc.  11  Eq.  65,  and  6 
Ch.  614. 

(t)  Kearns  v.  Leaf,  1  Hem.  &  M. 
681;  Gilbert  v.  Cooper,  10  Jur.  580. 
1302 


See,  also,  the  last  note  but  one. 

(Z)  Lyde  v.  East  Bengal  Rail.  Co.  36 
Beav.  10  ;  Munt  v.  Shrewsbury  and 
Chester  Rail.  Co.  13  Beav.  1 ;  Simpson 
V.  Denison,  10  Ha.  51 ;  Great  Western 
Rail.  Co.  V.  Rushout,  5  DeG.  &  Sm.  290; 
Vance  «.  East  Lane.  Rail.  C.  3  K.  &  J.  50. 
See,  also,  A.-G.  v.  Norwich,  16  Sim. 
225,  and  compare  Bateman  v.  Mayor  of 
Ashton-under-Lyne,  3  H.  &  N.  323. 

(«()  Ward  V.  Society  of  Attornies,  1 
Coll.  370,  as  to  which,  see  ante,  pp.  606, 
607. 

(«)  See  Williams  v.  Prince  of  Wales 
Co.  23  Beav.  338. 

(o)  Spackman  v.  Lattimore,  3  Giif.  16. 

Ip)  Maunsell  v.  Midland  Great  West- 
ern Rail.  Co.  1  Hem.  &  M.  130. 

{q)  Kemaghan  v.  Williams,  6  Eq. 
228. 

(r)  Pickering  v.  Stephenson,  14  Eq. 
322. 

(s)  Hope  V.  International  Financial 
Soc.  4  Ch.  D.  327. 


CUAP.  X.] 


INJUNCTION'S    AGAINST    DIRECTORS,    ETC. 


^1003 


II. — An  injunctioii  has  hecii  refused  to  restrain — 

1.  A  company  from  commencing  business  on  a  smaller  scale  than  contemplated 

by  the  prospectus,   or  before  its  nominal  capital  had  been  sub-   injunciioii.s 

■u    1  /j\  relused. 

scriboa  {t)\ 

2.  The  making  of  calls  by  a  company  commencing  business  with  less  capital 
than  that  originally  contemplated  (/t); 

*3.  The  making  of  necessary  calls  by  directors  who  had  been  guilty  of  *10U3 
improper  conduct  [x)  ; 

4.  The  making  of  calls  on  some  only  of  the  members  of  an  amal-    injunctions 
gamatiHl  society  (//)  ;  reiusfd. 

6.  The  making  of  calls  on  all  the  members  of  two  amalgamated  companies,  to 
pay  the  debts  of  one  of  such  companies  {z)  ; 

6.  Actions  for  calls  on  improperly  relinquished  or  forfeited  shares  (a)  ; 

7.  The  borrowing  of  money  by  a  limited  company  {h)  ; 
■  8.  The  issuing  of  preference  shares  (c)  ; 

9.  The  application  of  the  money  raised  by  the  issue  of  x>reference  shares  to  a 
purpose  different  from  that  for  which  it  was  raised  {d)  ; 

10.  The  return  of  deposits  to  subscribers  {e)  ; 

11.  The  payment  of  dividends  actually  declared  (/)  ; 

12.  The  payment  of  diviiiends  before  payment  of  deljts  (//)  ; 

18.  The  payment  of  dividends  before  the  completion  of  the  company's  works  (/()  ; 

14.  The  continuance  in  olHce  of  directors  appointed  in  the  place  of  others  re- 
moved for  alleged  misconduct  (/)  ; 

15.  The  management  of  a  company's  affairs  by  directors  whose  conduct  was  com- 
plained of;  no  sufficient  attempt  having  been  made  to  control  them  before  apply- 
ing to  the  Court  {k)  ; 


(<)  McDougall  V.  Jersey  Hotel  Co.  2 
Hem.  &  M.  .528. 

(m)  Norman  v.  Mitchell,  19  Beav. 
278,  and5DeG.M.  &  G.  648. 

{x)  Logan  v.  Courtown,  13.  Beav.  22. 

{y)  Bailey  t,  Birkenhead,  <S:c.  Rail. 
Co.  12  Beav.  433.  Compare  Preston  r. 
Grand  Collier  Dock  Co.  11  Sim.  327, 
and  see  No.  13,  infra. 

{z)  Cooper  v.  Shropshire  Union  Rail. 
Co.  6  Ra.  Ca.  136;  S.  C.  13  Jur.  443. 

(rt)  Harris  v.  North  Devon  Rail.  Co. 
20  Beav.  384;  Playfair  v.  Bristol,  &c. 
Kail.  Co.  1  Ra.  Ca.  640. 

{h)  Bryon  r.  Metropolitan  Saloon  Om- 
nibus Co.  4  Jur.  N.  S.  680,  and  on  ap- 
peal, 3  DeG.  &  J.  12:^     See  No.  15. 

(r)  Edwards  r.  Shrewsbury,  &c.  Rail. 
Co.  2  DeG.  &  Sm.  537.  See  under  fii-st 
head,  No.  5. 


[d)  Yetts  v.  Norfolk  RaU.  Co.  3  DeG. 
&  Sm.  293.     See  No.  15,  infra. 

{e)  Kent  v.  Jackson.  14  Beav.  367, 
and  2  DeG.  M.  &  G.  49. 

(/)  Fawcctt  V.  Laurie,  1  Dr.  &  Sm. 
192;  the  suit,  however,  was  defective, 
for  want  of  parties.     See  ante,  p.  888. 

[g]  Stevens  v.  South  Devon  Rail.  Co. 
9  Ha.  326.     See  No.  15. 

[h\  lirowne  r.  Monmouthshire,  &c. 
Rail.  Co.  13  Beav.  32.     See  No.  15. 

((•)  Iderwick  i\  Snell,  2  Mac.  &  G.  216. 

(A)  McDougall  v.  Gardiner,  1  Ch.  D. 
13,  and  10  Ch.  607;  Carlen  r.  Drury,  1 
Y.  k  B.  154;  Waters  v.  Taylor,  15  Yes. 
10;  Foss  r.  Harbottle.  2  Ha.  461;  Moz- 
ley  r.  Alston,  1  Ph.  790.  This  principle 
was  act'Hl  on  in  the  cases  cited  under 
Nos.  4,  5,  7,  8,  9,  12.  13. 

1303 


'^1001  ACTIONS    BETWEEN    PAKTNKUS,    ETC.  [liOOK  III. 

16.  Directoi-s  improperly  appo'ntod,  from  acting  (?)  : 

17.  Directors  from  putting  their  own  namas  on  negotiable  instruments  relating 
to  the  aft'aii's  of  the  company  (m)  ; 

18.     The  sailing  of  a  ship  on  a  voyage  disapproved  of  (n)  ; 
*1004  *19-  The  assignment  of  a  company's  property  to  trustees,  upon  trust,  (y\ 

sell  and  pay  the  company's  debts  (o)  ; 

20.  The  total  abandonment  by  a  railway  company  of  its  works,  it  not  having 
funds  to  complete  them  (^J ) ; 

21.  The  application  to  Parliament,  otherwise  than  at  the  expense  of  the  company, 
for  power  to  enable  the  company  to  do  what  it  was  never  intended  it  should  do(2), 
though  the  application  is  in  the  name  and  under  the  seal  of  the  company  (r); 

22.  The  sealing  of  an  agreement  to  make  such  an  application  {s)  ; 

23.  A  company  from  applying  to  a  foreign  legislature  for  increased  powers  {f) ; 

24.  An  application  to  Parliament  to  legalize  an  agreement  for  the  transfer  of  the 
business  of  one  company  to  another  {u)  ; 

25.  A  railway  company  empowered  to  purchase  a  canal,  from  exercising  the 
powers  of  a  canal  company  {x)  ; 

26.  A  railway  corapmy  having  steam  ferry-b^ats  from  using  them  for  ether  than 
ferry  purposes  when  not  wanted  for  those  purposes  (//)  ; 

27.  A  railway  company  from  carrying  out  a  traffic  agreement  entered  into  with 
another  company  {z) ; 

28.  An  hotel  company  from  temporarily  letting  out  part  of  its  hotel  for  other 
than  hotel  purposes  («j  ; 

29.  A  fire  msurance  company  from  paying  for  losses  usually  paid  for,  but  not 
covered  by  its  policies  {b)  ; 

30.  The  discharge  of  a  servant  whose  engagement  was  provided  for  in  the  com- 
pany's articles  of  association  (c)  ; 

31.  The  non- registry  of  a  transfer  or  shares  {d) ; 

32.  The  voluntary  winding  up  of  a  company  with  a  view  to  a  transfer  of  its 
business  under  §  161  of  the  Companies  Act,  1862  (e) ; 

(?)  Hattersley  v.  Shelburne,  10  W.  R.  10  W.  R.  881. 

881.  {•>^)  Rogers  v.  Oxford,  &c.  Rail.  Co.  2 

(w)  Bluck  V.  Mallalue,  27  Beav.  398.  DeG.  &  J.  662. 

(n)  Miles  v.  Thomas,  9  Sim.  606.  [y)  Forrest  v.  Manchester,  &c.  Rail. 

(o)  Lord  V.  Governor  &  Co.  of  Copper  Co.  30  Beav.  40,   affirmed  on  appeal,  4 

Miners,  2  Ph.  740.                                   '  BeG.  F.  &  J.  126,  but  on  a  diiferent 

( p)  Logan  V.  Courtown,  13  Beav.  22.  ground. 

(  q  )  Ware     v.    Grand  June.  Water-  (^)  Hare  v.  London  and  Northwestern 

works  Co.  2  R.  &  M.  470.  Rail.  Co.  2  J.  &  H.  80. 

(r)  Ex  parte   Hartridge.   5  Ch.  671;  («)    Simpson  v.  Westminster  Palace 

Great  Western  Rail.  Co.  v.  Rushout,  5  Hotel  Co.  2  DeG.  F.  &  J.  141,  and  8  H. 

DeG.  &  Sm.  290.     Compare  Maunsellv.  L.  C.  712. 

Midland  Great  Western  Rail  Co.  1  Hen.  {h)  Taunton  v.   Royal    Insur.   Co.   2 

&  M.  130.  Hem.  &  M.  135. 

(s)  Winch  r.   Birkenhead  Rail.  Co.  5  (c)  Mair  v.  Himalaya  Tea  Co.  1  Eq. 

DeG.  &  Sm.  580.  411. 

{t)  Bill  V.  Sierra  Nevada  Mining  Co.  {d)  Taft  v.  Harrison,  10  Ha.  489. 

1  DeG.  F.  &  J.  177.  (e)  Southall  v.   British  Mutual   Life 

(i(j  Hattersley  v.   Earl  of  Shelburne,  Ass.  Soc.  11  Eq.  65,  and  6  Ch.  614. 

1304 


cuAi'.  X.]  i:eoeivek.  *1005 


*3.  Of  Receivers.  *1005 

The  object  of  having  a  receiver  appointed  by  tlie  Court  is  to 
place  the  partnership  assets  under  the  protection  of  tlie  objectofhav- 
Court,  and  to  prevent  everybody,  except  the  oHicer  of  i"b'»rc*^*--ivcr. 
the  Court,  from  in  any  way  internieddlini^  with  them.'  Tlie  object 
of  liaving-  a  manag-er  is  to  liave  the  partnershi|>  business  carried  on 
under  the  direction  of  the  Court;  a  receiver,  unless  he  also  apj)oint- 
ed  manager,  has  no  power  to  carry  on  the  business. 

Courts  of  Justice  are  by  no  means  anxious  to  take  upom  them- 
selves the  management  of  a  partnership   business,  and  Receivers  in 
they  will,  it  is  said,  never  do  so,  save  with  a  view  to  a  t^^ki'i'mii''' 
dissolution  or  final  winding  up  of  the  aflairs  of  the  con-  ^^^^^i"'*""- 
cern.     In  the  well-known  case  of  Const -y.  Harris  (y),  q^^^^^ 
Lord  Eldon  intimated  that  a  receiver  might  be  ap-  ^'^'''is- 
pointed  in  a  suit  where  a  decree  could  be  made  for  carrjnng  on  the 
concern  according  to  some  specific  agreement  between  the  parties, 
as  well  as  in  a  suit  for  a  dissolution  and   winding  up;  and  in  that 
very  case  a  receiver  was  appointed,  although  no  dissolution  was 
prayed  by  the  bill.     The  receiver  liere  appointed  was,  however,  in 
no  sense  a  manager,  but  merely  a  person  nominated  to   Rceeivemnd 
receive  mone}'  coming  in  from  certain  quarters,  and  to   "^""-'sy''- 
apply  it  in  the  manner  agreed  upon  in  the  partnership  articles.  If 
the  appointment  of  a  receiver  does  not  involve  the  ai^pointment  of 
manager.  Const  v.  Harris  is  a  clear  authority  to  show  that  a  re- 
ceiver may  be  obtained   in  an  action  not  seeking  a  dissolution  of 
the  partnership;  the  later  cases  are  not  o]>])Osed   to  this.     J>ut  the 
writer  is  not  aware  of  any  instance  in  which  an  action  or  suit  has 
been  instituted  for  the  purpose  of  continuing  a  partnership,  and  in 
which   the  Court  lias  appointed  a  receiver  and   manager;  and   in 
Hall  V.  Hall  [g)  Lord  Cottenham  decided  that  in  such  a  suit  no  such 

'  Whore  the  receiver  of  firm  i)roportj'  to  take  possession  of  its  assets  in  a  for- 

has  assets  m  his  hands  which  are  shown  eif^n  jurisdiction.     Harvey   r.    Varney. 

to  belong  to  the  individual  partners,  an  104  Mass.  4;)6. 

order  will  be  made  that  they  be  restored  (/)  Turn.  &  R.  517.     See,  furtlier,  aa 

to  them.     Saylor  v.   Mockbie,  9  Iowa,  to  managers  as  distinguished  from  re- 

209.  ceivers,   Gardner  r.   Loud.   Chat,    and 

On  a  bill  in  equity  to  wind  up  a  part-  Dover  Rail.  Co.  2  Ch.  201. 
nership,  a  receiver  will  not  be  appointed  {g)  3  Mac.  «&  G.  79. 

1305 


*1006  ACTIONS    BETWEEN    PARTNERS,    ETC.  [bOOK  III. 

appointment   could   be   made.       Roberts   v.    Ebcrhardt  (A)   is    to 
the   same   effect.       There  the   plaintiff  and    the   defendants  were 

partners  in  a  colliery,  the  plaintiff  being  the 
Eberhardt.         *1006     *raanaging  partner.       Disputes  arose  between 

the  plaintifi"  and  tlie  defendant,  and  tlie  former 
filed  a  bill  for  an  account  and  a  receiver,  but  did  not  ask  for  a  dis- 
solution. The  Vice-Chancellor,  on  a  motion  by  the  plaintiff  for  a 
receiver,  refused  the  motion  on  the  ground  tliat  tlie  object  of  tlie 
suit  was  to  ensure  a  continuance  of  the  partnership,  and  not  to 
bring  it  to  a  close.  As  was  said  by  Lord  Eldon,  the  Court  will  not, 
by  appointing  receivers,  take  upon  itself  the  management  of  every 
trade  in  the  kingdom:  nor  will  it  take  upon  itself  the  manage- 
ment of  any  partnei'ship  business,  save  with  a  view  to  its  final 
winding  up.  (^y 

It  is  not,  however,  necessary  in  order  to  induce  the  Court  to 

Receiver  not      interfere,  that  the  plaintiff  should    in  his  action    ex- 
refused  De-  ^ 
cause  no  disso-  pressly  ask  for  a  dissolution:  for  the  Court  will  enter- 

prayed.  tain  an  application  for  a  receiver  if  the  object  of  the 

action  is  to  wind  up  the  partnership  affairs,  and  the  appointment 

of  a  receiver  and  manager  is  sought  with   that  view.     Thus,  in 

sheppardw.        Slieppard  v.  Oxenford  (>('),  a  bill  was  filed  by  the  plain- 

oxeniord.  ^j^  ^^^  behalf  of  himself  and  other  shareholders  in  the 

]S"ational  Brazilian  Mining  Company  against  the  defendant,  its  sole 

director  and  manager,  praying  for  an  account  of  monej^s  received 

and  paid   by  the  directors  on  behalf  of  the  association,  and  of  its 

debts,  and  for  payment  thereof,  out  of  the  assets  of  the  company, 

and  for  a  division  of  the  profits  amongst  the  shareholders.     The 

bill  also  prayed  for  an  injunction  to  restrain  the  defendant  from 

selling  the  property,  and  for  a  receiver  to  get  in  the  debts  owing  to 

the  company,  and   all   remittances    made  to  it    from    abroad,  and 

generally  to  conduct  the  business  and  affairs  of  tlie  association 

until  the  accounts  should  be  taken.      No  dissolution  was  expressly 

{h)  Kay,  148.  ^  A  receiver  will  be   appointed   only 

(?)  See  Goodman  v.  Whitcomb,  1  Jac.  with  a  view  to  a  dif3solution  and  wind- 

&  W.   589;  Harrison  v.   Armitage,    4  ing  up.     Receivers  are  not  appointed  to 

Madd.  143;  Hall  v.  Hall,  3  Mac.  &  G.  carry  on  and  manage  the  business  of  a 

79;  Smith  v.  J  eyes,  4  Beav.  503;  Wat-  partnership.     "Waterbury  «.  Express  Co. 

ers  V.  Taylor,  15  Ves.  10;  Oliver  v.  Ham-  50  Barb.  157;  S.  0.  3  Abb.  Pr.  N.  S. 

ilton,  2  Anstr.  453.      In  Morris  v.  Cole-  1G3;  Garretson  v.  Weaver,  3  Edw,  Ch. 

man,  18  Ves.  438,  there  was  a  reference  3S5. 

for  the  appointment  of  a  manager.  (A.-)  1  K.  &  J.  491. 

1306 


CUAP.  X.]  KKCEIVEU.  ""lUOT 

asked  for,  but  the  whole  object  of  the  suit  evidently  was  to  wind 
up  the  company,  and  liave  its  assets  applied  in  lifpiidation  of  its 
liabilities;  and  on  a  motion  by  the  plaintiff  for  an  injunction  and 
a  receiver,  an  injunction  was  grunted,  and  a  receiver  and  manager 
was  appointed,  as  prayed  by  the  bill,  {t) 

*Again,  in  Evans  V.  Coventry  (m),  the  mem-  *1007  ^^^ly^ll:^._ 
bers  of  two  societies,  or  rather  it  would  seem 
of  one  society,  having  two  branches  of  business,  viz.,  a  loan  branch, 
and  an  insurance  branch,  filed  a  bill  for  the  purpose  of  having 
the  funds  of  the  societies  made  good  by  the  defaulting  directors, 
and  of  having  the  accounts  investigated,  the  affairs  of  the  societies 
wound  up  if  necessary,  and  their  assets  in  the  meantime  protected 
by  the  appointment  of  a  manager  and  receiver.  It  was  proved  that 
some  of  the  funds  had  already  been  made  away  with  by  the  secre- 
tary; and  a  manager  and  receiver  was  appointed  to  protect  wh;it 
remained  until  the  hearing  of  the  cause,  upon  the  ground  that  the 
])laintiffs  had  an  interest  in  the  funds  in  question,  and  that  those 
funds  were  in  danger  of  being  lost. 

It  has  been  already  remarked,  that  in  granting  or  refusing  an  or- 
der for  a  receiver,  the  Court  does  not  act  on  the  same  Difreroiicc  bo 
Drinciples  as  when  it  jrrants  or  refuses  an  order  for  an  anji.jumti.m 

r  1  "  ,   .  and  aiiiJDiiitiiijj 

injunction;  it  being  one  thing  to  manage  the  affairs  arcccivLr. 
of  a  partnership  oneself,  and  another  to  prevent  a  person  who  has 
already  misconducted  himself  from  interfering  further  with  the 
partnership  concerns.  {ii)  Another  reason  for  drawing  a  distinc- 
tion between  an  injunction  and  a  receiver  is,  that  whibt  an  in- 
junction excludes  only  the  person  against  whom  it  is  granted,  the 
appointment  of  a  receiver  excludes  all  the  partners  from  taking 
part  in  the  management  of  the  concern.  It,  therefore,  does  not  fol- 
low that  because  the  Court  will  grant  an  injunction,  it  will  also  ap- 
point a  receiver;  nor  that  becauses  it  refuses  to  appoint  a  receiver, 
it  will  also  decline  to  interfere  by  injunction,  (o) 

(/)  A  receiver  and  manager  was  ap-  to  do.     The    Vice-Chancellor   refused 

pointed  in  this  country,  and  the  defend-  the  motion  merely  upon  the  ground  that 

ant,  who  had  gone  to  the  Brazils  alt<>r  he  could  not  take  upon  himself  the  man- 

the  bill  had  been  filed,  was  appointed  ageraent  of  such  societies,  even  until  the 

receiver  and  manager  out  there.  hearing  of  the  cause.     The   Court  of 

(wj)  5  DeG.  M.  &  G.  911,  reversing  S.  Appeal  did  not  allude  to  this. 

C.  3  Drew.  75.     It  does  not  appear  very  (n)  See  Hall  r.  Hall,  3  ]\Iac.  «fc  G.  85, 

distinctly  what  the  manager,  as  distin-  (o)    Although     an     injunction     was 

guished  from  the  receiver,  was  expected  granted,  a  receiver  was  refused,  in  Read 

1307 


■1008 


ACTIONS  betwkt:>:  rAnrxKus:,  etc. 


[nooK  in. 


In  considering  the  right  to  the  appointment  of  a  receiver 
"■U008     '^in  actions  for  a  dissolution  or  winding  up,  it  is  necessary 


Right  to  a 
rocciver. 


to  distinguish  cases  in  which  there  is  a  contest  between 


partners,  or  Late  partners,  from  those  in  wliich  the  con- 
test is*  between  partners,  or  hite  partners  on  the  one  side,  and  non- 
partners  on  the  other. 

Where  one  partner  seeks  to  have  a  receiver  appointed  against  his 
1.  As  between  co-partuei'S,  tlic  first  thing  to  ascertain  is,  whetlier  tlie 
partners.  ^j^^  partnership  between  them  is  still  subsisting  or  has 

been  already  dissolved;  for  if  it  is  still  subsisting  no  receiver  will  be 
appointed  unless  some  special  grounds  for  the  appointment  can  le 
sliown  (^),  or  unless  it  is  plain  that  a  decree  for  a  dissolution  will 
After  a  be  made  (^)  I  wliilst  if  the  partnership  is   already  dis- 

dissoiution.  solved,  the  Court  usually  appoints  a  receiver,  almost  as 
a  matter  of  course,  (r)'  In  the  case  supposed,  the  common  prop- 
erty has  to  be  applied  in  paying  the  partnership  debts,  and  has  to 
be  divided  amongst  the  partners;  and  each  partner  has  as  much 
right  as  the  others  to  wind  up  the  partnership  affairs.  Their  posi- 
tion is,  therefore,  essentially  different  from  that  of  mere  co-owners, 
between  whom  Courts  decline  to  interfere  by  appointing  a  receiver, 
except  under  special  circumstances,  {s) 


V 


V.  Bowers,  4  Bro.  C.  C.  441;  Hartz  v. 
Schrader,  8  Ves.  317;  Hall  v.  Hall,  12 
Beav.  414,  and  3  Mac.  &  G.  79. 

ip)  See  i)ifra,  p.  1010. 

(q)  Goodman  v.  Whitcomb,  1  Jac.  & 
W.  592. 

(r)  See  the  last  note,  and  Thomson  v. 
Anderson,  9Eq.  633;  Sargant  i?.  Read,  1 
Ch.  D.  600,  where  both  plaintiff  and 
defendant  applied  for  a  receiver.  Bait 
see  per  Lord  Eldon  in  Harding  v. 
Glover,  18  Ves.  281,  in  which  he  dis- 
avowed the  principle  that  a  dissolution 
was  a  sufficient  ground  for  a  receiver. 

^  When  a  partnership  is  dissolved  by 
decree,  the  Court  will  appoint  a  receiver, 
upon  a  disagreement  between  partners, 
in  the  course  of  the  winding  up ;  and  the 
same  rule  must  apply,  when  a  dissolution 
has  taken  place  by  consent  or  otherwise, 
and  a  serious  disagi-eement  arises  after- 
wai-ds,  Richards  v.  Baurman,  65  N.C.  162. 

Where  the  pleadings  showed  that  the 

1308 


parties  to  a  bill  in  equity  wei-e  co- part- 
ners equally  interested  in  the  property 
and  business  of  the  firm,  and  by  the 
articles' no  time  was  Limited  for  the  con- 
tinuance of  the  partnership,  and  the  bill 
alleged  that  it  was  dissolved  by  consent 
on  Dec.  31,  1862,  which  was  denied  by 
the  answer;  but  it  appeared  that  a  dis- 
solution was  then  contemplated  and 
imminent,  and  that  there  was  a  serious 
and  irreconcilable  disagreement  between 
the  parties  both  as  to  the  control  and 
disposition  of  their  property  and  effects, 
and  their  respective  claims  and  demands 
against  each  other:  Held,  that  the  ac- 
tion of  the  circuit  court  m  continuing  an 
injunction  granted  by  it,  and  appoint- 
ing receivers,  was  a  provident  exercise 
of  equity  power,  sanctioned  by  the  au- 
thorities, and  demanded  by  the  exigen- 
cies of  the  case.  Whitman  v.  Robinson, 
21  Md.  30. 

(s)  See  ante,  p.  63  et  seq. 


CHAP.  X.]  RECKIVER.  *10(l9 

AVlicii  tlie  contest  as  to  a  receiver  arises  between  a  partner  on  the 
one  hand,  and  the  executors,  administrators,  or  assigns  2.   As  between 

'  ,  .  partiii-rs  and 

of  a  hite  co-partner  on  the  other,  the  first  tiling  to  he  con-  non-purtuers. 
sidered  is  wlicthertlie  person  sought  to  be  excluded  from  intei-ference 
is  a  partner  or  not.  For  whilst  the  Court  is  reluctant  to  exclude  a 
])artner  from  the  management  of  the  partnership  affairs,  it  will  read- 
ily interfere  to  prevent  other  persons  from  intermeddling  therewith. 
The  reason  given  fur  this  is,  that  each  partner  is  at  the  outset  trusted 
by  his  co-partners,  and  has  confidence  reposed  by  them  in  liim;  and 
until  it  can  be  shown  that  he  ought  not  to  be  allowed  to  take  part 
any  longer  in  the  management  of  the  partnership  affairs,  the 
*Court  will  not  interfere  with  him.  But  this  reasoning  has  *1000 
no  application  to  persons  who  acquire  an  interest  in  the 
partnei'tjliip  assets  hy  events  over  which  the  partners  have  no  con- 
trol, e.  g.i  the  death  or  bankruptcy  of  one  of  the  members  of  the 
firm.  "Whilst,  therefore,  even  in  an  action  for  a  dissolution,  or 
winding  up,  a  receiver  will  not  be  granted  against  a  member  of  the 
firm  at  the  instance  of  the  executors,  administrators,  or  assigns  of 
a  late  partner,  unless  some  special  grounds  for  the  interlerence  of 
the  Court  can  be  established  (^);'  it  is  a  matter  of  course  to  ap- 
point a  receiver  where  all  the  partners  are  dead,  and  an  action  is 
pending  between  their  representatives  {u)\  or  where  such  aj^puint- 
ment  is  souii:ht  by  a  partner  against  the  representatives  of  his  late 
co-partner.  (.:^')  Fraser  y.  Kershaw  (y)  is  a  good  illus-  prazerv. 
tration  of  this  doctrine.  There  one  partner  had  be-  Kershaw, 
come  bankiMipt;  the  share  of  the  other  partner  had  been  taken  in 
execution  under  nji./a.  for  a  separate  debt,  and  had  been  assigned 
to  liis  creditor  by  the* sheriff.  The  creditor,  as  the  assignee  from 
the  sheriff  of  all  the  share  and  interest  of  the  non-bankru  it  ]iart- 
ner,  claimed  the  right  of  winding  up  the  affairs  of  the  partiiership, 
and  to  exclude  the  assignees  of  the  bankrupt  partner  froi  1  inter- 
fering. But  on  a  bill  filed  by  them  against  the  judgment  creditor, 
the  Court  granted  an  injunction,  and  appointed  a  receiver,  holding 

{f)  Collins  r.  Yonnor,  1  Macquecn,  385,  special  circumstances.     Horivll  r.  Witts, 

and  see  Harding  r.  Glover,  18  Ves.  281 ;  L.  R.  1  Pr.  &  Div.  103. 

Kershaw  v.  Matthews,  2  Russ.  62;  Ken-  '  See;w.<t^  1011,  note, 

nedy  r.  Lee,   3  Mer.   448;    Lawson  v.  (u)  Phillips  r.  Atkinson,  2  Bro.  C.  C. 

Morgan,  1  Price,  303.    For  similar  rea-  272. 

sons  the  Court  of  Probate  will  not  ap-  (.r)  Freeland  v.  Stansfeld,  2  Sm.  &  G. 

point  a  receiver  lyendente  lite  against  a  479. 

surviving  partner    unless    under    veiy  (y)  2  K.  it  J.  49G. 

liJOO 


Influence  of 
the  number  of 
partners  on 
the  appoi 
ment  of  a 
receiver, 


*1010  ACTIONS    BETWEEN    TARTXERS,    ETC.  [bOOK  III. 

that  tlie  riglit  of  the  non-bankrupt  partner  to  wind  up  tlie  affairs 
of  the  partnersliip  was  personal  to  himself,  and  was  incapable  of 
transfer,  and  did  not,  therefore,  pass  with  his  share  and  interest  in 
the  partnership  assets,  {zf 

In  those  cases  in  which  special  grounds  for  the  appointment  of 
a  receiver  must  be  shown,  it  follows  that  in  a  firm  of 

several  members  there  is  more  difficulty  in  ob- 
iJ^Bnf  n^f^i"'"       *1010     taining    a   receiver   *than    in    a  firm    of  two. 

For  the  appointment  of  a  receiver,  operating 
in  fact  as  an  injunction  against  all  the  members,  there  must  be 
some  ground  for  excluding  all  who  oppose  the  application.  If  the 
object  is  to  exclude  some  or  one  only  from  intermeddling,  the  ap- 
propriate remedy  is  rather  by  an  injunction  than  by  a  receiv^er.  («) 
Before  the  Judicature  acts  it  was  not  the  practice  to  appoint  a 
nefendantnow  receiver  at  the  instance  of    a  defendant    before   de- 

entitled  to  a  /  7  \       t^p  i  i      •       i  i        <■ 

receiver.  crce.  (6)     it  he  uesired  to  apply   for  a  receiver  before 

decree,  he  had  to  file  a  cross-bill.     But  this  is  now  unnecessary,  (c) 

The  grounds  on  which  the  Court  is  usually  asked   to  appoint  a 

receiver   before    dissolution,    are    either    because,  by 

the  appoint-       agreement  the  partners  have  divested  tliemselves  more 

ceiver  against     or  Icss  of  their  right  to  wiud  up  the  affairs  of  the  coii- 

'^      ^'  cern;  or  because,  by  misconduct,  the  right  of  personal 

intervention  has  been  forfeited,  and   the  partnership   funds  are  in 

danger  of  being  lost. 

As  an  illustration  of  an  appointment  of  a  receiver,  grounded  on 

an  express  agreement,  reference  may  be  made  to  Davis 

Agreement.        ^_  ^^^^^^_  ^^-^     rpj^^^.^  ^j^^  plaintiff  and  tlie  defendant, 

on  dissolving  partnership,  appointed  a  stranger  to  get  in  the  assets 
of  the  firm,  and  agreed  not  to  interfere  with  him. 
After  this  agreement  had  been  partially  acted  on,  one 

[z]  See,  too,  Candler  v.  Candler,  Jac.  not  made  the  assignment.     Van  Rens- 

225,    where    a    receiver    was    granted  selaer  v.  Emery,  9  How.  Pr.  135.     See, 

against  the  assignee  of  partnership  debts.  also,  Kirby  u.  Ingersoll,  1  Doug.  477. 

2  Where,  by  an  agreement  between  the  {a)  See  Hall  v.  Hall,  3  Mac.  &  G.  79. 

partners  and  a  third  party,  one  of  the  {h)  Robinson  t?.  Hadley,  11  Beav.  614. 

partners  assigns  his  interest  to  the  third  (c)  See  Ord.  xix.,  r.  8,  and  Hi.  r.  4. 

party,  who  by  the  agreement  is  to  act  Sargant  v.  Read,  1  Ch.  D.  600. 

with  the  other  partner  in  settling  the  {d)  3  Drew,  64.     See,  too.  Turner  v. 

affairs  of  the    firm,   such    assignee  is  Major,  3  GrfF.  442,  a  somewhat  similar 

entitled  to  an  injunction  and  receiver  to  case.     No  receiver,  however,  appears  to 

settle  the  affairs,  in  the  same  way  as  the  have  been  appointed.      An  injunction 

retiring  partner  would  have  been  had  he  was  sufficient. 

1310 


CHAP.  X.]  RECEIVER.  *1011 

of  the  partners  died,  and  disputes  arisini^  liL'iween  the  executors  of 
the  deceased  partner  and  the  surviviiii^  partner,  the  latter  proceeded 
to  get  in  the  debts  of  tlie  tirin,  in  violation  of  tlie  agreement.  On 
a  hill  tiled  h^^  the  executors  of  the  deceased  partner  for  an  account, 
and  for  an  injunction  and  a  receiver,  the  Court,  on  motion,  ap- 
pointed a  receiver,  but  declined  to  grant  an  express  injunction,  on 
the  ground  that  there  was  no  sufficient  impropriety  of  conduct  on 
the  part  of  the  defendant  to  nnider  such  an  order  necessary,  (c)' 

With  respect  to  misconduct,  the  observations  which  have  been 
already  made  on   this  head   when  s]ieaking  of 
injunctions,  *might  be  here  repeated.  (/)     If    -"1011  Misconduct. 
the  partnership  is  not  yet  dissolved  (j/),  there 

must  he  something  more   than   a  partnership   squabble;'   the  due 
winding  up  of  the  affairs  of  the  concern   must  be  endangered  to 
induce  the  Court  to  appoint  a  receiver  of  its  assets;  and  non-co-op- 
eration of  one  partner,  whereby  the  whole  responsibility  of  man- 
agement is  thrown  on  his  co-partner,  is  not  sufficient,  (h) 
,^  Where,  however,  a  partner  has  so  misconducted  himself  as  to 
show  that  he  is  no  longer  to  be  trusted,  as,  for  example,  -^^^^^^.^^ 
if  one  ]iartner  colludes  with  the  debtors  of  the  firm,   appointed, 
and  allows  them  to  dela}'  paying  their  debts (?*);  or  carries  on  trade 
on  his  own  account  with  the  partnership  property  (^);  or,  the  part- 
nership property  being  altroad,  runs  off  in  order  to  do  what  lie  likes 
with   it  there  (/);  or,  if  a  surviving  partner  insists  on  carrying  on 
the  business,  and  eni{)loying  therein  the  assets  of  his  deceased  part- 

{e)  See  anie.,  p.  994,  note  (/).  HcM,  that  the  application  should  Ix' 

*  Where  two  general  partners,  A  and  denied,  and  that  the  court  would  not  in- 

B,  siffn  an  ag'reement  at  the  dissolution  terfere  with  the  agreement  of  the  part- 

of  the  firm,  that  B  shall  settle  the  affairs  ners.    Hayes  r.  Heyer,  4  Sandf.  Ch.  48-J. 

of  the  firm,  and  use  the  finn's  name  in  (/)  Ante,  p.  998. 

so  doing,  and  the  agreement  is  publish-  (</)  See  ante,  p.  1008,  as  to  dissolved 

ed,  and  was  intended  for  publication:  partnerships. 

this  is  evidcmce  of  an  agreement  that  '  See  Loomis  v.   McKenzie,   ol  Iowa. 

B   alone  was   authorized  to  settle  the  425. 

affairs  of  the  partnership.     An  assign-  {K)  See  Roberts  r.   Eberhanlt.    Kay, 

ment  was  made  by  B  for  the  benefit  of  148,  and  Rowe  v.  Wood,  2  J.  I'S:  W. 

the  firm's  creditors  after  this  arrange-  556,   where    one    partner    declined    to 

ment,   and  while  A  was  present,   but  advance  more  money  to  work  a  mine. 

without    his    knowledge.      A    applied  (i)  Eastwick  r.    Coningsby,  1    Vern. 

thereupon  for  a  receiver,  but  alleged  no  118. 

fraud  or  bad  conduct  in  the  assignee,  (A)  Harding  r.  Glover,  IS  V.s.  281. 

and  the  answer  to  his    bill    insisting  (?)  Shcppard  r.  Oxi  nford,   1   K.  iV  J. 

strongly  on  the   solvency  of  the  firm:  491. 

1311 


••■1011 


rECKIVKR. 


[book  in. 


ner  (m)\  or  if  tliere  is  sncli  mismanagement  as  endangers  the  wliole 
concern  (;?)•,  or  if  the  persons  having  the  control  of  the  partnership 
assets  have  ah-eadv  made  away  with  some  of  them  (o)  in  all  these 
cases  tlie  Conrt  will  interfere  by  appointing  a  receiver.  (j?y 


(m)  Madg-wick  r.  Wimble,  6  Beav. 
495. 

(h)  See  De  Tastet  v.  Bordieu,  cited  in 
a  note  in  2  Bro.  C.  C.  272  ;  but  see  Const 
V.  Han-is,  T.  &  R.  524. 

(o)  Evans  v.  Coventiy,  5  DeG.  M.  & 
G.  911. 

( 2})  See  Smith  v.  Jejea,  4  Beav.  503. 

^  A  receiver  may  be  appointed  to  take 
charge  of  partnership  property,  where 
the  firm  or  one  partner  has  become  in- 
solvent, and  a  partner,  or  in  the  latter 
case  the  insolvent  partner,  is  wasting  the 
propeiiy,  or  threatens  to  make  an  im- 
proper application  of  it.  Williamson  r. 
Wilson,  1  Bland,  418;  Renton  v.  Chap- 
lain, 9  N.  J.  Eq.  62;  Birddall  v.  Colie, 
11  N.  J.  Eq.  6B;  Willson  v.  Ficher,  12 
N.  J.  Eq.  71;  Cox  V.  Peters,  13  N.  J. 
Eq.  39;  Deveau  v.  Fowler,  2  Paige,  400. 
Evans  v.  Evans,  9  id.  178:  Jacquin  v. 
Buisson,  11  How.  Pr.  385;  Geortner  v. 
Trustees,  etc.  2  Barb.  625;  Ellis  v.  Com- 
mander, 1  Strobh.  Eq.  188;  Phillips  v. 
Trezevant,  67  N.  C.  370;  Boyce  v.  Bur- 
chard,  21  Ga.  74. 

A  partner  having  possession  of  all  the 
partnership  effects,  has  no  ground  for 
an  application  for  the  appointment  of  a 
receiver  of  the  partnership  properly,  he 
having  full  power  to  dispose  of  it.  Smith 
V.  Lowe,  1  Edw.  33. 

A  partnership  was  entered  into  for  a 
special  purpose,  to  wit,  the  delivery  of 
40,000  feet  of  plank  stocks  at  a  certain 
place.  Subsequently,  the  partnership 
was  dissolved,  the  defendant  agreeing 
to  pay  the  plaintiff  for  his  interest  in 
the  timber,  at  certain  rates  specified  in 
the  contract  of  dissolution.  A  bill  was 
then  filed  to  set  aside  this  contract  of 
dissolution,  on  the  ground  of  fraud,  and 
praying  for  an  injunction  and  the  ap- 
pointment of  a  receiver.  Upon  the  mo- 
1312 


tion  to  dissolve  the  injunction:  Held, 
that  in  case  where  a  partnership  still 
subsists  to  authorize  either  party  to  ap- 
ply for  an  uij  unction  and  the  appoint- 
ment of  a  receiver,  he  must  be  prepared 
to  show  a  case  of  great  abuse  or  strong 
misconduct.  O'Brj-an  v.  Gibbons,  2  Md. 
Ch.  9. 

A  bill  allegmg  substantially  that  the 
complainant  had  bought  the  interest  of 
H.  in  the  newspaper  publishing  firm  of 
B.  &  H.;  that  B.  had  collected  debts 
due  the  finn  and  was  wasting  the  pro- 
ceeds; that  owing  to  personal  and  po- 
litical differences,  etc.,  irreparable  mis- 
chief would  be  done,  if  B.  retained  the 
management,  etc.,  sets  forth  just 
gi-Qunds  for  an  injunction  and  the  ap- 
pointment of  a  receiver.  The  legal 
effect  of  the  sale  was,  i2^so  facto,  a  dis- 
solution of  the  partnership  between  B.  & 
H.     Ballard  v.  Callison,  4  W.  Va.  320. 

Where,  upon  the  dissolution  of  a 
partnership,  its  members  form  new 
finns,  under  an  agreement  to  apply  the 
partnei-ship  assets  in  their  hands  to  the 
pa\anent  of  the  debts  of  the  old  part- 
nership, and  one  of  the  finns  converts 
to  their  own  use,  or  misappropi-iatcs 
such  assets,  or  their  conduct  induces 
the  conclusion  that  they  have  been  or 
are  likely  to  be  untrue  to  the  ti-ust  so 
reposed  in  them,  the  court  wiU  take  the 
partnership  assets  out  of  then-  hands 
and  place  them  in  those  of  a  receiver. 
But  in  such  case  there  must  be  evidence 
of  bad  faith  on  the  part  of  such  firm, 
before  the  court  will  appoint  a  receiver; 
mere  loss  of  confidence  in  them  is  not 
sufficient.  Coddington  i\  Tappan,  23 
N.  J.  Eq.  141. 

A  receiver  appointed  to  take  posses- 
sion of  the  property  of  a  husband  who 
has  absconded   with   a  paramour,   has 


CHAP.  X.] 


EECEIVER. 


4ull 


Again,  the  reluctance  of  tlie    Court   in    appointing   a  receiver 
against  a  ]xirtner,  being  based  on  the  contiJence  orig-   Etrt'ct  of 
inally  reposed  in  him,  that  reluctance  disappears  if  it  partner 
can  be  shown  that  such  confidence  was  originally  nii>j)hiced.   Tliere- 


no  right  to  dispossess  the  other  partner 
of  the  firm,  of  which  the  husljaiul  WiOS 
a  member,  of  the  partnership  property, 
in  the  absence  of  any  averments  of 
waste  and  fraud  committed,  or  about  to 
be  committed  by  such  partner,  to  the 
loss  of  the  absconding  member  or  his 
legal  representatives.  Hamill  v.  Hamill, 
27  Md.  679. 

'  If  a  surviving  partner  mixes  the  firm 
gno'ls  and  their  proceeds  with  his  own, 
and  keeps  no  accounts  whereby  they 
may  be  distinguished,  the  administra- 
tor may  have  a  receiver,  unless  the  sur- 
vivor vnU.  give  security.  Jeimings  v. 
Chandler,  10  Wis.  21. 

Where  it  appeared  that  a  co-partner- 
sihip  was  insolvent,  and  that  the  com- 
plainants, who  were  members,  were  ex- 
cludiid  from  their  full  share  in  the  man- 
agement of  the  concern,  and  that  the 
••espondent,  who  was  the  acting  partner, 
neglected  to  keep  proper  books  of  ac- 
count, and  to  keep  them  open  for  tJie 
inspection  of  the  complainants,  who 
were  refused  access  to  them,  the  court, 
on  motion,  appointed  a  receiver  before 
answer  and  final  decree,  and,  on  final 
hearing,  decreed  a  dissolution.  Gowau 
r.  Jetfries.  2  Ashm.  296. 

Where  a  partner  complainant  does 
not  show  by  his  bill  that  the  partner  de- 
fendant is  disposing  of  the  eft'octs  of 
the  firm  in  opposition  to  his  expressed 
wishes  or  view^s,  or  that  by  hnuself, 
agent,  or  attorney,  he  has  proposed  to 
take  part  in  the  collection  and  applica- 
tion of  these  effects,  and  has  been  pre- 
vented by  the  defendant,  or  that  the 
defendant  has  offered  any  opposition  to 
him.  and  the  answer  denies  that  the  de- 
fendant i?  proceeding  against  the  rights 
or  contrary  to  the  interests  of  the  com- 


plainant, or  that  the  latter  has  made 
any  demand  upon  him  for  any  of  the 
property  of  the  finn  or  his  individual 
property,  a  court,  of  equity  will  not  ap- 
point a  receiver  to  wind  up  the  business. 
TerreU  v.  Goddard,  18  Ga.  GC4. 

The  bill  stated  that  the  plaintiff 
agreed  with  A  to  fonn  a  p<u-tner.ship  in 
manufacturing,  and  that,  after  the 
partnership  had  continued  several  years, 
the  said  A  excluded  hira  from  taking 
any  part  in  the  business,  and  i-efused  to 
give  him  any  information  as  to  the  sales 
and  collections,  etc.  and  prayed  a  disso- 
lution and  the  appointment  of  a  re- 
ceiver, the  bill  not  charging  that  the 
plaintiff  was  unable  to  respond.  The 
answer  denied  the  exclusion;  stated 
that  the  parties  had  recently  had  a  set- 
tlement, when  the  plaintiff  acknowl- 
edged he  was  indebted  to  the  defendant 
to  the  amount  of  $609.92  over  and 
above  $400,  secured  by  a  mortgage; 
and  that  the  plaintiff's  share  of  the  net 
profits  since  the  settlement  was  not  suf- 
ficient to  pay  said  note.  The  defendant 
gave  an  account  of  his  sales  and  collec- 
tions, stated  that  he  always  had  been 
and  now  was  ready  to  account,  and  de- 
nied any  design  to  act  unfairly:  Held, 
that  the  plaintilf  was  not  entitled  to  a 
receiver.  Parkhurst  v.  Muir,  7  N.  J. 
Eq.  .307. 

Under  Gen.  St.  c.  55.  §  8,  a  special 
partner  is  liable,  in  ca.se  the  assets  of  the 
partnersliip  are  insufficient  to  pay  the 
debts,  only  for  the  amount  withdrawn 
by  him;  and  he  cannot  maintain  a  bill 
in  equity  against  his  general  partner  for 
*M  appointment  of  a  receiver  if  the  bill 
does  not  allege  that  the  assets  of  the 
partnership  arc  insufficient  to  pay  the 
debts,  or  that  the  conduct  of  the  general 

«  LSI  3 


•1G12 


ACTIONS  BET\  ::en  partners,  etc. 


[book  in. 


fore,  where  a  defendant,  by  false  and  fraudulent  representation?, 
induced  the  plaintiff  to  enter  into  partnership  with  him,  and  the 
plaintiff  soon  afterwards  filed  a  bill,  praying  that  the  partnership 
might  be  declared  void,  and   for  a  receiver,  the  Court  on  motion 

ordered  that  a  receiver  should  be  appointed.  ($-) 
*1012         ''^'Moreover,  even  although  there  be  no  misconduct  jeop- 
ardizing the  partnership  assets,  the  Court  will   appoint  a 
Effect  of  ex-       receiver  if  the  defendant  wrongfully  excludes  his  co- 
panncf.'^  partner  from  the  management  of  the  partnership  af- 

fairs, (rf  This  doctrine  is  acted  on  where  the  defendant  contends 
that  the  plaintiff  is  not  a  partner  (.s),  or  that  he  has  no  interest  in 
the  partnership  assets,  {t) 

Where  a  partnership  is  alleged  on  the  one  side  and  denied  on  the 
other,  and  a  molion  is  made  for  a  receiver,  the  Court 

Disputed  '  .  .  -•!    i-u    i. 

partnership.  usually  declines  to  appoint  a  receiver  until  tnat  ques- 
tion is  determined,  {itf 


partner  in  settlinc:  the  affairs  of  the 
partnership  is  such  that  there  is  danger 
of  insolvency.  Snyder  v.  Leland,  127 
Mass.  291. 

Where  the  security  of  an  administra- 
tor of  a  dsceased  partner  who  purchased 
the  firm  assets,  and  bound  himself  to 
pay  the  firm  debts,  and  who  has  died 
leaving  firm  debts  unpaid  and  finn  as- 
sets, is  not  sufficient;  the  Court  may 
appoint  a  receiver  to  receive  from  said 
administrator  the  pai-tnership  assets  in 
his  hands,  and  to  proceed  to  collect  the 
same.  Shackleford  v.  Shackleford,  02 
Grat.  481. 

(q)  See  Ex  parte  Broome,  1  Rose.  69. 

(r)  See  Wilson  v.  Greenwood,  1 
Swanst.  481;  and  Goodman  v.  Whit- 
comb,  IJ.  &  W.  589. 

^See  ante,  1011,  note  ;  Gowan  v.  Jef- 
fries, 2  Ashm.  296;  Wolbert  r.  Harris, 
7  N.  J.  Eq.  60-j.  See,  however,  Petit 
V.  Chevelier,  13  N.  J.  Eq.  181. 

(.s)  Peacock  v.  Peacock,  16  Yes.  49; 
Blakeney  v.  Dufaur,  15  Beav.  40. 

it)  Wilson  V.  Greenwood,  1  Swanst. 
471,  where  the  plaintiffs  were  the  as- 
signees of  a  bankrupt  partner.      See, 

1314 


too,  Clegg  V.  Fishwick,  1  Mac.  &  G.  294, 
where  the  plaintiff  was  the  administra- 
trix of  a  deceased  partner. 

[u)  Peacock  v.  Peacock,  16  Ves.  49; 
Chapman  v.  Beach,  1  J.  &  W.  594: 
Fairburn  v.  Pearson,  2  Mac.  &  G.  144. 
See  Rock  v.  Mathews,  2  DeG.  &  Sm. 
227,  as  to  the  conclusiveness,  upon  a 
motion  for  a  receiver,  of  an  answer  deny- 
ing the  partnership  alleged  by  the  bill. 

2  See  Baxter  r.  Buchanan,  o  Brewst. 
435;  Goulding  v.  Bain,  4  Sandf.  716; 
Williamson  v.  Munroe,  3  Cal.  383. 

In  an  action  for  the  settlement  of 
partnership  affairs,  it  is  proper  for  the 
Court,  upon  a  positive  denial  of  the 
partnership,  and  upon  its  being  made  to 
appnir  that  a  very  small  proportion,  if 
any,  of  the  capital  was  contributed  by 
the  plaintiff,  and  that  by  the  injunction 
and  receivership  a  large  and  flourishing 
business  will  be  arrested  and  perhaps 
ruined,  to  rescind  the  order  for  injunc- 
tion and  receivership  granted  in  the  first 
instance,  upon  the  defendants'  giving 
ade(iuate  security  to  pay  the  plaintiff 
any  sum  that  may  be  found  due  to  him 
on  final  settlement.    Popper  r.  Schieder, 


CIIAl'.  X.]  KECEIVEE.  *1(.)1;3 

Some  diffienlty  occurs  where  the  defendant  relies  on  illeirality  as 
a  defense  to  the  action  against  him.  If  the  illegality  inogaiitvof 
is  established,  the  Court  cannot,  it  is  conceived,  inter-  partnership. 
fere.  But  if  a  receiver  is  moved  for  before  the  hearing  of  the 
cause,  and  the  court  is  not  ])erfectly  satisfied  that  no  relief  can  ulti- 
mately be  given,  it  will  a])])oint  a  receiver  to  protect  the  property 
jyendente  lite,  and  the  character  of  the  defense  will  go  far  to  re- 
move any  scruples  the  Court  might  otherwise  have  in  interfering. 
Tims,  in  Hale  v.  Hale  (cp).  the  plaintiff  and  the  defend-   „  ,      _  , 

^  _    *  _  nale  V.  Hale. 

ant  had  carried  on'  the  business  of  brewers  for  many 
years  in  partnershi])  together.  The  plaintiff  fileil  a  bill  for  a  disso- 
lution, and  the  defendant  then  denied  the  plaintiff's  right  to  any 
account  or  relief  whatever,  on  the  ground  that  the  partnership  was 
illegal.  Having  thus  set  the  ]Maintiff  at  defiance,  and  claimed  the 
whole  ]n-operty  himself,  Lord  Langdale,  on  that  ground  alone,  ap- 
pointed a  receiver  and  manager,  although  the  plaintiff  was  only  a 
dormant  partner,  and  the  defendant's  management  of  the  business 
was  in  no  way  com]")lained  of. 

*In  mining  partnerships  a  receiver  will  be  appointed  or  re-     *1013 
fused  upon  the  same  principles  as  in   other  partnerships. 
Accordingly,  if  no  dissolution  or  winding  up  is  sought,  a  receiver 
and  manager  will  not  be  appointed  (?/);  but   with  a  Receivers  of 
view  to  a  dissolution  or  winding  up  areceiver  and  man-   "^'"^3. 
ager  will  be  appointed,  if  there  are  any  such  grounds  for  the  ap- 
]»ointment  as  are  sufficient  in  other  cases  (2);  or  if  the  partners  can- 
not agree  as  to  the  proper  mode  of  working  the  mines  until  they  are 

7  Abb.  Pr.  N.  S.  56;    38  How.  Pr.  34,  ship  will  not  entitle  one  of  the  parties  to 

See,  also,  Dunham  v.  Jarvis,  8  Barb.  88,  the  appointment  of  a  receiver  to  wind  np 

An  allegation  in  a  bill  in  equity,  that  the  affairs  of  the  concern.  Hobart  r. 
one  defendant  claims  to  have  been  in  Ballard,  31  Iowa.'>21. 
partnership  with  a  paiiy  deceased,  that  (.r)  4  Beav.  369.  See.  too,  Sheppard 
the  other  defendant,  the  administratrix  v.  Oxenford,  1  K.  &  J.  491,  where  a  re- 
ef said  deceased,  denies  such  partner-  ceiver  was  appointed  although  the 
ship,  and  that  the  complainant  himself  legality  of  the  partnei-ship  wiia  denied. 
is  ignorant  of  the  state  of  the  case,  is  (//)  Robert>s  r.  Eberhardt,  Kay,  \A>^: 
not  "  an  averment  of  partnership  "  suffi-  and  see  Rowlands  r.  Evans,  and  Wil- 
cient  to  authorize  the  issuing  of  ord*^rs  Hams  r.  Rowlands,  30  Beav.  80"2,  no- 
for  an  injunction  and  the  appointment  ticed  below. 

of  a  receiver.     Guyton  r.  Flack,  7  Md.  iz)  Sheppard  r.  Oxenford,  1  K.  &  J. 

398,  491,  where  there  was  no  prayer  for  a 

An  unexecuted  agreement  of  partner-      dissolution,         

1315 


■1014 


ACTIONS    BETWEEN    TAETNERS,    ETC 


[book  III. 


Kcwe  V  Wood  ^*^^^-  ('^O  ^^  Rowe  V.  Wood  (J),  indeed,  a  receiver  was 
refused,  altliongh  one  of  the  partners  excluded  t)ie 
other  from  interferini^  with  the  mine;  but  this  was  a  peculiar  case, 
for  the  partner  comphained  of  was  not  only  a  partner,  but  also  a 
mortgagee  in  possession,  and  his  mortgage  debt  wag  still  unsatis- 
fied. Again,  in  Norway '<;.  Rowe  (<?),  although  the  plaintiff  was  ex- 
cluded, a  receiver  was  refused  on  the  ground  of  his  laches,  he 
having  been  excluded  for  some  time,  and  having  taken  no  steps  to 
assert  his  rights  until  the  mine  proved  profitable,  {d) 

In  Rowlands  u  Evans,  and    Williams  v.   Rowlands  (e),  it  was 
held  that  a  manager  could  not  be  appointed  to  carry  on 
a  mine  for  the  benefit  of  a  lunatic  partner.     The  Court 
ordered  a  sale  and  appointed  an  interim  manager  only. 

If  the  Court,  on  being  applied  to  for  the  appointment  of  a  re- 
Appointment      ceiver,  thinks  that  a  proper  case  for  such  appointment 

of  partner  to  .  '        ^  .  i       ,        . 

be  receiver.  is  made,  and  tlie  partner  actually  carrymg  on  the  busi- 
ness has  not  been  guilty  of  such  misconduct  as  to  have  rendered  it 
unsafe  to  trust  him,  the  Court  generally  appoints  him  receiver 
and  manager  without  salary,  (f)  '  It  is  usual,  however,  to 
*1014       *require  him   to  give  security  duly   to  manage  the  part- 


Lunacy. 


(a)  JefFerys  v.  Smith,  1  J.  &  W.  298; 
Lees  V.  Jones,  3  Jur.  N.  S.  954.  In 
this  last  case  will  be  found  a  discussion 
as  to  what  ought  to  be  done  if  the  mine 
is  held  on  a  lease,  and  cannot  be  sold 
without  the  lessor's  consent,  which  is 
refused. 

(&)  2  J.  &  W.  553, 

(c)  19  Ves.  159. 

{d)  See  further  on  this  matter,  ante, 
p.  902  et  seq. 

(e)  30  Beav.  302. 

(/)  This  was  done  in  Wilson  r. 
Greenwood,  1  Swanst.  471 ;  Blakeney  v. 
Dufaur,  15  Beav.  40.  See  Sargant  v. 
Read,  1  Ch.  D.  600,  where  one  of  the 
plaintiffs,  being  senior  partner,  had  lib- 
erty to  propose  himself,  although  it  was 
urged  that  he  would  thereby  obtain  an 
unfair  advantage  as  regarded  the  good 
will. 

'  A  partner,  on  dissolution  of  the 
partnership,  appointed  agent  and  re- 
ceiver, although  he  have  an  interest,  is 

1316 


only  trustee  for  the  other  partners. 
Honore  v.  CoImesnU,  IJ.  J.  Marsh.  506. 

A  partner  cannot  under  any  plea  per- 
sonal to  liimself,  retain  moneys  collect- 
ed by  him  as  a  receiver  appointed  by 
the  court  pending  a  suit  for  a  partner- 
ship settlement.  To  retain  such  funds 
is  a  flagrant  breach  of  tnist,  and  the 
court  may  compel  their  immediate  pro- 
duction. Gridley  v.  Conner,  2  La. 
Ann.  87. 

The  compensation  of  a  receiver  ap- 
pointed to  wind  up  the  aS'airs  of  a  dis- 
solved partnership  is  to  be  limited  to 
such  an  amount  as  will  afford  a  reason- 
able compensation  for  the  services  re- 
quired and  rendered,  to  a  person  of  oi- 
dinaiy  standing  and  ability,  competent 
for  such  services;  and  is  not  to  be 
based  upon  the  usages  or  rates  of  profits 
which  prevail  in  any  branch  of  business, 
nor  upon  the  special  qualifications  or 
standing  of  the  person  appointed. 
Grant  v.  Bryant,  101  Mass.  567. 


CHAP.  X.]  ACTIONS    BETWEEN    PARTNERS,    ETC.  *lUl4r 

nersliip  affairs,  and  to  account  for  money  received  by  him.  (y) 
In  otlier  cases  the  appointment  of  a  receiver  is  referred  by  tlie 
judge  to  his  chief  clerk,  and  leave  is  freciuently  <!;iveii  for  each  part- 
ner to  propose  himself  A  partner  who  is  appointed  receiver  be- 
comes the  officer  of  the  Court  and  must  act  and  be  re^^pected  accord- 
ingly. 

The  order  appointing  a  receiver  usually  directs  the  partners  to 
deliver  up  to  him  all  the  effects  of  the  partnership,  and   ^  ^ 

'■  11^  Order  appoint- 

all  securities  in  their  hands,  for  the  outstanding  person-   ingreceiv«r. 

al  estate,  together  with  all  books  and  ])apers  relating  thereto.      The 

receiver  is  directed  to  get  in  the  debts  of  the  firm,  and  he  is,    if 

necessary,  empowered  to  bring  actions  with  the  approbation  of  the 

judge;  he  is  directed  to  pay  the  partnership  debts,  and  to  pass  his 

accounts,  and  to  pay  balances  in  his  hands  into  court,  [h) 

With  respect  to  the  partnership  books  and  papers,  an  order  for 
their  delivery  will  not  be  made  if  there  is  no  necessity  for  it,  or  if 
it  would  occasion  inconvenience.'  For  exam]>le,  in  Dacie  v.  John 
(i),  the  Court  declined  to  order  a  solicitor,  who  was  the  manairino- 
partner  of  a  firm,  to  deliver  up  its  books  and  documents  to  the  re- 
ceiver; for  the  receiver  had  free  access  to  them  all,  and  nothing 
more  was  considered  necessary. 

A  receiver  is  an  officer  of  the  Court,   and  any    interference  with 
him,  or  with  property  under  his  protection,  amounts  to    in,erferin 
a  contemjjt  of  Court,  and  is  punishable  accordingly,  (k)  with  receiver. 

(g)  See  note  (/),  previous  page.  the  next  of  kin  t^  ascertain  the  amount 

(h)  See  forms  o  f  order  in  2  Seton  on  of  the  interest  of  deceased  in  such  co- 
Decrees,  1002,  ed.  3;  Wilson  v.  Green-  partnership,  will  not  be  granted.  The 
wood,  1  Swanst.  484';  Whitley  r.  Lowe,  surviving  partner,  being  entitled  to  the 
4  Jur.  N.  S.  815.  The  receiver  here  custody  of  the  books  of  the  firm,  onglit 
was  appointed  without  opposition  ;  see  not  to  be  compelled  to  give  them  up. 
4  Jur.  N.  S.  197,  S.  C.  Waring  v.  Waring,  1  Redf.  205. 

'The  books  of  a  liquidating  partner-  («)  McClel.  20G. 

ship  are  in  the  quasi  possession  of  the  (^•)    See  Lane  v.  Sterne,  3  GifF.  629, 

law,  and  must  be  placed  in  the  hands  where  a  sheriff  sciz-  d  partnership  prop- 

of  the  receiver,   in  all  circumstances.  erty    in    the    custody    of    a    receiver. 

Succession  of  Andrew,  16  La.  Ann.  197.  When  an  order  for  a  receiver  is  made,  a 

On  an  application  that  the  executors  person  is  sometimes  immediately  put  in- 

file  an  inventory,  and  give  security  for  to  possession;  but  until  he  is  actually  ap- 

the  due  administration  of  the  estate,  a  proved  as  receiver  by  the  Court,  strang- 

juotion  for  an  order  that  the   executors  ers   to  the  action  in   which  he  is  ai> 

deposit  with  the  surrogate  the  books  of  a  pointed  are  not  guilty  of  contempt  of 

co-partnership  composed  of  the  deceased  court  if  they  interfere  with   him.     See 

and  one  of  the  executors,  so  as  to  enable  Defries  r.  Creed,  6  N.  R.  17. 

1317 


*1015 


SALE    OF    PAETi^EKSlIU'   PROPEKTi". 


[book  in. 


*1015     *4.     Of  the  sale  of  x>artnersh'(p  irropertii  under  the 
decree  of  the  Court. 

It  has  been  already  seen,  that  in  the  absence  of  a  special  aoree- 
conversion  of    ment  to  the  contrary,  the  rii-'ht  of  each  partner  il)  on 

partnership  j>        i       •  •  i  i 

property.  a  dissolution  IS  to  have  the  partnership  property  con- 

verted into  money  by  a  sale  (m)  ; '  even  although  a  sale  may  not 


(?)  A  person  paid  by  a  share  of  profits 
has  no  right  to  have  them  ascertained  by 
a  sale.  See  Rishton  v.  Grissell,  5  Eq.  326. 

[m)  Burdon  v.  Barkus,  3  Giff.  412, 
and  on  appeal,  4  DeG.  F.  &  J.  42, 
where  a  purchase  by  one  partner  at  a 
valuation  was  insisted  on;  Rowlands  v. 
Evans,  and  Williams  v.  Rowlands,  30 
Beav.  302,  a  case  of  lunacy.  See,  also, 
Crawshayt'.  Collins,  15  Yes.  227;  Craw- 
shay  V.  Maule,  1  Swanst.  495;  Feather- 
stonhaugh  v.  Fenwick,  17  Ves.  298; 
Hale  V.  Hale,  4  Beav.  375.  See  infra, 
p.  1018,  as  to  unsalable  assets  and 
pending  contracts. 

'See  Stevens  v.  Stevens,  39  Conn.  474; 
Dickinson  v.  Dickinson,  29  id.  600;  Levi 
r.  Karrich,  8  Iowa,  150;  Sigoumey  v. 
Munn,  7  Conn.  824.  See,  however, 
Tomlinson  v.  Ward,  2  Conn.  396. 

Where,  after  a  dissolution  of  a  part- 
nership one  of  the  late  partners  aban- 
doned the  partnership  concerns,  refused 
to  divide  the  stock,  and  made  no  reply 
to  the  repeated  sohcitations  of  the  other 
partner  to  come  to  an  amicable  settle- 
ment of  their  concerns;  and  where  it 
appeared  further,  that  in  this  State, 
among  merchants  and  traders,  the  cus- 
tomary mode  of  winding  up  the  concerns 
of  a  solvent  partnership,  after  a  dissolu- 
tion, is  to  divide  the  stock  of  goods  on 
hand  between  the  partners,  or  for  one 
partner  to  purchase  out  the  other;  that 
there  is  no  usage,  in  such  cases,  to  sell 
the  stock  on  hand  at  public  auction; 
and  that  when  this  mode  of  sale  has 
been  resorted  to,  it  has  been  generally 
attended  with  considerable  sacrifice  or 

1318 


loss  with  reference  to  the  appraised  val- 
ue; and  where  it  appeared  also,  that  the 
partner  in  whose  sole  possession  such 
goods  were  left,  in  order  to  render  them 
most  salable,  replenished  the  stock  with 
new  and  more  salable  goods,  and  so  in- 
termingled the  old  and  new  goods  that 
it  became  impracticable  for  him  to  keep 
a  separate  account  of  the  sales  of  the  old 
stock — thus  to  replenish  old  stocks  being 
generally  practiced  by  regular  mer- 
chants, and  this  being  the  only  method 
that  can  be  adopted,  with  a  prospect  of 
making  fair  sales;  it  was  held  that 
these  circumstances  did  not  deliver  the 
case  from  the  operation  of  the  general 
rule,  requiring  a  sale  as  the  criterion  of 
value.     Sigoumey  v.  Mmm,  7  Conn.  324. 

A  court  of  equity  has  no  power  to  de- 
cree the  sale  of  a  partner's  interest  in  a 
firm  brand  or  trade-mark.  Such  an  in- 
terest is  too  intangible;  before  decreeing 
a  sale  of  an  alleged  interest  of  a  partner, 
the  com-t  must  be  satisfied  that  the  ob- 
ject or  interest  sought  to  be  sold  has 
some  substantial  tangible  value.  Tay- 
lor V.  Bemis,  4  Biss.  406. 

In  an  action  between  partners  for  a 
settlement  of  the  co-partnership  affairs, 
and  to  recover  a  balance  claimed  by  the 
plaintiff  to  be  due  to  him,  a  receiver 
will  not  be  appointed  to  seU  stock  owned 
by  the  parties  jointly,  though  in  propor- 
tions dependent  on  the  state  of  th« 
partnership  accounts,  before  it  is  judi- 
cially determined  how  much  of  the  stock 
belongs  to  each  party,  where  no  insolv- 
ency is  alleged,  and  the  defendant  denies 
the  entire  equity  of  the  complaint,  and 


oil  A  I'.  X.] 


SALK    OK    I'AUTXKIiSllIl'    I'Uol'KUTV. 


1015 


be  necessary  for  the  payment  of  debts.  {)i)  This  mode  of  ascertain- 
ing the  value  of  the  ])artnersliip  etiects  is  adopted  by  courts,  unless 
some  other  course  can  be  followed  consistently  with  the  agreement  be- 
tween the  partners.     And  even  where  the  partners  have  provided 

that  their  shares  shall  be  ascertained  in  some  other  wav, 
Agreements  to  ;^ 

avoid  sale  still,  if  owluff  to  Euv  circumstauce  their  agreement  in 

wluuli  cannot  i  o  ./  o 

be cunied out.  ^his  res])ect  cannot  be  carried  out,  or  if  their  agreement 
does  not  extend  to  the  event  which  has  in  fact  arisen,  realization  of 


ott'ers  and  consents  that  one-half  of  the 
stock  may  be  transferred  to  the  plaintiff, 
and  to  give  securitj'  to  indemnify  him  for 
any  balance  he  may  establish  in  his  favor. 
Buchanan  V.  Comstock.  57  I'arb.  oGS. 

Where,  in  an  action  of  settlement, 
the  trouble  and  expanse  of  collecting  ac- 
counts would  render  them  less  produc- 
tive than  their  immediate  sale,  or,  being 
desperate  or  of  little  value,  the  delay  of 
collection  will  prevent  a  final  partition 
within  a  reasonable  period,  such  reasons 
will  justify  their  sale;  but  as  a  general 
rule,  they  should  not  be  sold  except  for 
cause  shown.  Pratt  v.  McHatton,  11 
La.  Ann.  260. 

The  fact  that  one  of  several  partners 
who  has  in  his  possession  all  the  assets 
of  a  fii-m,  paid  two  of  the  partners  their 
capital  invested,  under  the  belief  that  on 
a  sale  of  the  goods  there  would  be  no 
loss,  does  not  bind  him  to  anticipate  the 
sale  of  the  goods  in  settling  with  the 
other  partners .  when  called  upon  by 
them  for  an  account.  Derby  v.  Gage, 
1)8  111.  27. 

No  right  of  redemption  need  be. re- 
served when  property  of  an  insolvent 
jartnership  is  ordered  to  be  sold  for  pay- 
ment of  partnership  debts.  Rhodes  v. 
Williams,  12  Nev.  20. 

Upon  the  petition  of  one  of  the  par- 
ties, a  receiver  was  appointed  to  take 
charge  of  the  paiinersliip  assets  of  the 
firm  of  L.  &  Co. ;  and  he  reported  to 
the  court  an  offer  of  purchase  of  the 
partnership  assets.  Certain  creditors 
united  in  a  request  that  the  ofier  should 


be  accepted,  and,  in  consideration  of  its 
acceptance,  and  of  their  pro  rata  share 
of  the  dividends  thereunder,  they  agreed 
and  covenanted,  under  seal,  to  releas3 
the  firm  from  all  indebtedness,  lire 
offer  was  accepted;  and,  in  pai-suance 
of  an  order  of  notice  by  the  court,  B.  tV: 
C.  who  did  not  sign  the  agreement  to 
release,  filed  their  claim,  and  received  a 
dividend  thereon : 

Held,  1.  That  the  fund  thus  derived 
from  the  sale  of  the  partnership  property 
being  in  a  court  of  equity  for  distribu- 
tion, aU  the  creditoi-s  of  L.  &  Co.  liad  the 
right  to  claim  their  proportion  thereof; 
and  it  was  not  in  the  power,  either  of 
the  assenting  creditors,  or  the  partners 
themselves,  or  of  the  court,  or  all  com- 
bined, to  require  creditors  to  executt; 
releases  as  a  condition  upon  which  they 
should  be  permitted  to  participate  in 
the  distribution. 

2.  That  a  condition  annexed  by  one 
of  the  partners  to  his  assent  to  the  sale, 
that  the  creditors  should  relea.se  the  firm 
from  all  indebtedness,  was  one  that  he 
had  no  right  to  dictate. 

3.  That  the  doctrine  of  equitable  es- 
toppel would  prevent  the  non-relea;sing 
creditors,  after  filing  their  claim,  and 
receiving  a  dividend  thereon  from  deny- 
ing validity  of  the  sale  made  by  the 
receiver;  but  they  were  not  bound  by 
conditions  to  which  other  creditoi-s  as- 
sented, and  which  they  had  no  right  to 
impose,  except  upon  themselves.  Loney 
r.  Bayly,  45  Md.  447. 

[n)  See  Wild  r.  Milne,  26  Beav.  504. 

1319 


*1016  ACTIONS    BETWEEN    PARTNERS,    ETC.  [bOOK  117. 

the  property  hy  a  sale  is  the  only  alternative  wliich  a  conrt  can  ado]^t.^ 
Thus  in  Cook  v.  Collingridge  (o),  where  the  partners  had  agreed 
Agreement  for  ^^^^^  ^^  ^^^^  expiration  of  the  partnership  the  stock  in 
equal  division,  trade  should  be  divided  between  the  partners,  it  was  hehl 
Cook  V. Col-  that  a5  tliis  could  not  be  literally  carried  into  effect, 
ingri  ge.  there  must  be  a  sale  and  a  division  of  the  j^roceeds. 

So,  if  on  the  death  of  a  partner  an  option  is  given  to  a  third 
Agreement  to     party,  6.  0'.,  his  son  or    executor,   to  take  his  share  at 

takeatvalua-       '^        *  ,         .  ,       ,  .       .  ' 

tion.  a   valuation,    and   this   is   not   done,    a   sale   will    be 

decreed,  {p  )     Again,  in  a  case  where  the   articles  had  provided 

that  on  a  dissolution  by  the  death  of  a  partner 
Greenwood.        *101G     his  share  should  be  taken  by  the  *survivors  at 

a  valuation,*  and  they  had  afterwards  agreed 
that  in  the  event  of  a  dissolution  by  bankruptcy,  the  same  course 
should  be  followed  as  in  the  event  of  a  dissolution  by  death,  it  was 
held  that  this  last  agreement  not  being  under  the  circumstances 
binding  on  the  assignees,  the  partnership  property  and  effects  ought 
to  be  sold,  (q) 

On  the  other  hand,  if  the  articles  of  partnership  can  be  carried 
out  in  their  spirit,  and  if  a  sale  is  inconsistent  with  them,  then  the 
rule  in  question  will  not  apply,  as  for  example  in  those  cases  al- 
ready noticed  (?'),  in  which  it  has  been  agreed  that  a  deceased  part- 
ner's share  shall  be  ascertained  by  valuation,  or  from  the  last  signed 
account. 

^  See  Quinlivan  v.  English,  42  Mo.  362.  pay  the  plaintiff  for  his  interest  in  the 

(o)  .Jac.  607,  and  see  Rigdeni'.  Pierce,  good-witl  of  tlie  business,  such  sum  as 

6  Madd.  353.  it  should  be  decided  to  be  reasonably 

[p)  See  Downs  v.  Collins,  9  Ha.  418;  worth,  by  arbitrators,  to  be  appointed 

Kershaw  ?;.  Matthews,  2  Russ.  62;  and  by  the  parties.      Under  this  agreement 

Madgwick  v.  Wimble,  6  Beav.  495.  arbitrators  were  aiapointed,   who  were 

^  See  Quinlivan    v.  English,  42  Mo.  unable  to  come  to   any  decision  on  the 

362.  question    submitted   to   them:      Held, 

Upon   a  dissolution,    the    court  can-  that  plaintiff  could  not  maintain  an  ac- 

not  compel  the  continuirg  partners  to  tion  to  have  the  value  of  his  interest 

take  an  unexpired  lease  and  good-will  determined  and  paid  to  him,   and  that 

of  the  business  at  a  valuation.     If  not  in  the  absence  of  bad  faith  on  the  part 

disposed  of  by  consent,  they   must  be  of   defendants,    the    rendering  of  an 

sold,    like    other    partnership    effects,  award  by  the  arbitrators  was  a  condition 

Dougherty  iJ. Van  Nostrand,  1  Hoffui.  68.  precedent  to  the  plaintiff's  right  of  ac- 

Plaintiff  and  defendants  having  been  tion.  Altman  v.  Altman,  5  Daly,  436. 
partners  in   business,  and    having    by  (q)  Wilson  ?;.  Greenwood,  1  Swanst. 

mutual  agreement  dissolved,  the  defend-  471. 
ants,  by  a  written  stipulation,  agreed  to  (r)  See  ante,  p.  847  et  seq. 

1320 


CHAl'.  X.]  SALE    OF    rAKTNKKSIIIP    PKOl'KUTV.  *1017 

The  rule  as  to  selliiii^  partnership  property  is  merely  adopted  in 
order  that  justice  may  be  done   to  all  parties,  when  no   ^o  sale  where 
'    other  con rse  has  been  or  can  be  a!j;reed  upon.     It  is  not  },^rt.enu-nt -o 
an  arbitrary  rule,  inflexibly  applied  in  all  cases  whether  'v^ULTe.m'^L 
it  is  necessary  or  not;  and  although,  if  one  partner  or  ^^"^'i  <J"- 
his  representatives  insist  on  a  sale,  the  Court  may  not  be  able  to 
refuse  to  enforce  that  rir^ht  (s),  still  the  Court  is  always  inclined  to 
accede  to  any  other  mode  of  settlement  which  may  be  fair  and  just 
between  the  partners.     In  a  case  where  one  ])artner  had   j^.^,^  ^,,j ,,,,. 
become    lunatic,   and  a  decree    for   a  disst)lution   had   oiuMmnner'^'*^ 
been   obtained  on  that  ground,  and  an  offer  was  made  ^^■'*«  1"'"^'"=. 
by  the  other  partners   to  pay    a  sum  of  money   as   the   lunatic's 
share,  the  Court   referred  it  to   the   ]\[aster  to   inquire  whether   it 
would  be  for  the    beneiit  of  the  lunatic  that  such    offer  should  be 
accepted,  and  on  the  Master  reporting  in  the  affirmative,  the  Court 
ordered  that  the  offer  siiould  be  accepted,  thereby  dispensing  with 
a  sale  and  winding  up  in  the  ordinary  way.  (t)     So,  if  one  partner 
is  an  infant,  and  it  appears  that  it  will  be   for  his  benefit  that  the 
whole  property  shall  be  sold  to  one  or  more  of  the  partners  who 
are  desirous  of  buying  it,  and  the  other  partners  consent,  the  Court 
will  sanction  a  sale  accordingly,  (u)     But  although  it  may  be  for 
the  benefit  of  an  infant  or  lunatic  ]iartner  that  his  share 
*should  be  sold,  3-et  if  the  other  partners  insist  on  the  sale     *1017 
uf  the  whole  ]>ruperty,  they  are  entitled  to  such  a  sale,  (a?) 

Co-owners  of  land,  whether  mineral  or  not.  are  entitled  to  a  par- 
tition and  not  a  sale;  and  even  although  they  may  be  Minins part- 
partners  in  the  profits  arising  from  the  land,  still  if  the  "^''-sii'i'. 
land  itself  is  not  partnership  propei'ty,  one  co-owner  is  not  entitled 
to  have  it  sold  against  the  wishes  of  the  others,  (y)  But  if  land 
or  a  mine  is  partnership  property,  the  right  of  each  partner  is  to 
have  it  sold;  and  a  partition  can  only  be  decreed  by  consent. (3)' 

(,s)  Wild  r.  Milne,  26  Beav.  504,  and  see  Biudon  v.  Barkus,  4  DeG.  F.  S:  J. 

Rowlands  v.  Evans,  30  Beav.  302.  42,  and  Rowlands  r.  Evans,  30  Bi>av. 

(0  Leaf  V.  Coles,    1   DeG.   M.  &  G.  302.      As  to  mines  not  salable  without 

171.     See,  too,  Prentice  v.  Prentice,  10  the  consent  of  the  landlord,  see  Lees  r. 

Ha.  App.  22.  Jones,  3  Jur.  N.  S.  9")4;  and  as  to  un- 

(»)  Crawshayt'.  Maule,  ISwanst.  530.  salable     but    valuable    assets,    infra, 

(.r)  Rowlands  v.  Evans,  and  Williams  note  ((/). 

('.  Rowlands.  30  Beav.  302.  '  Real  estate  of  a  partnei-ship,  after 

(//)  See  oiifc,  p.  63.  its  dissolution,  is  to  be  converted   into 

{:)  Wild  i\  Milne,  26  Beav.  504;  and  pei-sonalty  by    a  com-t  of  equity   only 

1321 


•1017 


SALE  OF  PAKTNERSHIP  PKOPERTY. 


[book  III. 


Mode  of 
selling. 


The  sale  to  wliich  each  partner  lias  a  right  is  a  sale  to  the  liighest 
bidder,  (a)  But  witli  a  view  to  do  as  little  injustice  as 
possible,  when  tlie  Court  decrees  a  sale  it  will,  if  neces- 
sary, direct  an  inquiry  as  to  the  proper  mode  of  selling  ((^);  and 
whether  it  will  be  for  the  benefit  of  all  parties  that  there  should  be 
an  im mediate  sale,  or  that  the  concern  should  be  carried  on  for  the 
purpose  only  of  winding  up  its  affairs:  and  if  the  latter  is  the 
case,  the  Court  will  g-ive  any  of  the  parties  liberty  to  propose  him- 
self as  manager  until  a  sale,  (e)     In    Kuwlands  v.  Evans  (cl),  part- 


when  such  conversion  is  required  for 
the  payment  of  claims  against  the  part- 
nership which  are  in  the  nature  of  debt. 
Shearer  v.  Shearer,  98  Mass.  107. 

Although,  as  a  general  rule,  so  for  as 
the  partners  and  their  creditors  are  con- 
cerned, real  estate  of  the  firm  is  re- 
garded in  equity  as  personal  property, 
and,  in  case  of  dissolution,  is  often  de- 
creed to  be  sold,  as  a  proper  method  of 
ascertaining  its  value  and  making  an 
vqual  distribution  of  the  partnership 
elfects,  yet  where  partners  have  taken 
title  to  real  estate  as  tenants  in  com- 
mon, and  all  the  debts  due  to  thh-d  per- 
sons and  between  themselves  have  been 
discharged,  and  an  equal  distribution  of 
the  assets  can  be  made  without  a  sale 
of  the  real  estate,  such  a  sale  need  not 
he  ordered  on  a  dissolution,  unless  it 
appears  that  such  an  order  would  be 
most  beneficial  to  the  partners.  Pierce 
V.  Covert,  39  Wis.  252. 

In  this  case,  which  was  an  action  for  the 
dissolution  of  a  partnership,  it  appeared 
that  the  assets  in  money,  notes  and 
accounts  were  much  more  than  sutficient 
to  pay  all  debts,  and  that  title  to  real 
estate  of  the  firm  had  been  taken  by  the 
partners  in  their  individual  nafnes  as 
tenants  in  common;  that  one  of  the 
partners  was  dead,  and  his  personal  rep- 
resentatives, heirs,  and  widow  were 
made  parties  to  the  action;  and  that 
another  of  the  partners  had  conveyetl 
his  undivided  third  of  the  real  property 
to  one  G.,  not  a  member  of  the  firm,  who 
was  made  defendant.  The  complaint 
1322 


alleged  that  the  real  estate  could  not  be 
divided  without  great  prejudice  to  the 
owners,  but  there  was  no  pretense  that 
the  sale  was  necessary  for  an  equal  dis- 
tribution of  the  assets:  Held,  that  the 
Court  erred  in  ordering  G.  to  convey  his 
undivided  one-thu'd  of  the  real  property 
to  the  re<',eiver  appointed  in  the  action. 
Pierce  v.  Covert,  sujjra. 

A  partnership  however,  for  buying 
and  selling  lands  is  governed  by  the 
same  principles  as  ordinary  partnerships ; 
and,  after  the  expnation  of  such  part- 
nership, a  court  of  equity  will  decree  a 
sale  of  the  land  purchased,  and  a  prop^'v 
division  of  profit  or  loss,  according  to  the 
tenns  of  the  partnership.  Olcott  v. 
Wing,  4  McLean,  15. 

One  partner  cannot  maintain  a  bill  for 
a  partition  of  partnej-ship  land,  after  a 
suit  for  an  account  of  the  partnership  is 
barred  by  the  statute  of  limitations  with- 
out offering  to  account  with  his  co-part- 
ner.   Baird  v.  Baird,  1  Dev.  &  B.  Eq.  524. 

(«)  No  partner  has  a  right  to  buy  or 
to  compel  his  co-]3artners  to  buy  at  a 
valuation  unless  there  is  some  agree- 
ment to  that  efFect,  Burdon  v.  Barkus, 
4  DeG.  F.  &  J.  42,  and  other  cases  cited, 
ante,  p.  1015,  note  (m). 

(6)  As  in  Wilson  v.  Greenwood,  1 
Swanst.  484;  Cook  v.  Collingridge,  Jac. 
624. 

((;)  Crawshay  v.  Maule,  1  Swanst. 
529;  Waters  v.  Taylor,  2  V.  &  B.  306. 
Sep,  too.  Wild  V.  Milne,  26  Beav.  504. 

{d)  Rowlands  v.  Evans,  and  Williams 
V.  Rowlands,  30  Beav.  302. 


oil. VI'.  X.]  ACTIONS    BETWEEN    PARTNERS,    ETC.  *101S 

nei^hip  property  was  ordered  to  be  sold,  as  a  goiiif,'  concern,  b}-  a 
disinterested  person,  with  liberty  to  all  parties  to  bid;  and  an  in- 
terim receiver  and  manager  was  appointed. 

The  Court  is  extremely  reluctant  to  give  parties  who  luive  the 
conduct  of  a  sale  liberty  to  bid  at  it;^  and  the  conduct  Conduct  of 

•^  1    •      •  /v«      ^^'^'^  "'"^  leave 

of  a  sale  in  an  action  usually  belongs  to  the  plaintifl:  ;  to  bid. 
if,  therefore,  he  desires  to  bid,  some  arrangement  has  generally  to  be 
made  res})ecting  the  conduct  of  the  sale.     Other  parties 
♦interested  have  seldom  any  difficulty  in  obtaining  liberty     *1018 
to  bid.  (e) 

In  selling  the  good-will  of  a  going  concern,  the  book  debts  and 
business  ought  to  be  sold  in  one  lot,  and  the  purchaser  ga,e  of  good- 
ought  to  be  informed,  if  the  facts  be  so,  that  the  sellers  ^^'^^ 
are  entitled  to  carry  on  business  in  competition  with  him.(y) 

If  one  of  the  partners  holds  an  appointment  which  is  not  sal- 
able, but  the  prolits  of  which  are  by  agreement  to  be  unsalable 

■  r  ./      o  jjm  valuable 

accounted  for  by  him  to  the  partnership,  the  partner  assets, 
holding  the  appointment  will  be  debited  with  its  value;  for  that  is 
the  only  mode  in  which,  upon  a  dissolution,  such  a  source  of  gain 
can  be  dealt  with,  (g)     The  same  principle  applies  to  other  unsalable 
but  valuable  assets,  to  which  one  partner  has  no  exclusive  right,  {h) 

But  if  the  object  of  the  partnership  is  to  carry  out  a  certain  con- 
tract which  is  uniinished  when  the  partnership  is  dis-  pg^^inj, 
solved,  the  Court  will  not  necessarily  order  the  benefit  '^ouiT>x^is. 
of  it  to  be  sold;  nor  order  the  share  of  a  partner  in  it  at  the  time 
of  dissolution  to  be  ascertained  by  valuation;  but  will  leave  the 
])artners  to  complete  the  contract,  and  will  postpone  the  ultimate 
account  until  its  completion.  (/) 

Althouirh  it  is  not  usual  for  the  Court  to  direct  a  sale  before  the 
hearimr  of  the  cause,  still,  if  circumstances  require  it,  saie  before  the 

o  '  '  _  -^  licanng  ot  the 

an  order  for  a  sale  will  be  made  on  motion,  even  al-  came. 
though  the  partnership  has  not  been  previously  dissolved,  {k) 

2  Where  partnership  property  is  sold  {g)  See  Smith  r.  Mules,  9  Ha.  572; 

uiuler  a  decree  of  court  for  the  payment  Ambler  r.  Bolton,  14  Eq.  427. 

of  the  joint  debts,  and  one  of  the  part-  {h)  Ibid.     See  ante,  note  {z). 

ners    becomes    pm-chaser,    the    record  (i)  See  McClean  r.   Kennanl,   9  Ch. 

should  show  paj-nicnt  before  confinna-  336,  where  the  surviving  partners  urged 

tion.     Renfrow  v.  Pearce,  68  111.  125.  that  this  would  not  be  fair,  as   they 

{e)  See,  on  this  subject,  2  Seton  on  might  have  to  find  all  the  capital  to  corn- 
Decrees,  1184,  ed.  3.  plete  the  contract. 

(/)  See  Johnson  v.  Helleley,  34  Beav.  [k)  Bailey  v.  Ford,  13  Sim.  49");  Craw- 

63,  and  2  DeG.  J.  &  Sm,  446.  shay  v.  ilaule,  1  Swaust.  "'06,  523.  525, 

1323 


*1019       PERSONS  WHO  HAVE  AGREED  TO  BECOME  PARTNERS.       [bOOK  III. 

*1019      *  SECTION  VII.— OTHER  MISCELLANEOUS  ACTIONS. 
1.  Between  persons  who  have  agreed  to  hecome  partners. 

If  a  person  ai^rees  to  become  a  partner,  and  he  breaks  his  agree- 
Actionon  ment,  an  action  for  damages  will  lie  against  him;    and 

partnerships,  anj  premium  he  may  have  agreed  to  pay  may  be  recov- 
ered {l)\  and  it  is  no  defense  that  the  defendant  has  discovered  that 
the  plaintiff  is  a  person,  with  whom  a  partnership  is  undesirable,  (w) 
So,  if  a  member  of  a  firm  agrees  to  introduce  a  stranger,  an  action 
lies  at  the  suit  of  the  latter  against  the  former  for  a  breach  of  this 
ao^reement, '  although  it  may  have  been  made  without  the  knowl- 
edge of  the  other  members  of  the  iirm,  and  they  may  decline  to 
recognize  it.  (ri) 

Upon  the  same  principle,  if  a  person  has  agreed  to  take  shares 
Actions  for  de-  in  a  proposed  company,  and  to  pay  a  deposit  in  respect 
to  be^lfdf^  of  such  sharcs,  an  action  for  the  recovery  of  the  deposit 
he  has  agreed  to  pay  will  clearly  lie,  {p)  The  persons  to  bring  such 
action  are  those  with  whom  the  agreement  sued  upon  was  made. 
If,  therefore,  the  agreement  was  with  the  members  of  the  provis- 
ional committee,  those  members,  and  not  the  managing  section  of 
them,  are  the  proper  parties  to  sue.  {p) 

Again,  where  a  person  agrees  to  become  a  partner  upon  the  per- 
Actions  for  the  fomiauce  of  Certain  conditions  precedent,  which,  with- 
of^deposits.^^  out  any  fault  of  his,  are  not  performed,  he  is  entitled 
to  recover  back  any  moneys  he  may  have  subscribed  for  the  pur- 
poses of  the  partnersliip  when  formed.  It  is  upon  this  principle 
that,  as    was    seen    in    a   previous    chapter  {q\  subscribers    to  an 

and    529  ;     Wilson    v.    Greenwood,    1  Bing.  68. 

Swanst.  483.      See,  also,  Hargreaves  v.  {m)  Andrewes  v.  Garstin,  10  C.  B.  N. 

Hall,  11  Eq.  415,  the  order  of  July  22,  S.  444,  where  the  defendant  pleaded  tliiit 

1859,  since  the  agreement  was  entered  into  he 

(1)  Walker  v.  Harris,    1  Anst.   245;  had  discovered  that  the  plaintiff  had 

Gale  V.  Leckie,  2  Stark.  107.     In  Figes  been  guilty  of   fraud    and   dishonesty 

i:  Cutler,  3  Stark.  N.  P.  C.  139,  it  was  towards  a  former  partner, 

held  that  an  action  for  breach  of  an  *  See  Byrd  v.  Fox,  8  Mo.  574. 

agreement  to  become  a  partner,  could  (»)  McNeill  v.  Reid,  9  Bing.  68. 

not  be  supported  without  proof  of  the  (o)  See,  for  instance,  Duke  v.  Dive,  1 

terms  of  the  intended  partnership.    See,  Ex.  36;  Duke  v.  Forbes,  ib.  356. 

also,  Morrow  v.  Saunders,   1  Brod.  ife  (p)  Woolmer  v.  Toby,  10  Q.  B.  691. 

Bing.  318.     But  see  McNeill  v.  Reid,  9  (q)  Ante,  p.  117  et  seq. 

1324 


CUAr.  X.]  ACTIONS    UKTWEEN    PROMOTERS.  ^'U^'2i 

abortive  *com])anv  are  held  entitled  to  recover  back  tlieli-  ^'lo^o 
suliscriptions,  if  they  have  not  assented  to  the  a])])licati<»n 
of  those  subscriptions  to  any  other  than  the  purposes  of  the  com- 
pany wlien  duly  formed,  (r)  Thus  it  has  been  held  that  a  snl).scri- 
ber  to  a  scheme  for  a  tontine  which  is  never  in  fact  fairly  start- 
ed, is  entitled  to  recover  the  whole  amount  of  his  subscription, 
although  expenses  liave  been  incurred  in  attemjtting  to  start  it(«); 
also,  that  a  subscriber  to  a  scheme  for  making  a  railway  was  enti- 
tled to  recover  his  money  back  by  an  action  at  law  if  the  scheme 
]>roved  a  failure  (i5);  and  that  he  was  so  entitled,  although  shares 
might  have  been  allotted  to  him  [ii),  and  although  he  might  have 
signed  an  agreement  authorizing  the  application  of  his  deposits  to 
])reliniinary  expenses,  if  he  had  been  induced  to  enter  into  that 
agreement  by  fraud  {x)\  or  if,  notwithstanding  that  agreement,  the 
return  of  his  deposit  had  been  expressly  guaranteed,  (y)  So  it  has 
been  held  that  the  subscriber  to  a  cost-book  mining  company  is 
entitled  to  recover  his  money  back  if  it  is  clear  that  it  cannot  be 
formed  as  intended  when  he  subscribed  to  it.  (3)  In  the  case  in 
which  this  was  decided  the  company  had  actually  begun  to  work 
the  mine,  but  the  plaintiff  had  not  sanctioned  that  proceeding,  and 
it  was  no  part  of  his  bargain  that  he  should  be  considered  a  part- 
ner in  a  concern,  the  capital  of  whicrh  was  less  than  that  fixed  when 
he  agreed  to  join  it. 

The  persons  to  be  sued  for  the  recovery  back  of  deposits  paid  are 
those  who  received  such  deposits  by  themselves  or  their  Defendants  in 
agents.  («)  ^"'^'^  '^^■"""^• 

In  order  that  the  plaintiff  may  prove  that  the  consideration  for 
which  he  paid  his  money  has  failed,  he  must  show  what  that  con- 
sideration was.  (l) 

*In  the  class  of  cases  to  which  reference  has  just  been     ^1021 
made,  it  is  to  be  observed   that,  ex  hyjjothesl,  no  partner- 
ship has  commenced  between  the  plaintiff  and  the  persons  whom 

(r)  See,  as  to  this  qualification,  Gar-  anie,  p.  121. 

wood  r.  Ecle,  1  Ex.  264,  and  cases  of  that  (//)  Mowatt  v.  Lord  Londosborough, 

class  noticed,  ante,  p.  120  et  seq.  3  E.  &  B.  307,  and  4  ib.  1,  ante,  p.  122. 

(s)  Nockels  V.  Crosby,  3  B.  &  C.  814,  {z)  Johnson  r.  Goslett,  18  C.  B.  728; 

and  attte,  p.  118.  3  C.  B.  N.  S.  569. 

(0  Walstab  v.  Spottiswoode,  15  M.  &  (a)  See  ante,  p.  122;  and  see  Wolls  v. 

W.  501;  and  ante,  p.  118.  Ross,  7  Taunt.  40:^.  as  to  the  receipt  of 

(»)  Walstab  v.  Spottiswoode,  15  ^I.  &  one  i)artner  l)eing:  tlie  receipt  of  both. 

W.  501.  (b)  See  anie,  pp.  117,  118. 

(x)  Wontner  v.  Shairp,  4  C.  B.  404, 


*1022  ACTIONS    BETWEEN    TAKTNERS,    ETC.  [bOOK  111. 

obsen-ations      he  sues  for  his  money.     The  question,  Can  a  subscril)or 

on  abortive  ,  .  ,    "  .  .  i       i   q     • 

schemes.  to  an  aoortive  scheme  recover  his    money  back  5    is, 

therefore,  totally  different  from  that  put  l)y  Ilolroyd,  J.,  in  Nock- 
les  V.  Crosby  (c),  when  he  asked  wliether,  if  five  persons  enter  into 
partnersldp^  and  contribute  lOOOZ.  each,  and  they  afterwards  find 
the  concern  a  losing  one,  and  put  an  end  to  it,  any  one  of  them 
can  maintain  an  action  against  the  others  for  his  share?  Whilst 
this  latter  question  may  be  answered  in  the  negative  (<i),  the  for- 
mer may  properly  be  answered  in  the  afiirmative,  as,  in  fact,  it  has 
been  in  the  cases  already  referred  to. 

Persons  engaged  in  forming  a  company  of  which  they  are  to  be 
members  are  not  impliedly  liable  to  make  each  otlier 

Actions  be-  n         ■,     •  .  .      j,  . 

tweenpro-  comr)ensation  for  then'  respective  services  in  forming 
compaDies.  ^jjg  company,  for  although  such  persons  are  not  part- 
ners, they  are  all  engaged  in  the  prosecution  of  a  common  design; 
and  each  prim/j  facie,  is  to  be  taken  as  looking  for  remuneration 
to  what  he  will  get  if  his  efforts  prove  successful,  {e)  But  a  per- 
son who  is  retained  by  the  promoters  to  assist  them,  is  entitled  to 
be  paid  by  them  for  his  services,  although  he  may  afterwards  him- 
self "subscribe  for  shares  in  the  company.  (/) 

However,  in  Gorgier  v.  Morris  {g\  an   ngreement  between  the 
promoters  of  a  company  and  the  plaintifi;  to  the  eflfect 

Gorgier  v.  1  i       •/  l  > 

Morris.  ^\^^i  x\\Q  plaintiff   should   have  a   large   sum  m  free 

shares  of  the  company,  in  consideration  of  his  past  and  anticipated 
future  services  in  promoting  the  interests  of  the  company,  was 
held  to  amount  merely  to  a  promise  to  make  the  plaintiff  a  present, 
and  to  be  invalid  for  want  of  a  consideration.  The  co'inpany  was 
never  formed,  and  no  shares  were  ever  issued. 

Where  a  company  is  required  by  act  of  Parliament  to  apply  its 

first  funds  in  defraying   the   expense.-i   of  its   formation,  an  action 

lies  airainst  it  by  those  who  liave  expended  their 

Company  re-  —  i  i  i  i  •  i 

quired  to  pay      *1022     moucy,    *titne    and    trouble,    m    forming    the 

expenses  of  •'  '  _  i      i       i 

formation.  coiiipany.     J3ut  a  clause  in  a  company  s  deed 

of  settlement  or  articles  of  association  to  the  like  efiect  does  not 
necessarily  have  the  same  operation.  {Ji) 

(c)  3  B.  &  C.  819.  (/)  Lucas  v.   Beach,  1   Man.  &  Gr. 

(rf)  See  i->er  Pollock,  C.  B.,  in  Gar-  417.     See,  too,  Caldicott  v.  Griffiths,  8 

wood  V.  E'le,  1  Ex.  267.  Ex.  898;    and  Bartnett  v.  Lambert,  15 

{e)  See  Holmes  v.  Hi^glns,  1  B.  &  C.  aAI.  &  W.  489. 

74;  Wilson  v.  Cm-zon,  15  M.  &  W.  532;  (g)  7  C.  B.  N.  S.  -588. 

Milburn  r.  Codd,  7  B.  &  C.  419.  {h)  See  ante,   book  ii,    §  3,  vol.  i.  p. 


CHAP.  X.J  ACTIONS    BKTWKKN    rAUTNKKS.  ^Jd^iJ 

Although  the  promoters  of  companies  are  not  impliedly  liable 
to  each  other  for  service  rendered,  nor  for  money  ex-  contribution 
pended  by  any  of  them  in  the  prosecntion  of  their  ^^'^'•''-'"' 
common  design;  still,  if  they  render  themselves  jointly  liable  to  a 
third  party,  and,  by  virtue  of  that  liability,  soma  only  of  them  are 
compelled  to  pay  what  ought,  as  between  themselves  and  the  oth- 
ers, to  be  paid  by  all,  an  action  of  contribution  lies,  at  the  suit  of 
those  who  have  been  so  compelled  to  pay,  against  the  others;  and 
even  before  the  Judicature  acts  it  was  no  objection  to  such  an 
action  that  there  were  unsettled  accounts  wliich  required  to  be 
taken,  before  what  was  due  from  each  to  the  other  could  be  prop- 
erly ascertained.  (^) 


2. —  Actions  h'tveen jpartners. 

The  Judicature  acts  and  rules  have  materially  altered  the  law  re- 
lating to  actions  between  partners.  Formerly  no  action  at  law 
could  be  maintained  by  one  partner  against  another  if  it  in  any 
way  involved  talcing  a  partnership  account;  for  although  the  right 
to  an  account  was  a  legal  right,  the  old  action  of  account,  at  least 
between  partners,  had  long  become  obsolete,  and  courts  of  law  had 
no  machinery  enabling  them  to  do  justice  in  matters  of 
account,  {k)  Hence  it  became  settled  *that  actions  involv-  *1023 
ing  accounts  between  partners  could  not  be  sustained. 
The  Judicature  acts  and  rules  have,  however,  abolished  this  rule; 
and  the  present  state  of  the  law  on  this  subject  ap[)ears  to  be  as 
follows: — 

396.  See,  also  Wyatt  v.  Metrop.  Board  his  hill,  Be  Stephen,  2  Ph.  562. 
of  Works.  11  C.  B.  N.  S.  744,  as  to  who  (/,.)  No  instance  of  an  action  of  ac- 
can  sue  in  such  cases.  count  brought  by  one  partner  against 
(i)  Boulter  v.  Peplow,  9  C.  B.  49.3;  another,  is  known  to  the  writer.  Tht> 
Batard  r.  Hawes,  2  E.  &  B.  287;  Edger  action  of  account  is  almost  obsolete, 
V.  Knapp,  7  Jur.  583,  C.  P.  It  may  be  although  there  have  been  a  few  in- 
observed  here,  that  where  the  promoters  stances  of  it  in  modern  times  betwe^m 
of  a  company  retain  a  solicitor,  they  arc  tenants  in  common  of  real  property, 
all  liable  to  be  sued  by  him  for  payment  See  Baxter  r.  Hozier, .')  Bing.  N.  C.  2>!8; 
of  his  bill,  and  that  a  di'livcry  by  him  Sturton  r.  Richardson,  13  M.  k  AV.  17; 
of  his  bill,  duly  signed,  to  any  one  of  Beer  v.  Beer,  12  C.  B.  00;  Hend'>i->on  r. 
those  liable,  is  asufficient  dehvery  to  all,  Eason,  17  Q.  B.  701;  reversing  Eason  r. 
Mant  r.  Smith,  4  H.  &  N.  324;  and  Henderson,  12  ib.  986 
that  any  ona  of  them  is  entitled  to  tax 

1327 


*102-i  ACTIONS    BETWEEN    PARTNERS,    ETC.  [liOOK  III. 

First  as  regards  real  property — The  equitable  as  well  as  the  le- 
Ai'tions reiat-      gal  Ownership  iiiust  be  regarded;  and   no  partner  can 

iiigtoreal  ^.  ,   i   .  ••  i         i     •  i  •    i      i 

iiropeity.  eject  or  expel  his  co-partners   trom  land  in  which  he 

may  have  the  legal  estate,  but  of  which  he  is  a  trustee  for  the  iirm, 
nor  can  he  maintain  an  action  against  his  co-partners  for  coming 
on  such  land.  On  the  other  hand,  tliey  can  restrain  him  from  ex- 
cluding them  therefrom  (Z)  Whether  the  relationship  of  trustee 
and  cestuis  que  trust  exists,  depends  upon  whether  the  property  is 
partnership  property  or  not,  upon  whether  the  partnership  is  dis- 
solved or  not,  and  upon  whether,  if  dissolved,  the  property  is  a  part- 
nership asset  in  which  all  the  partners  are  still  interested. 

Secondly  as  regards  personal  propert y . — Partners  are  tenants  in 
,  ^      common  or  joint  tenants  of  the  goods  and  chatties  be- 

Acfions  relat-  •'  " 

iiig  to  goods.  longing  to  the  firm;  but  one  partner  has  no  right  to 
take  possession  of  them  and  to  exclude  his  co-partners  from  them; 
and  he  can,  it  is  apprehended,  be  restrained  from  doing  so.  (m) 

Thirdly^  as  regai-ds  actions  for  money  demands  or  damages. — 
.  ,.      „  The  three  following  rules  maybe  taken  as  guides; — 

Actions  for  i^  J  ^ 

damages,  &c.  \    ^^  action  for  damages  ma}''  be  maintained  by  one 

partner  against  another  in  all  those  cases  in  which  such  an  action 
might  have  been  maintained  before  the  Judicature  acts;  provided 
the  action  would  not  have  been  restrained  by  a  court  of  equity. 

2.  Any  action  which  would  have  been  so  restrained  cannot  be 
supported. 

3.  An  action  may  be  maintained  by  one  partner  against  another 
for  any  money  demand  which  before  the  Judicature  acts  could  have 

been  made  the  subject  of  a  suit  for  an  account,  {ii) 
102i*         *Practically,  the  important  questions    which  will  arise 
under  the  new  procedure  are  reduced  to  the  following: — 

1.  When  can  an  action  be  maintained  between  partners  without 
taking  a  general  account  of  all  the  })artnership  dealings  and  trans- 
actions ? 

2.  When  will  such  an  account  be  ordered  without  a  dissolution 
of  the  firm  ? 

The  second  of  these  questions  has  been  already  considered,  (o) 
The  first,  which  has  also  been  alluded  to  ^p\  can  only  be  answered 

{J)  As  to  the  old  law,  see  infra,   the  (n)  A  transfer  to  the  Chancery  Divis- 

note  a,t  the  end  of  this  section,  and  as  to  ion  may  become  necessary  in  some  of 

injunctions  in  such  cases,  a^tte,  p.  996.  these  cases.     See  ante,  p.  876. 

(w)  As  to  the  old  law,  see  the  note  at  (o)  Ante,  p.  947. 

the  end  of  this  section.  (p)  Ibid. 
1C28 


CIIAI',  X.]     WIIKN  MAINTAINAliLE  BEFOKE  THE  JUUUATL  liE  ACTS.    *lU25 

geiicrully  hy  sayiiii;  that  each  case  must  depend  upon  its  own  cir- 
cumstances, and  upon  wlictlier  justice  can  really  be  done  without 
tal<iiii^  such  an  account,  (q)  But  there  appears  to  he  no  reason 
why  an  action  should  wot  he  hron<^ht  to  have  some  dis])Uted  item 
in  an  account  settled,  and  why  a  declaratory  judgment  should  not 
be  ])ronounced  settling  that  dispute  without  g(»ing  further,  unless 
it  should  become  necessary  to  do  so. 


NOTE  ON  THE  LAW  xVS  IT  STOOD  BEFORE  THE    JUDICATURE  ACTS. 

Although  the  law  relating  to  actions  at  law  between  partners  has  been  complete- 
ly altercfl,  a  summary  of  it  may  still  l)e  useful  for  reference,  and  is  accordingly  here 
append 'd. 

When  an  artioii  iroitJd  fie. 


FirKf,  as  regards, real  property.     In  an  action  of  ejectment   a  plea  on  equitable 
grounds  was  not  allowed,  (r) '     Hence,  if  a  firm  was  in  the  occupa-    j  Ejectment 
tion  of  land,  the  legal  estate  in  which  was  in  one  of  the  partners    i""'  trespitss 
only,  he  could  at  law  eject  his  co-partners  (s);  and  if  the  firm  had    against  anoih- 
been  dissolved  no  notice  to  quit  was  necessaiy  before  ejectment  (/),    *^''' 
or  trespass  (»).  was  brought  against  them.     The  equii  able  doctrine  that  a  partner- 
ship although  dissolved,  subsists  for  the  purpose  of  winding  up  its  affairs  afforded 
no  defense  at  law  to  such  an  action,  {x)     If  the  legal  estate  was  in  all  the 
*partnei's,  and  one  partner  actually  excludml  the  others,  from  the  land        *10"25 
legally  belonging  to  them  all,  ejectment  would  lie  (//);  and  if  one  utterly 
destroyed  the  common  property,  an  action  for  damages  might  be  sustained  (r);  but 


{q)  On  this  head  the  old  cases  refer- 
red to  infra,  p.  1027,  as  illustrating  the 
6th  rule,  will  still  be  useful.  See,  also, 
ante,  p.  947. 

(r)  Neave  v.  Avery,  16  C.  B.  328. 

'A  and  B  owned  real  estate  as  partner- 
ship property,  the  title  standing  in  B's 
name;  upon  dissolution  B  sold  to  A, 
who  agreed  to  pay  the  debts;  after- 
wards this  sale  and  agreement  was  can- 
celled, and  A  reconveyed  one-half  to  B, 
retaining  the  other  half;  afterwards  B 
sold  the  whole  to  M.  with  notice  of  A's 
rights:  Held,  that  A  could  enforce  his 
title  to  the  half,  against  M.  at  law;  that 
the  agreements  between  A  and  B  di- 
vested it  of  its  character  as   partnership 


property,  and  therefore  that  A  need  not 
proceed  in  equity  to  have  the  firm  af- 
fairs settled  before  iisserting  his  title  to 
his  half  of  the  land.  Brush  v.  Maud- 
well,  14  Cal.  208. 

(.s)  Francis  v.  Doe,  4  M.  &  W.  8:51  ; 
Smith  V.  Howth,  10  Ir.  Com.  Law  Hep. 
r25. 

(0  Doe  V.  Bluck,  8  C.  c<.-  l\  4CA. 

(»)  Benham  r.  Gray,  5  C.  B.  133. 

[x)  See  the  last  case. 

(,»/)  See  Peaceable  r.  Read,  1  East, 
50^;  Doe  v.  Horn,  3  M.  &  W.  3;«,  and 
5  ib.  564. 

(;:)  See  Cubitt  r.  Porter,  8  B.  &  C. 
257;  Sttdman  t-.  Smith,  8  E.  &  B.  1. 

1329 


''^1025     WHEN  MAINTAINABLE  BEFORE  THE  JUDICATURE  ACTS.    [bOOK  III. 


for  injuries  not  amounting  to  the  utter  exclusion  by  one  partner  of  tlie  others,  an 
action  it  seems  did  not  lie.  (a) 

Secondly,  as  regards  personal  proparty.  If  one  of  several  joint  tenants,  or  ten- 
2.  Trover  ftres-  ^"''^  ^"  common,  was  in  exclusive  possession  of  the  common  prop- 
pass  and  10-  erty,  he  had  a  right  so  to  continue  if  he  could,  and  no  action  against 
partner  agiiinst  him  would  lie  at  the  suit  of  his  co-tenant,  (fe)  But  if  one  tenant  m 
liuother.  common  or  joint  tenant  destroyed  (c),  or  as  it  seems  sold  {d)  the 

common  property,  he  might  be  sued  at  law  by  his  co-tenant.  In  the  case  of  a  sale, 
however,  the  purchaser  could  not  be  made  to  restore  the  property,  for  he  at  all 
events  acquired  the  interest  of  the  vendor,  and  became  therefore  tenant  in  common 
with  the  other  owners,  and  could  not  be  sued  by  them  at  law.  (e) 

If,  on  a  dissolution  of  partnership,  the  partnership  propertyy  had  been  divided 

in  specie  amongst  the  partners,  each  might  recover  what  had  been 

division  of  allotted  to  him,  for  as  to  that  he  had  become  sole  owner  {fY;  and 

property.  jf  ^jjg  dissolution  and  the  divison  of  the  property  were  made  by  deed, 

See,  also,  Jenkins  v.   Howard,   21  La. 
Ann.  597. 

Plamtiff  and  defendant  being  part- 
ners in  business  agreed  that  the  plain- 
tiff should  assign  to  the  defendant  an  un- 
divided third  of  a  patent,  of  which  he 
and  a  third  partner  of  them  both  were 
owners — and  that  the  defendant  should 
pay  to  the  plaintiff  a  sum  of  money, 
furnish  the  means  necessary  to  de- 
velop the  invention,  and  carry  on  tho 
business  thereunder  as  long  as  they 
should  agree,  the  defendant  to  have  one- 
third  of  the  profits.  At  the  beginning 
of  the  partnership,  plaintiff  brought  to 
the  shop  of  the  firm  machinery  and  ma- 
terials which  before  belonged  to  him 
and  were  needed  and  used  for  the  de- 
velopment of  the  invention.  After 
some  months  the  defendant  put  an  end 
to  the  business  and  took  possession  of 
all  the  property  on  hand  including  what 
remained  of  the  said  machinery  and 
materials.  It  was  admitted  that  this 
property  belonged  to  the  partners  in 
equal  shai'es:  Held,  that  the  plaintiti' 
could  not  maintain  an  action  against 
the  defendant  for  its  value.  Reming- 
ton V.  Allen,  109  Mass.  47. 

Partners  agreed  under  seal  to  dissolve 
and  that  one  should  take  all  th3  assets, 
pay  the  debts  and  divide  the  surplus, 
each  agreeing  with  the  other  to  make 


(«)  But  see  Martyn  v.  KnowUys,  8  T. 
R.  146;  Stedman  v.  Smith,  8  E.  &  B.  1. 

[h)  See  2  Wms.  Saund.  47,  o.;  Foster 
V.  Crabbe,  12  C.  B.  136:  Hohday  v. 
Camsell,  1  Tr.  658;  Fcnnings  v.  Gren- 
ville,  1  Taunt.  241. 

(c)  Barnardiston  v.  Chapman,  cited 
in  4  East,  121,  and  Bull  N.  P.  34-5;  2 
Wms.  Saund.  47,  o. 

id)  Jvlayhow  v.  Herrick,  7  C.  B.  247; 
Barton  v.  Williams,  5  B.  &  A.  395; 
Williams  v.  Barton,  3  Bing.  139. 

(e)  Fox  V.  Hanbury,  Cowp.  445,  and 
other  cases  of  that  class. 

(/)  See  Jackson  v.  Stopherd,  2  Cr.  & 
M.  361;  and  Wiles  v.  Woodward,  5 
Ex.  557. 

'  When  on  the  winding  up  of  a  part- 
nership business,  the  partnership  effects 
are  divided  between  the  several  partna-s 
by  an  actual  separation  thereof,  so  that 
certam  specific  articles  are  assigned  to 
each  as  his  individual  share,  either  part- 
ner may  maintain  an  action  at  law 
against  the  other  in  respect  to  such  arti- 
cles. But  a  mere  agreement  to  divide 
affords  no  foundation  for  such  an  action. 
Until  the  effects  are  actually  separated 
they  remain  joint  assets,  and,  as  neith- 
er partner  has  in  such  a  case  a  remedy 
at  law  to  specifically  enforce  the  agree- 
ment, equity  has  jurisdiction  to  grant 
relief.     Hunt  v.  Morris,  44   Miss.   314. 

1330 


OIIAl'.  X.]     WHEN  MAIXTAIXABLE  UKFORK  THE  JUDICATURE  ACTS.    *102r» 


each  partner  was  precluded  from  denying  that  anj'  division  had  in  fact  been  made, 
or  that  the  previously  existing  tenancy  in  common  had  not  l>een  determined,  and 
each  therefore  was  entitled  to  recover  what  the  deed  declared  to  be  his.  (V/) 

Thirdh),  an  action  for  damages  for  the  breach  of  an  express  agreement  entered 
into  by  one  partner  with  another  would  lie,  if  the  damages  when    3.  Action  for 
recovered  would  have  belonged  to  the  plaintitF  alone. '^    Thus  where    '^"■^"^■''  "f  *~'^- 
a  partner  retired,  and  he  covenanted  with  his  co-partners  not  to    ">'  V'"-'  P'Ttntr 
carry  on  business  within  certain  limits,  or  they  covenant-jd  to  indem-    ofher? 


up  any  deficiency  :  Held,  that  trover 
would  lie  by  the  liquidating  partner 
against  the  other  for  refusal,  to  deliver 
the  goods,  Bartley  v.  Williams,  66  Pa. 
St.  029.^ 

That  one  partner  fraudulently  con- 
verts to  his  own  use  property  supplied 
by  another  for  the  partncrsliiy  use,  dis- 
solves the  partnership,  or  at  least  gives 
the  injured  party  a  legal  right  of  action. 
Crosby  v.  McDenuitt,  7  Cal.  116. 

Where  A,  one  partner  of  a  fii-m,  sold 
all  the  goods  in  the  store,  against  the 
will  of  his  co-partner  B,  and  A  and  the 
purchaser  broke  open  the  store,  and  the 
goods  were  delivered  to  the  purchaser: 
Held,  that  B  could  not  maintain  tres- 
pass against  A  and  the  purchaser  joint- 
ly, nor  against  A,  except  for  the  goods 
actually  destroyed.  Montjoys  v.  Holden, 
Litt.  Sel.  Cas.  447.  See,  also.  Mason  v. 
Tipton,  4  Cal.  276. 

A  partner  cannot  maintain  replevin 
against  his  co-partnes  for  any  of  the 
partiiert;hip  property.  Whitesides  v. 
Collier,  7  Dana,  283;  Azel  v.  Betz,  2  E. 
D.  Smith,  188.  See,  also,  Buckley  v. 
Carlisle,  2  Cal.  420. 

A  partner  cannot  arrest  his  co-partner 
upon  affidavit  of  fraudulent  removal  of 
the  paiinership  property.  Cary  v.  Will- 
iams, 1  Duer,  667. 

Where  one  partner  holds  possession 
of  the  partnership  property,  and  refuses 
to  let  his  co-partner  into  possession,  he 
will,  in  equity,  be  held  to  pay  to  such 
co-partner,  or  his  vendee,  the  value  of 
the  use  of  the  property  so  withheld. 
Adams  v.  Kable.  6  B.  Mon.  384. 

ig)  Ibid. 

2  See  Glover  r.  Tuck,  24  Wend.  153; 


TeiTj'  V.  Carter,  2o  Miss.  168:  Kinlock  r. 
Hamlin,  2  HUl,  (S.  C.)  Ch.  19;  Fowlber 
V.  Rhodes,  12  Mo.  225;  Robinson  v. 
Bullock,  58  Ala.  618;  Whitehall  r. 
Shickle,  ^i  Mo.  5)38;  Wills  r.  Simmondii, 
15  N.  Y.  Supreme  Ct.  189;  Morgan  f. 
Nunes,  54  Miss.  308;  ]\roritz  r.  Phelps, 
4  E.  D.  Smith,  135;  Hunt  v.  Reilly,  50 
Tex.  99. 

A  suit  at  law  may  always  be  main- 
tained for  a  breach  of  partnei-ship  arti- 
cles, where  the  business  of  the  partner- 
ship has  not  been  commenced,  and  there 
are  no  accounts  in  dispute  between*  the 
partners.  And  where  some  of  the  paj- 
ties  have  sold  out  their  interest  before 
the  matter  in  controversy  arose,  they 
need  not  be  made  parties.  Yance  v. 
Blair,  18  Ohio,  532. 

If  a  contract,  though  made  concerning 
the  partner.«;hip  affairs,  and  in  further- 
ance of  the  joint  undertaking,  is  the  iii- 
dividual  contract  of  the  partnei-s  who 
are  parties  to  it,  and  if  it  is  made  by 
them  in  their  o\\n.\  names,  and  not  in  tlio 
name  of  the  firm,  an  action  may  be 
maintiiined  thereon  by  one  against  the 
others,  during  the  continuance  of  the 
partnership.  Wright  v.  Michie,  6  Gralt. 
354. 

An  action  will  lie  for  a  breach  of  a 
covenant  to  continue  a  partnership  for  a 
fixed  period,  unless  sooner  dissolved  in 
accordance  with  the  terms  of  the  artick's 
of  such  partnership.  Bagley  r.  Smith, 
10  N.  Y.  489;  Addams  c.  Tutton,  39 
Pa.  St.  447. 

In  a  suit  by  one  member  of  a  partner- 
ship against  another  for  a  breach  of  a 
covenant  to  continue  a  pai-tnership  for 
a   fixed   term,    the   loss   of  prospective 

1381 


*i025    WHEN  MAINTAINABl.E  BEFORE  THE  JUDICATURE  ACTS.    [coOK  III. 


nify  liim  against  the  debts  of  the  firm,  actions  for  damages  occasioned  by  breaches 


profits  from  the  performance  of  the  con- 
tract, is  the  true  measure  of  damages, 
and  in  such  case,  the  plamtiff 's  claim 
for  pi-ofits  should  not  be  limited  to  the 
intei-val  between  the  dissolution  of  the 
partnership  by  the  act  of  the  defendant 
and  his  subsequent  entry  into  business. 
Bagley  r.  Smith,  10  N.  Y.  489. 

The  measure  of  damages  in  an  action 
for  a  breach  of  a  partnership  agreement 
is  the  value  of  the  contract  broken, 
according  to  its  value,  separate  and  in- 
dependent of  any  former  contract.  Ad- 
dams  V.  Tutton,  39  Pa.  St.  447. 

Where  one  partner  agrees  w^ith  his 
co-partner,  who  has  just  acquired  an  in- 
terest in  the  property  used  by  them  as  a 
distillery,  to  pay  a  certain  tax  due  the 
United  States,  so  as  to  save  the  property 
from  seizure  and  sale,  and  gives  personal 
security  for  such  payment,  and  after- 
wards pays  such  tax  out  of  the  partner- 
ship funds,  charging  himself  with  the 
amount,  the  other  cannot,  in  an  action 
at  law,  recover  more  than  nominal  dam- 
ages until  the  partnership  accounts  are 
settled.  Smith  v.  Reddeil,  87  111.  165. 
An  express  promise  by  one  partner, 
out  of  his  share  of  the  income,  to  pay 
another  partner  for  his  personal  atten- 
tion to  the  business  of  the  concern, 
may  be  enforced  in  assumpsit,  although 
the  articles  of  co-partnership  are  under 
seal  and  provide  for  such  payment. 
Paine  v.  Thatcher,  25  Wend.  450. 

A  stipulated  compensation  may  be  re- 
cx)vered  at  law,  though  payable  out  of 
profits.  Robinson  r.  Green,  5  Harr.  115. 
Where  a  partnership  covenant  recites 
that  A  and  B  had  entered  into  partner- 
ship; that  A  had  purchased  and  put 
into  the  firm  goods  to  the  amount  of 
$2696.26;  that  he  had  received  of  B  a 
negro,  at  it!600,  in  part  payment  of  the 
goods;  that  they  were  to  be  at  equal 
expense  and  profits  in  the  goods;  and 
that  B  was  to  account  to  A  for  one-half 

1332 


of  said  goods,  except  the  said  negro  at 
$600;  the  agreement  to  account  will  be 
held  to  have  arisen  prior  to  the  partner- 
ship transactions;  and  A  may  maintain 
an  action  of  covenant  against  B  for  fail- 
ing to  account  for  the  balance  of  one- 
half  of  the  price  of  the  goods.  Bailey 
V.  Starke,  6  Ark.  191. 

Even  where  a  party  to  a  contract  was 
held  to  be  a  partner  by  the  terms  of  the 
contract,  yet.  if  it  contained  an  express 
covenant  to  pay  him  his  losses,  or  the 
amount  of  his  advances  less  his  receipts, 
at  the  end  of  a  specified  time,  an  ac- 
tion at  law  upon  the  covenant  may  be 
resorted  to,  and  a  bill  in  equity  calling 
for  a  settlement  of  the  partnership  ac- 
counts is  unnecessary.  Whit4?liill  v. 
Shickle,  43  Mo.  538. 

If  three  or  more  co-partners  enter 
into  mutual  covenants,  where  they  con- 
tribute severally  and  in  difl"erent  pro- 
portions to  the  joint  stock,  their  cove- 
nants are  several,  and  each  partner  has 
his  several  remedy  for  a  breach.  Dun- 
ham V.  Gillis,  8  Mass.  462. 

Where,  by  articles  of  association, 
each  of  the  associates  severally  bound 
himself  to  pay  a  ratable  proportion  of 
all  expenditures  for  improvements 
made  or  to  be  made :  Held,  that  the 
undertaking  was  mutual ;  the  covenants 
of  the  associates  being  made  with  each 
other,  and  that  the  liabUility  arose  on 
the  promise  by  each  party  to  the  other, 
which  could  only  be  enforced  by  an  ac- 
tion among  themselves.  Troy,  etc. 
Factory  v.  Coming,  45  Barb.  231. 

A  promise  by  a  continuing  partner  to 
reimljurse  a  retii'ing  partner,  for  taking 
up,  by  his  mdividual  note,  a  partnership 
note  on  which  the  latter  is  still  liable, 
but  which  the  fomier  has  at  the  dissolu- 
tion promised  to  pay,  will  sustain  an 
action,  a  demand,  whether  necessary  or 
not,  having  been  first  made.  Warbrit- 
ton  V.  Cameron,  10  Ind.  302. 


CHAP.  X.J     WHEN  MAINTAINABLE  BEFORE  THE  JUDICATURE  ACTS.    *1025 


of  these  covenants  would  clearly  lie.  {h)    So,  if  a  partnership  was  entered  into  for 


Two  partners,  A  and  B,  on  dissolu- 
tion of  the  paitnership,  entered  into  an 
a^eement,  the  performance  of  which 
was  secured  by  a  penalty,  by  which  A 
conveyed  and  assigned  to  B  all  the  busi- 
ness, effects,  and  debts  of  the  firm,  and 
B  agreed  to  pay  all  the  debt.s  due  by  the 
firm.  On  a  bill  filed  by  B  ajriiinst  A, 
alleging  that  A  had  failed  to  deliver  to 
him  all  the  notes,  bonds,  and  eflects  of 
the  concern,  according  to  the  agreement, 
and  praying  that  A  might  be  decreed 
to  perfomi  his  part  of  the  agreement, 
but  not  alleging  fraud  nor  asking  a  ire- 
scission  of  the  agreement:  Held,  that 
the  rehiedy  of  B  was  at  law,  and  that 
chancery  had  no  jurisdiction.  Clark  v. 
Clark,  4  Port.  9. 

Where  one  partner  has  made  profits, 
by  engaging  in  any  other  business  in 
violation  of  his  contract,  his  co-partner 
has  his  option  to  sue  for  damages  for  the 
breach  of  the  contract,  or  to  bring  a  bill 
in  equity  to  compel  an  accounting. 
Moritz  r.  Perbles,  4  E.  D.  Smith,  1:35. 

An  action  may  be  maintained  for  the 
lireach  of  a  promise  to  admit  the  plain- 
tilf  as  a  partner  in  an  undertaking,  in 
which  the  plaintiff  and  defendant  mutu- 
ally agreed  to  become  partnei-s,  and 
share  the  profits  and  losses.  Byrd  v. 
Fox,  8  Mo.  574.  See,  also,  Lane  v. 
Roche,  RUey  Ch.  215. 

When  a  firm  has  been  dissolved,  and 
one  partner  has  assumed  the  entire  con- 
trol of  the  goods,  an  action  may  be 
brought  by  such  a  partner  against  an- 
other partner  to  whom  he  has  sold  a 
portion  of  the  goods,  at  the  other's  re- 
quest, and  on  a  promise  to  pay  him,  and 
not  the  finu.  Caswell  v.  Cooper,  18  111. 
532. 

Upon  a  sale   by  one  partner  of  his 


int<?rest  to  the  other,  who  agrees  to  pay 
him  therefor  the  capital  which  the  ior- 
mer  had  put  into  the  originiU  business 
*'  as  soon  as  he  can  do  so  without  incon- 
venience," an  action  at  law,  and  not  a 
bUl  in  equity,  is  the  proper  remedy  to 
recover  the  price;  such  capital  stock 
being  ascertainable  without  any  adjust- 
ment of  the  losses  and  profits.  Wells 
V.  Cai-penter,  65  111.  447. 

Where  one  of  two  partners,  by  agree- 
ment between  them,  takes  certain  speci- 
fic articles  of  partnership  property,  an/1 
agrees  to  pay  his  co-partner,  for  his  share 
thereof,  a  definite  sum,  at  a  specified 
time,  the  co-partner  may,  if  he  choses  so 
to  do,  maintain  an  action  to  recover  the 
amount  so  agreed  to  be  paid,  indepen- 
dent of  the  settlement  of  the  partnership 
accounts.  But  this  right  of  sepai-ate 
action  may  be  waived,  by  consenting  to 
a  full  account  of  the  partnei-ship  mattei-s, 
including  tlie  price  so  agi-eed  to  be  paid 
for  the  goods.  Neil  v.  Greenleaf,  26 
Ohio  St  567. 

In  an  action  on  a  note  given  by  an 
outgoing  partner  for  assets,  he  may  set 
up  in  defense  an  understanding  that  foi 
any  notes  and  accounts  which  should 
prove  worthless  there  should  be  a  rebate 
from  the  amount  pro  tanto.  In  such 
case  no  resort  to  equity  is  necessary  in 
the  fii-st  instance.  Bethel  c.  Franklin, 
57  Mo.  466. 

Whore  one  partner,  not  well  acquain- 
ted with  the  atfaii-s  of  the  firm,  pur- 
chased a  portion  of  the  ])artnership  in- 
terest of  the  other  partner,  and  gave  his 
note  therefore  relying  on  the  representa- 
tions of  the  latter  as  to  its  value,  which 
he  subsequently  ascertained  to  be  fraud- 
ulent, and  the  interest  so  purchased 
was  in  reality  worth  nothing  at  all,  the 


{h)  Leighton  v.  Wales,  3  M.  &  W. 
545;  White  r.  Ansdell,  Tyr.  &  Gr.  785; 
Barker  r.  Allan,  5  H.  &  N.  61,  is  an  in- 
stance of  a  successful  action  by  a  share- 


holder against  directoi-s  who  had  agreed 
to  indemnify  him  against  calls.  See, 
too,  Haddon  v.  Ayres,  1  E.  &  E.  118. 

1333 


1026 


ACTIONS    BETWEEN    PARTNERS,    ETC. 


[book  iir. 


a  definite  time,  and  one  partner  was  turned  out  by  his  co-partners  before  that 
time  had  expired,  he  could  sue  them  for  this  breach  by  them  of  their 

*1026  *agreement,  and  recover  damages  for  the  injury  he  had  sustained  (/) ;  so  an 
action  might  b-  maintained  for  not  rendering  accounts  and  dividing  profits 

(X-);  for  a  penalty  stipulated  to  be  paid  in  case  of  a  breach  of  agreement  (0;  for  rent 

covenanted  to  be  paid  (»();  for  not  indemnifying  the   plaintiff  against   a  debt  («); 

for  not  putting  the  plaintiff  in  funds  to  enable  him  to  defray  expenses  as  agreed,  (o) 

sue  the  other  on  his  failure  to  perform  a 
covenant  to  which  they  were  both 
bound  ia  liquidated  damages  by  the  ar- 
ticles of  partnership;  he  must  first  ap- 
ply to  equity  for  a  dissolution  of  the 
partnership.  Stone  v.  Fouse,  3  Cal. 
292. 

One  partner  cannot  maintain  an  ac- 
tion at  law  on  the  covenants  in  the  ar- 
ticles of  co-parfnership  to  recover  dam- 
ages of  his  co-partner  for  neglect  of  the 
parfnership  business,  while  there  is  a 
considerable  amount  due  from  him  to 
his  co-partner,  and  the  debts  due  by 
and  to  the  firm,  the  burden  of  which  is 
to  be  borne,  and  the  benefit  enjoyed  by 
the  partners,  in  certain  proportions,  are 
not  ail  settled.  Capen  v.  Barrows,  1 
Gray,  376. 

Where  the  owner  of  a  hotel  executes 
a  lease  thereof  and  thereafter  enters  into 
a  contract  of  partnership  in  keepmg  the 
hotel  with  the  lessee,  with  an  agreement 
that  the  rent  reserved  shall  be  a  charge 
upon  the  firm,  if  the  latter  contract  is 
separate  from  the  first,  it  does  not  work 
a  surrender  of  the  lease,  but  the  lessor 
cannot  sue  at  law  to  recover  the  rent, 
but  must  sue  in  equity  for  a  partnership 
accounting,  as  the  rent  must  be  paid  out 
of  the  net  profits  of  the  partnership. 
Pi  Pie  V.  Cuzas,  47  Cal.  174,  id.  180. 
(0  See  Greenham  v.  Gray,  4  Ir.  Com. 
Law  Rep.  501. 

(A-)  Owston  V.  Ogle,  18  East,  538;  and 

see  Stavers  v.  Curling,  3  Bing.  N.  C.  355. 

(/)  Radenhurst  v.  Bates,  3  Bing.  463. 

(m)  Bedford  Brutton,  1   Bmg.  N.  C. 

.399. 

(n)  Want  v.  Reece,  1  Bing.  18. 
(o)  Brown  v.   Tapscott,  6  M.   &  W. 
119. 


firm  being,  in  fact,  insolvent  at  the  time : 
Hehl,  that  these  facts  constituted  a 
icood  defense  to  an  action  against  the 
purchaser  upon  the  note,  in  favor  of  the 
vendor  or  his  administrator,  though  the 
purchaser  may  have  made  no  offer  to 
rescind  the  contract.  Smith  v.  Smith, 
30  Vt.  139. 

On  the  dissolution  of  a  partnership, 
one  partner  assigned  to  his  co-partners 
all  his  interest  in  all  the  firm  assets,  and 
further  covenanted  not  to  interi'ere  with 
the  collection  of  debts  owmg  the  firm. 
Afterwards  he  receipted  for  one  of  the 
debts  so  assigned,  receiving  a  valuable 
consideration :  Held,  that  his  co-part- 
nors  might  maintain  a  suit  against  him 
for  the  amount  of  the  debt.  Ross  v. 
West,  2Bosw.  360. 

Where  a  deceased  partner  covenanted 
for  a  consideration,  to  pay  the  debts  of 
the  firm  without  unnecessary  delay,  and 
without  recourse  on  his  co-partner,  a 
failure  on  his  part  to  perform  the  act 
which  he  had  covenanted  to  do,  gives  a 
right  of  action  to  his  co-partner,  and 
the  latter  may,  in  such  case,  file  his 
claim  against  the  estate  of  the  deceased 
I»artner,  before  he  has  paid  any  part  of 
the  partnership  debts.  Hogan  v.  Cal- 
verf;,  21  Ala.  194. 

A  and  B  agreed  in  partnership  arti- 
cles that,  "at  the  expiration  of  the 
partnership,  each  pai+y  shall  draw  from 
the  establishment  one  thousand  dollars, " 
etc.  A  brought  an  action  of  covenant 
on  this  agreement  against  B,  assigning 
a.s  a  breach  thereof  that  B  did  not  pay 
over  the  $1000:  Hehl,  that  the  decla- 
ration was  insufficient.  Ridgway  t\ 
Grant,  17  111.  117. 
One  of  two  partners  cannot,    at  law, 

1334 


CHAT. 


X.] 


ACTIONS    BKTWEEN    PARTNERS,    ETC. 


*102G 


Fourthh/,  if  a  person  agreed  to  become  a  partner  with  others  and  to  furnish  a 
certain  amount  of  capital,  and  he  made  default,  they  could  sue  him    ^  ^^j.  ^^^  ^__^ 
at  law  for  diuna^es,  although  he,  as  well  as  they  were  to  have  had    not  lurnisbing 
an  interest  in  what  he  undertook  to  furnish.  ( /v)'  ^*' 

It  followed  from  the  above  that  if  A.  and  B.  agreed  to  become  partners,  and  each 
agreed  to    furnish  a  certain  amount  of  capital,  and  A  lent  B  the    Loan  by  one 
amount  B  was  to  contribute,  this  loan  constituted  a  debt  for  which    f" b"bn?us*i"™ 
an  action  by  A.  against  B.  would  lie,  although  they  may  actually    in  by  the- other, 
have  become  partners,  {qf    And  it  also  followed  that,  if  partners  agreed  to  con- 


ip)  Hesketh  v.  Blanshard,  4  East, 
141;  Venning  v.  Leckie,  13  East,  7;  Gale 
r.  Leckie,  2  Stark.  107.  Hesketh  v. 
Blanshard  gave  rise  to  mmh  contro- 
versy (see  Stocker  v.  Brocklebank,  3 
Mac.  &  G.  265;  Rawlinson  v.  Clarke, 
15  M.  and  W.  298;  Collyer  on  Part.  p. 
60),  not  mdeed,  with  reference  to  the 
question  decided,  but  with  reference  to 
an  opinion  expressed  by  Lord  Ellen- 
borough,  that  no  partnership  existed 
between  Robertson  and  the  plaintiff, 
except  as  regards  third  parties.  Hav- 
ing regard  to  the  decisions  relating  to 
partnerships  in  profits,  it  is  difficult  to 
assent  to  this  opinion;  but  the  case  was 
unimpeachable  as  regaids  the  point  be- 
fore the  court,  viz.,  the  right  of  the 
plaintiff,  whether  partner  or  not  with 
Robertson,  to  recover  the  price  of  the 
meat  for  which  the  plaintiff  had  been 
compelled  to  pay. 

'See  Ellison  v.  Chapman,  7  Blackf. 
224;  Grigsby  v.  N^nce,  3  Ala.  347; 
Scott  V.  Campbell,  30  id.  728;  Truitt  v. 
Baird,  12  Kan.  420;  Wills  r.  Simmonds, 
r)l  How.  Pr.  48;  Currier  r.  Webster,  45 
N.  H.  226. 

Where  one  partner  fails  to  comply 
with  his  agreement  to  furnish  buildings 
and  macliinery,  for  the  purpose  of  car- 
rying on  the  partnership  business,  the 
other  partner  may  maintain  an  action 
of  assumpsit  against  hun  for  damages 
arising  to  him  for  such  breach  of  con- 
tract. And,  in  such  case,  equity  will 
not  enforce  a  specific  performance. 
Wadsworth  v.  Manning,  4  Md.  59. 


One  partner  may  sue  another  at  law 
on  a  note  given  by  the  latter  to  the 
former,  for  the  payment  of  a  part  of  the 
capital  stock.  Grigsby  r.  Nance;  Scott 
V.  Campbell,  fti(j))-a. 

Where,  however,  a  partnen-^hip  is 
actually  formed  and  proceeds,  to  do 
business  as  such,  such  a  case  has  been 
distinguished  from  a  case  where  one 
refuses  to  become  a  partner  according 
to  his  agreement,  and  it  has  been  held 
th.at  in  the  former  case  no  action  at  law 
can  be  maintaim^d  by  one  of  the  part- 
ners against  another  for  his  misconduct 
as  a  member  of  the  firm  in  refusing  to 
furnish  money  to  complete  the  business 
undertaken,  as  he  had  agreed  to  do  in 
the  formation  of  the  partnership,  where- 
by a  great  loss  of  profits  was  sustained. 
A  final  settlement  must  first  be  had,  and 
this  can  only  be  enfoi'ced  in  equity. 
Buckmaster  v.  Gowen,  81  111.  153. 

((/)  Elgie  r.  Webster,  5  M.  S:  W.  518; 
Ex  parte  Notley,  1  Mon.  &  Ayr.  46  and 
3  D.  &  Ch.  367.  See  Jestons  r.  Brooke, 
Cowp.  793. 

^  A  suit  at  law  can  be  maintained  by 
one  partner  against  another,  for  money 
advanced  to  him  to  launch  the  partner- 
ship, or  to  be  used  in  the  partnership 
business,  if  the  claim  does  not  neces.sa- 
rily  connect  itself  with  the  atlaii-s  of  the 
whole  finn,  and  can  be  a.sc^»rtained 
without  a  pi-evious  examination  of  the 
partnei-ship  accounts.  Cmrier  i\  Rowe, 
46  N.  H.  72;  Crater  r.  Binninger,  45 
N.  Y.  545;  Van  Ness  e.  Forest,  8  Cranch, 
30;  Gridloy  v.  Dole,  4  N.  Y.  486. 

1335 


^1020 


ACTIONS    BETWKEX    rAKTNKUS,    ETC. 


[dook  III. 


tribute  capital  from  time  to  time  to  meet  expenses,  as  occasion  might  requ're, 
and  one  of  them  was  compelled  to  pay  the  whole  of  the  expenses  for 
which  all  were  liable,  he  could  sue  his  co-partners  for  what  they 
ought  to  have  contributed,  according  to  their  agreement,  (r) 
Fifihli/,  oue  partner  might  maintain  an  action  for  damages  in  respect  of  a  demand 
which  had  either  nothing  to  do  with  the  partnership  business.^  or, 
if  entangled  in  it,  was  only  so  entangled  by  reason  of  the  wrongful 
conduct  of  the  defendant.''  Thus  one  partner  who  had  received 
money  to  the  use  of  another  might  be  sued  for  it,  although  he  had 
paid  it  to  the  credit  of  the  firm;  for  his  business  was  to  hand  it 


Action  for  not 
contributing  to 
expenses. 


5.  Action  by, 
one  partner 
against  another 
lor  matters  un- 
connected with 
the  partnership 
accounts; 


(r)  Brown  v.  Tapscott,  6  M.  &  W. 
119.  See,  also,  French  v.  Styring,  2  C. 
B.  N.  S.  357. 

2 See  Biernan  v.  Biernan,  14  Mo.  24; 
Chamberlain  v.  Walker,  10  Allen,  429; 
Haller  v.  Williamowicz,  23  Ark.  566; 
BattaiJle  v.  Battaille,  6  La.  Arn.  682; 
Elder  v.  Hood,  38  III.  533;  Paine  v. 
Moore,  6  Ala.  129;  Seaman  v.  Johnson, 
46  Mo.  111. 

A  and  B  entered  into  partnership,  A 
to  furnish  the  land  and  buildings  for 
the  business,  and  B  certain  cash  capital. 
To  enable  A  to  put  the  buildings  in  bet- 
ter repair,  B  also  loaned  him  a  certain 
sum.  The  partnership  business  was  in- 
terrupted by  the  death  of  A :  Held, 
that  B  was  entitled  to  recover  the 
amount  of  his  loan  from  the  estate  of 
A,  as  a  debt  unconnected  with  the  affairs 
of  the  partnership.  Biernan  v.  Braches, 
supra. 

Where  one  partner  advances  money 
for  the  benefit  of  another,  to  relieve 
him  from  liability  upon  an  execution 
issued  for  debts  due  the  firm,  and  takes 
his  note  therefor,  the  contract  is  a  pri- 
vate one,  and  may  be  enforced  without 
regard  to  the  state  of  the  affairs  of  the 
partnership.  Chamberlain  v.  Walker, 
supra. 

If  a  partner's  individual  property  used 
in  the  partnership  business  is  damaged 
by  the  other  partner,  his  remedy  there- 
for is  at  law, — not  by  a  bill  in  chancery 
for  an  account  of  the  partnership  deal- 
ings.    Haller  t\  Williamowicz,  siij^ra. 

One  who  is  clerk  and  also  in  partner- 

1336 


ship  in  a  particular  business  with  his 
employer,  may,  where  his  duties  as 
clerk  and  partner  are  distinct,  sue  for 
his  salary-  due  him  in  the  former  capac- 
ity, without  resorting  to  a  suit  for  the 
settlement  of  the  partnership  transac- 
tions. Alexander  v.  Alexander,  12  La. 
Ann.  588. 

If  one  co-partner  contribute  funds 
which  it  was  the  duty  of  another  co- 
partner to  furnish,  in  furtherance  of  a 
partnership  enterprise,  such  funds  thus 
contributed  may  be  recovered  in  an  ac- 
tion of  assumpsit,  without  waiting  for 
a  final  adjustment  of  the  business  of 
the  co-partnership.  Wright  v.  East- 
man, 44  Me.  220. 

A  partner  may  sue  his  co-partners 
upon  an  independent  contract  made  by 
them  as  a  firm  with  him  before  the 
partnership  was  formed  between  him 
and  them.  Mullany  p.  Keenan,  10  Iowa, 
224. 

Where  a  carpenter  employed  to  work 
on  a  house  belonging  to  a  partnership 
in  which  it  conducts  its  business,  buys  a 
partner's  interest  when  the  work  is 
nearly  finished,  and  finishes  it  after- 
wards, he  may  sue  the  other  partner  for 
his  share  of  the  work,  it  not  being  a 
partnership  transaction,  before  claiming 
a  settlement.  Boyd  v.  Brown,  2  La. 
Ann.  218.  • 

*  The  rule  that  generally  one  partner 
cannot  sue  the  other  to  recover  money 
paid  into  the  firm,  does  not  apply  where 
one  was  induced  by  the  other's  fraud  to 
sign  the   articles;  the  latter  obtaming 


CilAP.   X.]     WHEN  MAINTAINAi:  i.:  BKKOltK  THE  JUUICATUUE  ACTS.    *1027 


over  to  his  co-pariner.  {sf    So  a  parlncr  who,  in  fraud  of  his  co-partnoi-s, 

had  ffivfu  a  note  in  the  name  *of  the  firm  for  a  private  debt  of  his  own,     *1027 

whereby  his  co-partners  had  been  compelled  to  ])ay  such  not<^,  was  liable 

them  at  law  for  the  whole  of  what  they  had  been  compelled  to  pay.  (t) 

Sixthly. — One  partner  mif,''ht  sue  another  at  law  in  respect  of  a  matter  which ^ 
thougrh  relating  to  the  partnership  business,  was  separate  and  dis-  g  „„,!  f„r  mat- 
tinct  from  all  the  other  matters  in  question  between  the  partners,  jJi^jW^^^'l^""^^" 
and  could  and  ought  to  be  detennined  without  going  into  the  part- 
nership accounts,  (h)  Thus  where  a  pai-tnership  had  been  dissolved,  and  it  had 
been  agreed  that  one  partner  should  take  all  the  partnership  property   ^^.^j^^^^  j.^,^ 

at  a  valuation,  and  it  had  been  valued,  and  he  had  taken  it  at  that    anioiint  of 
„  ,       ,  n  ,,        ,1  .  Ill  valiiiition ; 

valuation,  and  the  values  of  the  shares  of  the  other  partners  had  been 

ascertained,  they  might  separately  sue  him  at  law  for  the  amount  payable  to  them 

respectively,  (r) '     So,  if  partners  went  through  the  atx-ounts  of  the  partnership,  and 

a  final  balance  was  struck,  and  the  amounts  of  their  shares  were  as-    f^^.  v^niance 

certained,  and  the  person  by  whom  those  amounts  were  to  be  paid   sinu'k; 

was  also  ascertained,  an  action  would  lie  against  him  in  respect  of  each  share  to  be 

paid  by  him.  (x).  ^    Tlie  balance,  however,  must  have  been  a  final  balance  to  be 


the  money  not  for  partnership  purposes, 
as  pretended,  but  with  intent  to  appro- 
priate it  to  his  own  use.  Hale  v.  Wil- 
son, 112  Mass.  444. 

The  plaintitFs  and  the  defendants  pur- 
chased jointly  certain  real  estate,  which 
they  subsequently  conveyed  to  a  petro- 
leum company,  receiving  in  part  pay- 
ment shares  of  the  company's  stock, 
which  were  distributed  among  the  par- 
ties proportionately  to  their  several  in- 
terests in  the  land:     Held,  that  there 
was  not  such   a  mutuality  of  interest 
between  the  parties  as  to  make  appli- 
cable the    rule   which    precludes    one 
partner  from  suing  another,  and  there- 
fore that  the  plaintifls  could  maintain 
an  action  against  the  defendants  to  re- 
cover damages  for  fraud  practiced  on 
them  in  the  purchase  of  the  land.    Dart 
V.  Walker,  8  Daly,  l:5G. 
is)  Smith  V.  Barrow,  2  T.  R.  476. 
*A,  B  and  C  were  partners.      A,  in 
his  absence,  left  his  private  affairs  in 
the  hands  of  B,  as  his  agent.     On  the 
return  of  A,  B  gave  him  a  writing  stat- 
ing receipts  and  expenditures  as  agent, 
and  acknowledging  a  certain  sum  due 
to  A  and  "put  into  the  partnership:" 
Held,  that  the  acceptance  of  such  writ- 
ing by  A  did  not  make  it  necessary  for 


him  to  resort  to  the  partnership  to  re- 
cover the  amount  due,  and  that  B  was 
liable  individually.  Paine  v.  Moore,  6 
Ala.  129.  See,  also,  Seaman  v.  John- 
son, 46  Mo.  111. 

(0  Cross  V.   Cheshire,  7  Ex.  4^3;  Os- 
bonie  r.  Harper,  5  East,  225. 

[n)  The  Court  of  Chancery  would  not 
restrain  such  actions.     See  ante,  p.  998. 
(r)  See  Jackson  v.  Stopher-d,  2  Cr.  & 
M.  361. 

'  See  ante,  102-''),  note, 
(.r)  Morley  v.  Baker,  3  Fos.  &  Fin. 
146;  Moravia  v.  Levy,  2  T.  R.  4'^3,  note; 
Foster  r.  Allanson,  2  T.  R.  479;  Wray 
V.  Milestone,  5  M.  &  W.  21  ;  Brierly  r. 
Cripps,  7  C.  &  P.  709;  Preston  r.  Strut- 
ton,  1  Anst.  50;  Henley  v.  Sloper,  8  B. 
&  C.  16;  Rackstraw  v.  Imber,  Holt, 
36«;  Wells  I'.  Wells,  1  Vcntr,  40. 

2 See  Guhck  r.  Gulick,  14  N,  J.  Law, 
r)78;  Clark  v.  Dibble,  16  Wend.  601; 
Robinson  r.  Williams,  8  Mete.  4-')4; 
Ridgeway  r.  Grant,  17  111.  117;  Pope  r. 
Randolph,  13  Ala.  214;  Wilby  r.  Phin- 
ney,  15  Mass.  116;  Fanning  r.  Chad  wick. 
3  Pick.  420;  M'Call  r.  Oliver,  1  Stew. 
510;  McGehee  r.  Dougherty,  10  Ala. 
863;  Martin  r.  Solomons,  5  Han-.  344; 
Wycoflt"  r.  Purnell,  10  Iowa.  332;  Lane 
V.  Tyler,  49  Me.  252;  Nims  r.  Bigelow, 
1337 


*1037     WHEN  MAINTAINABLE  BEFORE  THE  JUDICATUKE  ACTS.    [bOOK  III. 


paid,  and  not  a  balance  to  be  carried  over  to  a  fresh  account  in  continuation  of  that 
just  closed.    Therefore,  where  one  partner  sued  another  for  a  debt  unconnected 


44  N.  H.  376;  Hanks  v.  Baber,  53  111. 
292.  See,  also,  Wood  v.  Merrow,  25 
Vt.  340;  Wan-en  v.  Dickson,  30  lU.  363; 
Byrd  v.  Fox,  8  Mo.  574. 

Balances  struck  only  preparatory  to  a 
settlement,  are  not  sufficient.  Until 
the  final  settlement  is  had,  the  remedy 
is  in  equity.  Bums  v.  Nottingham,  60 
111.  531. 

No  express  promise  to  pay  the  bal- 
ance need  be  alleged.  Mackey  i'.  Auer, 
15  N.  Y.  Sup.  Ct.  180.  See,  also,  Ross 
V.  Cornell,  45  Cal.  133;  Purvines  v. 
Champion,  67  111.  459.  See,  however, 
Killara  v.  Preston,  4  Watts  &  Serg.  14. 

A  &  B,  partners  in  a  house  of  enter- 
tainment, called  on  a  person  to  make 
out  an  account  current  from  the  books, 
in  the  presence  of  the  parties,  and 
agreed  verbally  that  they  should  settle 
by  the  balance  found  by  him;  and  if 
they  could  not  agree  upon  the  balance 
found  by  laim,  then  they  should  call  in 
two  other  persons  to  adjust  the  matter, 
and  the  party  against  whom  the  bal- 
ance should  be  found,  shoald  pay  it  to 
the  other.  One  of  the  parties  refused 
to  abide  by  the  agreement,  but  the  other 
proceeded,  called  in  one  person  and 
had  the  account  stated.  Upon  this  ac- 
count he  sued  the  other:  Held,  there 
could  be  no  recovery,  although  proof 
■was  made  that  the  account  was  correctly 
stated  from  the  books.  Moitow  v.  Riley, 
15  Ala.  710. 

The  rule  that  when  a  balance  is  struck 
between  partners,  and  a  promise  to  pay 
is  made,  an  action  at  law  lies  to  recover 
the  amount,  applies  where,  on  the  disso- 
lution of  an  incorporated  association, 
a  resolution  was  passed  detennining  the 
share  of  the  common  fund  which  should 
be  paid  to  each  member,  and  the  de- 
fendant (the  treasurer)  promised  to  pay 
such  balance.  Kockler  v.  Brown,  31 
How.  Pr.  235. 

1338 


A  partnership  between  the  jjlaintiff 
and  defendant  having  been  dissolved, 
the  plaintiff  agreed  to  pay  all  the  debts 
against  the  company ;  and  the  defendant 
agreed,  in  writing,  that  a  certain  sum 
was  the  final  balance  of  accounts  be- 
tween them  as  partners:  Held.^  that  the 
plaintiff  might,  before  paying  the  out- 
standing partnership  debts,  maintain 
assumpsit  against  the  defendant  to  re- 
cover the  sum  thus  agreed  to  be  the 
final  balance,  the  defendant,  if  com- 
pelled to  pay  any  such  debts,  having  his 
remedy  on  the  plaintiff's  agreement. 
Dickinson  v.  Granger,  18  Pick.  315. 
Where  one  partner,  upon  the  settlement 
of  the  partnership  account,  promises  to 
pay  the  other  a  certain  sum,  provided  it 
shall  be  found  that  the  promisor  has 
never  paid  such  sum  to  a  certain  third 
party  for  such  other  partner,  upon  its 
being  ascertained  that  the  money  has 
not  been  paid  to  such  third  person,  the 
promisee  may  recover  the  same  from  his 
partner  in  an  action  of  assumpsit. 
Adams  v.  Funk,  53  III.  219. 

In  1859  plaintiff  and  defendant's  in- 
testate, each  owned  a  bank  in  Wiscon- 
sin; plaintiff,  th"C.  bank,  and  the  other, 
the  M.  bank.  They  formed  a  co-part- 
nership, each  contributing  his  bank,  and 
together  they  constituted  a  bank  known 
as  the  L.  bank,  and  each  contributed 
some  money.  The  partnership  thus 
formed  continued  until  1861,  when  it 
was  dissolved.  During  the  time  the 
three  banks  continued  to  do  business  as 
such,  and  had  transactions  with  eacli 
other,  as  though  no  partnership  existed 
between  the  owners.  At  the  time  of 
the  dissolution  the  books  of  the  banks 
showed  that  the  M.  bank  was  indebted 
to  the  C.  bank  $1,000,  and  that  the  L. 
bank  was  indebted  to  it  $3,000.  Upon 
dissolution,  plaintiff  transferred  to  his 
partners  all  the  interest  in  the  M.  and 


CIIAP.  X.]     WHEN'  MAINTAlXAIiLE  BEFORE  THE  JLDICATLKK  ACLS.     •  i'»:^7 


with  the  partnership,  the  defi'inhint  was  not  allowed  to  set  off  a  balance  found  due 
to  him  on  the  paiinership  account;  for  it  did  not  appear  that  the  account  which 


L.  banks,  and  hia  partners  transferred 
to  him  all  the  interest  in  the  C.  bank. 
The  partners  agreed  in  writing  that  the 
M.  and  L.  banks  should  pay  plaintiff  the 
$3,000  due  the  C.  bank,  as  soon  as  they 
conveniently  could,  with  interest  at  the 
rate  of  12  per  cent.;  and  defendant's 
intestate  pledged  "  his  honor  to  pay  the 
balance  "  as  soon  as  it  could  be  done 
without  pressing  the  banks.  In  an  ac- 
tion upon  this  agreement,  held,  that  the 
indebtedness,  if  any,  was  not  in  favor 
of  plaintiff  against  the  two  banks  as 
such,  but  against  the  intestate,  arising 
'  out  of  partnership  transactions;  that 
there  was  not  shown  to  have  been  a 
final  accounting  between  the  two  part- 
ners, or  an  express  promise  on  the  part 
of  the  intestate  to  pay,  and  that  the 
plaintiff  could  not  recover.  The  rule 
in  N-ew  York  is  well  settled,  that  one 
partner  cannot  recover  at  law  against 
another,  except  after  a  final  accounting, 
balance  struck  and  express  promise  to 
pay.  Bloss  v.  Chittenden,  2  Thomp.  & 
C.  11. 

When,  by  common  consent,  all  the 
members  of  a  partnership  charge  cer- 
tain of  their  number  with  the  exclusive 
management  of  the  business,  and  with 
the  collection  and  disbursement  of  all 
revenues,  agreeing  that  the  managing 
partners  shall  pay  over  to  each  of  the 
othei-s,  separately,  his  share  of  the  prof- 
its when  dividends  accrue,  each  inember 
may  sue  separately,  at  law,  for  unpaid 
dividends,  and  there  is  no  occasion  for 
resorting  to  equity;  but,  whether  the 
suit  for  dividends  is  in  one  fonn  or  the 
other,  it  must  be  brought  in  the  county 
where  the  managing  partners  reside,  as 
they  alone  are  the  real  debtors,  and  the 
only  necessary  parties  defendant.  Wad- 
ley  r.  Jones,  55  Ga.  329. 

The  payment  by  one  partner  to  an- 
other of  a  certaia  sum  as  his  share,  is 


not  equivalent  to  a  settlement  of  the 
partnership  account ;  nor  is  it  evidence 
that  th(>  same  sum  ha.s  been  ascertained 
as  the  share  of  each  partner,  so  that  as- 
sumpsit wdl  lie  by  a  third  partner. 
Beach  v.  Hotchkiss,  2  Conn.  425. 

After  a  settlement,  wherein  each  part- 
ner waives  his  right  to  have  all  the 
partnership  matters  which  may  come  to 
light  after  the  dissolution  adjusted  in  a 
smgle  proceeding  in  equity,  one  may 
maintain  an  action  at  law  against  an- 
other to  recover  his  proportion  of  money 
of  the  partnership  in  the  latter's  hands 
at  the  time  of  the  settlement,  which  was 
not  then  accounted  for,  nor  mentioned 
by  him.  nor  entered  on  the  books  of  the 
firm,  no  other  assets  of  the  firm  having 
been  discovered.  Dakin  v.  Graves,  48 
N.  H.  45. 

Wliere  only  a  smgle  item  of  account 
between  partners  remains  miadjusted, 
it  can  be  settled  by  an  action  at  law. 
Buckner  v.  Ries,  34  Mo.  357;  Finlay  r. 
Stewart,  56  Penn.  St.  183;  Wheeler  v. 
Arnold,  30  Mich.  304.  See,  also,  Moran 
V.  Lc  Blanc,  6  La.  Ann.  113;  Dole  r. 
Thomas,  67  Ind.  570. 

Where  parties  agree  to  engage  in  a 
single  transaction,  for  the  purpose  of 
making  profits,  their  agreement  docs 
not  amount  to  a  partnership,  in  such 
manner  as  to  compel  the  partner  seek- 
ing his  share  of  the  profits,  or  payment 
for  work,  and  materials  furnished,  in 
excess  of  his  proportionate  sharo  of  the 
venture,  from  the  other  partner,  to  re- 
sort to  an  action  of  account  render,  but 
he  may  recover  in  assumpsit.  Where 
the  partnei-ship,  if  it  existed,  was  in  a 
single  transaction,  and  there  were  no 
debts  due  by  or  in  favor  of  tlie  firm,  the 
plaintiff',  in  such  a  ciuse,  may  i-ecover,  in 
the  equitable  action  of  assumpsit,  that 
whicli  will  make  him  equal  with  his  co- 
partner.    Wright  v.   Cumpsty,  41  Pa. 

1389 


^1027    "WHEN  MAIXTAINABLK  BEFORE  THE  JUDICATL'KE  ACTS,     [bOOK  III. 


had  been  stated  was  a  final  account,  nor  that  the  plaintiff  had  ever  promised  to  pay 

the  balance  which,  on  taking  the  account,  was  found  due  to  the  defendant,  (y)     In 

this  last  case  the  partnership  continued  after  the  balance  sued  for  was  struck;  but 

if  a  balance  was  struck,  and  was  to  be  paid  by  one  partner  to  the  other,   it  might 

probably  have  been  sued  for,  notwithstanding  the  continuance  of  the  partnership; 

for,  ex  hi/j)ot]icni,  it  was  isolated  and  separated  from  the  general  account,  (z) 

Again,  if  one  partner  gave  to  his  co-partner  a  bill  or  note  which  was  in  such  a 

form  as  to  bind,  not  the  firm,  but  the  partner  who  gave  it,  he 

^"  ^'    might  be  sued  by  his  co-partner  thereon,  whatever  the  state  of 

the  accounts  between  the  two  might  be,  and  although  the  bill  or  note  m  cjues- 

tion  had  reference  to  some  partnership  transaction;    for  by  giving  the  bill  or 

note,  the  de]nand  in  respect  of  which  it  was  given  was  isolated  from  the  general 


St.  102.  See,  also,  Hamilton  v.  Ham- 
ilton, 18  id.  20. 

In  an  action  by  a  partner  against  his 
co-partner  to  recover  a  final  balance, 
where  there  are  no  demands  outstand- 
ing against  the  partnership,  the  plaintiff 
may  sustain  the  action  by  showng  that 
no  part  of  the  outstanding  debts  due  to 
the  partnership  can  be  collected,  and 
thus  that  the  judgment  to  be  rendered 
will  make  a  final  settlement  between 
the  partners,  more  especially  if  an  as- 
signment of  all  such  outstanding  debts 
shall  have  been  tendered  to  the  defend- 
ant before  the  action  was  commenced. 
Wniiams  v.  Henshaw,  11  Pick.  79.  See, 
also,  Sikes  v.  Work,  6  Gray,  433;  Wil- 
liams V.  Henshaw,  12  Pick.  378. 

In  an  action  at  law  on  negotiable 
promissory  notes  given  by  one  partner 
to  another,  for  the  amount  of  the  bal- 
ance ascertained  upon  dissolution,  it  is 
not  competent  for  the  defendant  to  show 
that  there  had  been  no  final  settlement 
of  partnership  accounts.  McSherry  v. 
Brooks,  46  Md.  103.  See  Laudiy  v. 
Laudry,  23  La.  Ann.  312. 

Where  a  co-partnership  was  dissolved 
by  one's  selling  all  his  interest  in  the 
goods  and  accounts,  excepting  a  few 
which  were  reserved  to  the  other  two 
partners,  and  the  books  showed  an  ac- 
count of  the  firm  against  such  outgoing 
partner,  which  was  not  excepted,  in  a 
suit  by  the  latter  against  the  other  two, 
it  was  held,  that  the  amount  of  the  ac- 

1340 


count  was  a  proper  set-off,  and  that  it 
was  en-or  to  refuse  testimony  showing 
its  amount.  Shennefield  v.  Button,  8-"> 
111.  504. 

If  an  agreement  of  settlement  between 
partners  be  set  aside,  in  an  action  upon 
it,  on  the  ground  of  fraud  in  obtaining 
it,  the  parties  are  thereby  restored  to 
their  original  rights  and  liabilities,  and 
an  action  of  account  render  will  after- 
wards lie  by  one  against  the  other. 
Leonard  v.  Leonard,  1  Watts  &  Serg. 
342. 

Where  the  interest  of  one  partner  in 
the  partnership  property  has  been  pur- 
chased by  the  other  for  a  gross  sum, 
which  purchase  was  effected  by  fraud 
and  deception,  the  party  defrauded  may 
repudiate  the  contract  in  toto  and  open 
the  account  anew,  in  which  case  his  rem- 
edy is  in  a  court  of  equity.  Chase  v. 
Gai-vin,  19  Me.  211,  Hopkins  v.  Watt, 
13  111.  298. 

{ij)  Froraont  v.  Coupland,  2  Bing.  170, 
See,  too,  Lyon  v.  Haynes,  5  Man.  &  Gr. 
504,  where  the  sum  ascertained  to  be 
payable  was  subject  to  contingent 
claims. 

{z)  This  point  was  raised,  but  not  de- 
cided, in  Carr  v.  Smith,  5  Q.  B.  128, 
where  the  action  failed,  because  the  ac- 
count sued  on  had  been  made  out  by  a 
non-partner,  and  had  not  been  assented 
to  by  the  partners,  and  was  not  stamped 
as  an  award. 


CIIAl' 


X.] 


ACTIONS    BirrWKICN    rAKTNKUS,    ETC. 


*102.S 


♦partnership  account.  (a)>     An  1.  O.  U.  being  ovidonce  of  an  account 
stated,  might  be  sued  upon  by  one  partner  against  another  accordingly,  (fc) 


4028 


(a)  See  Beecham  v.  Smith,  E.  B.  &  E. 
442;  Neale  r.  Turton,  4  Bing.  151  ; 
Preston  r.  Stnitton.  1  Anst.  50;  Fo.x  v. 
Frith,  10  M.  &  W.  131,  and  Hoy  wood 
V.  Watson,  4  liing.  490.  Compare 
Tihiildi  r.  KllL-rnian,  6  Dowl.  &  L.  71. 
And  as  to  one  partner  suing  another  on 
a  bill  which  he  has  indorsed,  but  not 
with  the  intention  of  paying  it,  see 
Denton  v.  Peters,  L.  R.  5  Q.  B.  475. 

'  See  Anderson  v.  Robertson,  32  Miss. 
241;  Powell  v.  Graves,  9  La.  Ann.  435; 
Gibson  r.  Jiloore,  6  N.  H.  547;  Sturgcs 
r.  Swift,  32  Miss.  230;  Lyon  v.  Malone, 
4  Port.  497.     See,  also.  Miller  v.  Andres, 

13  Ga.   3GG.      See,   however,    Buell  v. 
Cole,  54  Barb.  .T,;!. 

So,  even  thongh  the  note  is  for  the 
use  of  the  firm.  Anderson  v.  Robertson, 
fiupra.     See,  also.  Bonnaffee  v.  Fenner, 

14  Miss.   212;    Mahan  v.  Sherman,   7 
Blachf.  378. 

Where  the  name  of  a  firm  is  signed 
by  one  of  two  partners  to  a  note  paya- 
ble to  the  other,  it  is,  in  effect,  merely 
the  note  of  the  former  to  the  latter;  and 
the  payee  may  sue  the  administrator  of 
the  other  partner  on  the  note,  and  re- 
cover the  whole  amount,  as  a  court  of 
law  could  not  apjiortion  the  debt.  Mor- 
rison r.  Stockwell.  9  Dana,  172. 

Where  it  is  ascertained  by  partnei-s, 
who  are  about  closing  their  partnership 
concerns,  that  a  bahince  will  be  due  to 
one  of  them  on  a  final  settlement,  al- 
though the  exact  amount  of  such  bal- 
ance cannot  be  ascertained,  yet,  if  the 
debtor  partner  gives  the  creditor  part- 
ner a  promissory  note  for  a  sum  not  ex- 
ceeding the  amount  of  the  balance 
which  will  be  due  on  a  final  settlement, 
such  note  is  given  on  a  good  and  suffi- 
cient consideration,  and  payment  thereof 
may  be  enforced  by  action  at  law, 
though  the  balance  is  not  sti'uck  be- 


tween the  partners.  Rockwell  r.  Wilder, 
4  Mete.  55G. 

If  two  partners,  upon  a  settlement  of 
private  and  partnership  accounts  which 
exist  between  them,  find  that  a  balance 
of  the  private  accounts  is  in  favor  of 
one  of  them,  and  a  smaller  balance  of 
such  of  the  partnership  accounts  as  are 
considered  and  adjusted  is  in  favor  of 
the  other,  and  a  note  is  accordingly 
given  for  the  balance  so  found  of  the 
private  accounts,  after  deducting  the 
balance  so  found  of  the  partnership  ac- 
counts, an  action  may  be  maintained 
upon  the  not'\  although  other  unad- 
justed parlu'  rsbjp  accounts  ex'st  be- 
tween th'.nn.  Currier  r.  Hale.  5  AILmi, 
5GI. 

A  balance  which  maybe  due  on  a  set- 
tlement of  a  pai-tnership  cannot  be  set 
up  in  equity  agamst  a  note  given  by 
one  partner  to  another,  and  now  in  the 
hands  of  an  assignee,  on  the  ground 
that  the  assignor  had  h^ft  the  State, 
leaving  no  property  in  the  Statt\  where 
the  note  was  not  in  any  way  connected 
with  the  partnership,  and  the  assign- 
ment was  made  ni-ior  to  the  removal  of 
the  assignor.  Pool  v.  Delaney,  11  Mo. 
570. 

The  surviving  partner  of  a  finn  un- 
dertook to  settle  the  firm's  atfairs,  took 
part  of  the  partnership  stock,  gave  Ins 
notes  to  the  executoi-s  of  his  decased 
partner,  and  paid  all,  except  one,  ol'said 
notes.  A  suit  was  commenced  on  the 
note  which  remained  unpaid :  lltid,  on 
a  bill  in  equity  by  the  surviving  partu'-r, 
praying  for  an  injunction  upon  the  pro* 
ceedings  on  said  note,  and  alleging  that 
he  had  overpaid  the  executoi-s,  that  the 
subject-matter  of  that  part  of  the  bill 
did  not  relate  to  the  dealings  of  the  co- 
partners, and  that  the  court  had  no  ju- 
risdiction.   Burditt  r.  Grew,  8  Pick.  lOS. 


{b)  Graves  r.  Cook,  2  Jur.  N.  S.  475,  Ex. 


1341 


■102$ 


ACTIONS    BETWEKN       7'AItTNi:RS,    ETC. 


Li:ooK  III. 


Upon  precisely  the  same  principle,  if  a  partner  leasad  property  to  trustees  for  the 

firm,  and  those  trustees  covenanted  to  pay  the  rent,  he  mig-ht  sne 

orrci  ,  ^j^g^^  ^^  ^i^^j.  (jQygna^nt,  although  he  might,  as  one  of  the  firm,  be 

bound  to  indemnify  the  trustees  against  all  losses  sustained  by  them  in  that  charac- 


It  is  no  defense  at  law  to  a  suit  on  a 
promissorj'  note  given  to  a  retiring  part- 
ner by  a  new  firm,  to  one  of  whom  he 
transferred  his  interest  in  the  firm,  that 
such  payee  had  collected  moneys  belong- 
ing to  the  firm  and  failed  to  account-for 
the  same.    Bumey  v.  Boone,  32  Ala.  486. 

The  defendant,  in  an  action  brought 
against  him  to  recover  the  amount  due 
upon  a  promissory  note,  alleged  that 
plaintiff  and  himself  were  co-partners; 
that  the  partnership  accounts  were  un- 
settled ;  that,  upon  a  settlement,  the 
plaintiff' y/oukl  be  found  largely  indebt- 
ed to  defendant ;  that  plaintiff  was  in- 
solvent; and  that  defendant  would  be 
in-eparably  damaged  by  being  compelled 
to  pay  plaintiff  the  amount  of  the  note: 
Held,  that  these  averments,  if  true,  af- 
forded good  gi-ounds  for  invoking  the 
equitable  powers  of  the  court  to  settle 
the  partnership  accounts  before  trying 
the  legal  issues  involved  in  the  case. 
Foulks  V.  Rhodes,  12  Nev.  225. 

An  answer  to  a  suit  upon  a  promis- 
sory note  against  the  maker  and  in- 
dorser,  aven-ed  that  the  note  grew  out 
of  certain  partnership  transactions  be- 
tween plaintiff  and  one  of  the  defend- 
ants, which  had  proved  unsuccessful  ; 
that  it  was  indorsed  by  the  other  defend- 
ant, with  the  understanding  that  it  was 
to  be  paid  only  in  event  that  the  partr 
nership  turned  out  prosperously;  that 
the  accounts  of  the  concern  were  still 
unsettled,  and  the  maker  of  the  note 
had  paid  more  than  his  share  of  the 
losses.  There  was  a  prayer  that  the 
excess  of  his  payments  might  be  allowed 
as  a  set-off  against  the  note,  and  for 
judgment  for  the  balance.  It  was  not 
averred  that  plaintiff  was  insolvent,  and 
no  other  ground  for  equitable  relief  was 
stated;  neither  was  an  account  of  the 
partnership  affairs  stated  or  prayed  for: 

1342 


Held,  that  the  answer  did  not  state  a 
good  defense  for  either  defendant.  Jones 
V.  Shaw,  67  Mo.  667. 

One  partner  gave  his  note  to  another 
for  his  interest  in  land  in  defense  to  a 
suit  on  it;  he  alleged  that  his  partner 
had  deceived  hiin  in  the  division  of  the 
partnership  stock,  and  was  indebted 
therefor  in  as  great  or  a  greater  amount 
than  the  sum  due  on  the  note:  Held, 
that  as  the  division  had  nothing  to  do 
with  the  consideration  of  the  note,  it 
could  not  be  set  up  as  a  counter-claim 
or  defense;  and  that  all  the  answer,  ex- 
cept so  much  as  admitted  the  execution 
of  the  note,  and  denied  indebtedness, 
should  be  stricken  out.  Case  v.  Maxey, 
6  Cal.  276. 

Where  a  promissory  note  is  given  by 
one  partner,  with  sureties,  to  his  co- 
partner, as  a  guaranty  that  the  interest 
of  the  latter  in  the  firm  shall  not  suffer 
by  reason  of  the  failure  of  the  first  to 
pay  certain  indebtedness  for  which  the 
firm  property  is  liable,  upon  breach  of 
the  contract  the  payee  of  the  note  can 
only  recover  on  the  note  such  damages 
as  he  has  sustained  as  a  partner,  and 
this  cannot  be  ascertained  in  a  court  of 
law.  A  final  settlement  of  the  partner- 
ship accounts  is  an  essential  basis  for 
the  measure  of  damages  in  such  a  case. 
Smith  r.  Riddell,  87  111.  165. 

Where  one  of  two  partners,  being  in- 
debted to  the  firm,  gives  his  note  to  the 
other  for  his  proportion  of  the  debt,  it 
is  a  proper  set-off  in  an  action  upon  a 
bond  executed  upon  dissolution  of  the 
firm  by  the  payee  of  the  note  to  the 
maker,  conditioned  for  the  payment  of 
the  partnership  debts.  Merrill  v.  Green, 
55  N.  Y.  270. 

A  member  of  a  partnership,  doal'ng 
in  real  estate,  made  a  note  payalilo  to  a 
third  person,  which  became  the  proper- 


CHAr.  ?:.] 


ACTIOXS    BETWEEN    PAETXrr.S,    ETC. 


no28 


ter,  and  tlio  trustopp  mifrht  tlvmselvcs  be  members  of  the  firm;  for  the  covenant  to 
pay  the  rent  constituted  a  demand  distinct  from  all  o.hcrs.  (c) 

Afrain,  if  one  partner  received  monej'  for  the  nse  of  the  firm  in  respect  of  sonv 
transaction  separate  and  distinct  from  its  other  business,  and  the 
money  thus  received  ought  to  have  been  divided  v.ithout  reference  to 
other  matters,  his  co-partners  might  sue  him  at  law  for  their  shares 
of  the  money  in  question,  (rf)  ^ 


for  in'.m'V 
pliiiiiti.'l  's  Uho: 


ty  of  the  company;  and  in  the  distribu- 
tion of  the  proceeds,  the  note  was  deliv- 
ered to  another  member  to  collect,  re- 
tain from  it  his  share,  and  pay  the  resi- 
due to  the  treasurer:  Held,  that  the 
party  receiving  the  rote  could  maintain 
an  action  thereon  in  the  name  of  the 
payee  for  his  own  use.  Bowland  r. 
Boozer,  10  Ala,  690. 

A  gave  B  his  note,  the  consideration 
of  which  was  two-thirds  of  the  profits 
arising  from  apartneri^hip  formed  by  A 
and  B.  B  appropriated  one-half  instead 
of  one-third  of  said  profits.  B's  as- 
signee after  maturity  sued  A  on  the 
note :  Held,  that  A  was  entitled  to  be 
crjJitel  with  the  excess  over  one-third 
of  ihi  profits.  Carter  v.  Christie,  SO 
Ga.  81:'.. 

One  patner  cannot  maintain  an 
action  against  his  co-partner  as  indorser 
of  a  bill  of  exchange  purchased  by  the 
company  with  their  own  bills,  and  in- 
dorsed to  them  in  blank,  the  indorse- 
ment being  filled  up  payable  to  one,  but 
it  not  appearing  that  the  partnership 
do?s  not  own  the  bill.  Tipton  v. 
Nance,  4  Ala.  194. 

If  one  partner  contribute  for  his  f-havc 
in  the  partnership  the  bond  of  another 
partner  which,  according  to  the  articles 
of  agreement  is  returned  to  the  oV)lig(>e 
on  the  dissolution  of  the  partnership,  no 
stranger  to  the  transaction  can  impeach 
a  judgment  obtained  on  the  bond.  Cun- 
ningham r.  Ihmsen,  63  Pa.  St.  351. 

An  indorsee  of  the  note  or  bill  of  a 
finn  to  one  of  its  members  may  main- 
tain an  action  on  the  note  or  bill  against 
the  makers  or  drawers.  Davis  r.  Briggs 
39  Me.  304;  Hazl'ehurst,  v.  Pope  2  Stew. 
&   Port.   259;  McChesney  v.   Kipp,  G6 


111.  4G0.     See,  also,  Baring  r.  Lyman, 
1  Story,  396. 

Where  three  members  of  a  finn  gave 
their  joint  and  several  promissoiy  note, 
payable  to  the  firm,  and  the  firm  subse- 
quently indorsed  the  note  to  a  third 
person,  such  third  person  will  hold  the 
note  as  an  individual  claim  against  the 
makei-s.  as  distinguished  from  a  partner- 
ship claim,  having  the  right  to  hold  the 
firm  also  lialtle.  not  as  maker.s  but  as 
indorsers;  and  this  individual  character 
of  the  claim  against  the  makers  will  not 
be  in  the  least  modified  or  changed  by 
the  fact  that  the  note  has  been  reduced  to 
judgment  against  them.  Union  Natl. 
Bank  v.  Bank  of  Commerce,  94  111.  271. 
A  partner  who  has  made  a  promisso- 
ry note  to  the  partnership  as  eviilence  of 
the  amount  drawn  out  of  the  firm  by 
him,  and  afterwards,  upon  di>:solution 
of  the  partnership,  assigned  all  his  in- 
terest in  the  propeity  and  debts  of  the 
firm  to  his  co-partner,  is  not  liable  to  an 
action  on  the  nota  by  the  latter,  who 
has  taken  the  note  by  indorsem::nt  from 
the  partnership  when  overdue,  and  with 
notice  of  the  facts.  Stoddard  r.  Vv'ood. 
9  Gray,  90. 

(r)  Bedford  r.  Brutton,  1  Bing.  N.  C. 
3.39.  In  such  a  case,  however,  a  counter 
claim  would  now  be  .set  up,  and  have  to 
be  adjusti^d. 

(f?)  See  Graham  r.  Robertson.  2  T.  R. 
282.  In  Ex  parte  Dodgson,  Mon.  & 
Mac.  Ar.  445,  it  was  held  that  one  of 
two  sub-partners  might  prove  against 
the  other's  estate  for  half  of  the  profits 
received  by  him  in  respect  of  his  share 
in  the  principal  firm.  Compare  Bovill 
r.  Hanmiond,  6  B.  &  C.  149. 

*  If  one  partner  collect  a  portion  of  the 

1343 


■"1029    WHEN  NOT  :.iaintaixai;li;  j)];i'orI';  .jchicature  acts.   [nooK  iii. 

So,  if  one  partner  paid  monej'  of  his  own  to  his  co-partner,  in  order  that  it  miyht 

for  money  ^-"^  applied  by  him  for  some  spjcified  partnership  pui-pose,  and  it  was 

^)laced  in  de-       received  for  that  purpose  and  no  other,  and  was  misappHed,  an  ac- 

lendant'sliands    ,.,«.,  /•        ,  p  ,  ,       .    ', 

for  a  particular   tion  lay  tor  tne  I'ecovery  or  such  money;  tor,  ex  hypothesis  it  never 

purpose;  ^^^  ^^  money  of  the  firm,  and  the  duty  of  the  partner  who  received 

that  money  was  either  to  apply  it  as  agreed,  or  to  return  it  intact,  (e) 

actions  for  So  a  purchaser  of  a  partner's  share  at  a  price  calculated  on  the 

un  ?cr  ra'istake     P^'ofits,  could  recover  the  amount  which  he  had  ovei-paid  in  ignor- 

as  to  accounts;    ance  of  the  real  state  of  the  accounts.  (/)  ^ 

Again,  if,  in  respect  of  some  particular  transaction,  one  partner  had  expressly 
on  ao-rccmcnt  agreed  to  indemnify  another,  and  had  not  done  so,  an  action  might 
to  indemnify;  be  brought  by  the  latter  against  the  former,  inasmuch  as  the  right 
to  be  indemnified  had,  by  agreement,  been  made  independent  of  all  other  questions 
between  the  partners.  ((/)  Therefore,  where  one  partner  in  his  own  name  accepted  a 
bill  for  a  partnership  debt,  on  the  faith  of  a  promise  by  one  of  the  other 
*1029  pai'tners  that  he  would  provide  fimds  to  pay  the  bill,  *and  the  acceptor 
was  nevertheless  compelled' to  pay  it,  he  was  held  entitled  to  recover 
the  whole  amount  from  the  other  partner,  (/t) 

Further,  if  some  of  a  number  of  partners  gave  their  promissory  note  for  better 
for  contribu-  securing  payment  of  a  debt  owing  by  them  and  their  co-partners, 
oTa paVucufa*  ^^^  *^^^  *^^  ^-^^^  makers  of  the  note  was  compelled  to  pay  the  whole 
loss;  amount  of  it,  he  was  entitled  to  sue  each  of  the  other  makers  of 


claims  due  the  firm,  and  fail  to  account 
for  the  amount  so  collected  in  the  part- 
nership settlement,  he  may  be  sued  by 
the  other  partner  without  any  impeach- 
ment of  the  settlement  or  re-adjustment 
of  the  partnership  accounts.  Partners 
are  not  forbidden  to  sue  each  other  at 
law,  merely  because  they  are  or  have 
been  partners,  but  only  when  the  adjust- 
ment of  the  matter  in  controversy  in- 
volves the  investigation  and  settlement 
of  partnership  accounts.  Russell  v. 
Grimes,  46  Mo.  410. 

(e)  See  Wright  v.  Hunter,  1  East,  20. 

(/)  Townsend  v.  Crowdy,  8  C.  B.  N. 
S.  477. 

^  One  partner  may  maintain  an  action 
of  assumpsit  against  his  co-partner, 
after  a  dissolution  of  the  partnership,  to 
recover  back  money  paid  by  mistake,  on 
an  adjustment  of  the  partnership  con- 
cers.  Bond  v.  Hays,  12  Mass.  34.  See, 
also,  Beidler  v.  Shallenberger,  42  Iowa, 
203. 

If,  however,  upon  an  attempted  settle- 
ment between  partners,  the  account  be- 
tween them  is  not  correctly  stated,  an 
1344 


assumpsit  will  not  lie  to  recover  the 
alleged  balance;  the  remedy  is  by  bill 
in  chancery  for  a  settlement  of  the  part- 
nership accounts.  Hanks  v.  Barber,  53 
III.  292. 

Action  on  promissory  note  given  part- 
ner by  co-partner  on  settlement  of  firm 
affairs.  Defendant  offered  to  prove, 
under  plea  of  set-off,  that  a  mistake  wai 
made  in  the  settlement,  and  that  plain- 
tiff's share  of  the  rent  due  defendant 
from  the  firm  for  the  use  of  a  stoi-e 
owned  by  him,  was  accidentally  om.itted 
from  the  settlement:  Held,  that  unless 
there  was  an  adjustment  of  these  items 
and  a  promise  to  the  plaintiff  to  pay, 
they  constituted  no  defense  at  law;  and 
that  even  if  they  could  in  any  manner 
be  used  as  a  defense  to  the  action  on  the 
note,  they  were  admissible  only  as  show- 
ing only  a  failure  of  consideration  and 
not  as  a  set-off.  Johnson  v.  Wilson,  -54 
111.  419. 

(g)  Coffee  v.  Brian,  3  Bing.  54;  see, 
too,  Wilson  V.  Cutting,  10  Bing.  436; 
Brown  v.  Tapscott,  6  M.  &  W.  119. 

{h)  Coffee  v.  Brian,  2  Bing.  54. 


CriAP.  X.]    WHEN  NOT  MAINTAINADLE  JJKFOUE  .If  DICATURK  ACTS.       '^1020 


tho  note  for  his  propoiHon  of  the  sum  so  paid.  For.  in  the  case  supposed, 
the  rifjht  to  contribution  arorii»  in  re:-!p:>ct  of  a  matter  not  involved  in  the 
•jfeneral  account,  and  did  notdi'pi'ml  upon  the  circumstance  that  the  makers  of  the 
note  were  partners.  This  was  decided  by  the  Court  of  Exchequer  in  Sedgwick  v. 
Daniell.  (/J' 

However,  the  decisions  did  not  go  the  length  of  allowing  one    for  fontrihu- 
partnerwho  had  been  compc-lled  to  pay  the  whole  of  a  partnership   i,'a'\mili'in."x! 
debt  to  sue  his  co-partners  at  law  for  contribution,  in  the  absence  of    th'>'>  •'•'*  »iiare 
special  cu'cumstances.  (k)  ^  firm. 


(0  Sedgwick  v.   Daniell,  2  11.  &  N. 

'  If,  after  the  dis.';olution  of  a  partner- 
ship, the  several  partners  sign  their  in- 
dividual names  to  a  note  for  a  partner- 
ship debt,  and  one  afterwards  pays  off 
Ihis  note,  he  cannot  mamtain  an  action 
at  law  against  the  others  for  contri))u- 
tion  without  showing  that  the  business  of 
the  partnership  is  settled.  DeJarnette 
r.  McQueen,  81  Ala.  2:30;  White  r. 
Harlow,  5  Gray,  463;  Haskell  t'.  Adams. 
7  Pick.  59. 

If  the  note  of  one  of  two  partners, 
actually  given  for  apartnershi])debt,  be 
paid  by  the  other  member  of  the  Gaa, 
the  partner  so  paying  the  firm  debt  can- 
not afterwards,  by  obtaining  a  transfer 
of  the  note  to  himself,  collect  the  whole 
amount  of  the  note  of  the  maker. 
Tucker  v.  Peaslee,  36  N.  H.  167. 

(A-)  Sadler  v.  Nixon,  5  B.  &  Ad.  936. 
See,  too,  Batard  v.  Hawes,  2  E.  &  B. 
287;  Helmer.  Smith,  7  Bing.  713;  and 
Pearson  v.  Skelton,  1  M.  &  W.  504;  and 
compare  Woolley  v.  Batte,  2  C.  &  P. 
417;  Osborne  v.  Harper,  1  Smith,  411. 

2  Harris  r.  Harris,  39  N.  H.  45;  Law- 
rence v.  Clark,  9  Dana,  257;  Morin  v. 
Maitin,  25  Mo.  360;  Kennedy  r.  M.,'Fa- 
don,  3  Har.  &  ,T.  194;  Westcrlo  v. 
Evertson,  1  Wend.  532  (a  law  partner- 
ship); Gridley  v.  Dole,  4  N.  Y.  487; 
Bracken  v.  Kennedy,  3  Scam.  558; 
Haskell  v.  Adams,  7  Pick.  59;  Mun-ay 
r.  Bogert,  14  John.  318;  Roberts  v. 
Filler,  13  Pa.  St.  265;  Torrey  v.  Twom- 
bley,  57  How.  Pr.  149;  Succession  of 
Powell,  14  La.  Ann.  425.      See  Johnson 


V.  Kelly,  4  Thomp.  &  C.  417;  Bumpnss 
V.  AVebb,  1  Stew.  19. 

An  agreement  between  two  co-part- 
ners, after  dissolution  of  their  co-part- 
nership, to  the  etfect  that  they  would 
"quit  even,  "  to  avoid  the  expense  of  a 
chanc'ry  suit,  does  not  authorize  one  to 
maintain  an  action  at  law  against  the 
other  to  recover  contribution  for  a  part- 
nership debt  suVjsequently  paid.  De- 
Jarnette I'.  McQueen,  31  Ala.  230. 

A,  B,  and  C  being  partners,  D,  with 
the  consent  of  A,  bought  out  the  inter- 
est of  B  ahd  C,  and  became  the  partner 
of  A.  D  agreed  with  B  and  C  to  pay 
their  proportion  of  the  outstanding 
debts  of  the  old  finn.  After  the  disso- 
lution of  the  partnership  between  A  and 
D,  A  paid  the  debts  of  the  old  finn, 
which  D  had  agreed  to  pay:  ffehl, 
that  A  could  not  maintain  an  action  at 
law  to  recover  the  amount  of  D.  Phil- 
lips V.  Lockhart,  1  Ala.  521. 

A  partner  who  in  prosecuting  the 
partnership  enterprise  has  advanced  in 
excess  of  what  was  required  of  him  by 
the  terms  of  the  partnership,  camiot.  in 
the  alisence  of  a  contract  authorizing 
it,  maintain  an  action  for  contribution 
of  the  excess  without  going  into  a  gen- 
eral settlement  of  the  partnership  ac- 
counts, under  proper  averments  in  the 
pleading.  Merriwether  v.  Harderveau, 
51  Tex.  436. 

H.  and  S.  made  a  joint  purchase  of  a 
qnantivy  of  goods,  each  paying  one-half 
of  the  price.  They  sold  to  A.  one  pack- 
age of  the  goods,  on  a  credit  of  five 
months,  and  afterwards  divided  the  re- 

1BI5 


*1029     WHEN  NOT  MAINTAINABLE  BEFORE  JUDICATURE  ACTS.     [eOOK  III. 


But  if  one  of  several  projectoi-s  of  a  company  was  compelled  to  pay  a  debt  owing 
by  them  all,  he  could  obtain  contribution  from  them  by  an  action  at  law,  although 
there  were  unsettled  accounts  between  him  and  them.  (?) 


mainder  of  the  goods  between  tht^m, 
and  H.  paid  S.  for  one-half  of  the  price 
of  the  package  sold.  A.  having  become 
insolvent,  H.  brought  flssww^J.vfV  against 
S.  to  recover  one-half  the  loss  arising  on 
the  sale :  Held,  a  co-partnership  con- 
cern, and  an  action  at  law  therefore 
not  maintainable  without  proving  ex- 
press promise  to  pay.  Halstead  v. 
Schmelzel,  17  Johns.  80. 

Assumpsit  by  the  executor  of  A 
agamst  B  to  recover  the  share  of  losses 
due  from  B  on  a  speculation  which  had 
been  carried  on  by  A,  B  and  C,  but 
which  had  been  closed  and  the  losses 
ascertained.  All  the  capital  had  b:?en 
furnished  by  A :  Held,  that  the  action 
was  prop?rly  brought,  and  could  be 
maintained  without  proof  of  a  settle- 
ment betv/een  A,  B  and  C  as  co-part- 
ners, and  of  a  promise  by  B  to  pay  the 
amount  due  to  A  in  such  settlement. 
Fry  V.  Potter,  12  R.  I.  542. 

Where,  upon  a  dissolution  of  partner- 
ship, one  member  of  the  firm  executes 
to  another  member  a  promissory  note 
for  the  amount  found  to  be  due  him  on 
settlement,  and  subsequently  pays  a 
debt  of  the  finn  not  included  in  the  set 
tlement,  in  a  suit  on  the  note,  the  payer 
may  plead  as  a  set-off  the  payment  of 
such  partnership  debt,  and  require  the 
other  partner  to  contribute  his  propor- 
tion of  the  amount  thus  paid;  and  in 
order  to  recover,  it  is  not  necessary  that 
the  defendant  should  prove  an  agree- 
ment by  the  retiring  partner  to  contrib- 
ute to  the  payment  of  such  debt.  Far- 
well  V.  Tyler,  5  Iowa,  535. 

Where  upon  the  dissolution  of  a  part- 
nership and  the  settlement  of  its  aft'au-s, 
one  partner  pays  more  than  his  share  of 
the  partnership  debts,  or  pays  the  other 

1346 


partner  a  certain  sum,  for  which  the 
latter  agrees  to  pay  the  former's  share 
of  such  debts,  which  sum  the  latter 
converts  to  his  own  use,  there  is  created 
an  individual  liability  in  favor  of  the 
former  against  the  latter,  which  upon 
his  death  will  constitute  a  proper  claim 
against  his  estate.  Price  v.  Gavins,  50 
Ind.  122. 

If  upon  the  dissolution  of  a  firm 
there  is  an  oral  agreement  between  the 
partners,  that  one  of  them  shall  take 
the  joint  property  and  pay  the  joint 
debts,  and  after  taking  the  property  he 
fails  to  pay  the  debts,  the  other  may 
voluntarily  pay  them,  and  maintain  an 
action  against  the  former,  to  recover  the 
amounts  so  paid  by  him.  Hunt  v.  Rog- 
ers, 7  Allen  (Mass.),  469. 

A  i^artiier  who,  upon  the  dissolution 
of  the  partnership,  has  received  all  the 
partnership  assets,  and  agreed  to  apply 
them  to  the  payment  of  the  outstanding 
debts,  for  which  they  are  sufficient,  is 
not  liable  to  an  action  at  law  by  his  co- 
partner for  the  amount  of  a  partnership 
debt  which  he  has  been  obliged  to  pay, 
without  showing  a  final  settlement  of 
the  partnership  business,  or  that  there 
are  no  other  debts  outstanding.  Shat- 
tuck  V.  Lawson,  10  Gray  (Mass.)  405. 

The  plaintiff  and  defendant  were 
pa"  tnei-s,  and  for  settlement  of  their  ac- 
counts referred  them  to  arbitrators,  who 
awarded  that  each  party  pay  one-half 
of  the  outstanding  debts  of  the  firm. 
The  plaintiff'  paid  the  whole:  Held, 
that  he  was  entitled  to  recover  one-half 
from  the  defendant  in  an  action  at  law. 
Coleman  r.  Coleman,  12  Rich.  183. 

(?)  Batard  v.  Hawes,  2  E.  &  B.  287; 
Boulter  v.  Peplow,  9  C.  B.  493. 


CIIAl'.  X.]     WHEN  NOT  MAINTAIXAlil-E  BEFORE  JU  DITATLKE  ACTS.     *10i:9 


When  an  action  icouhJ  not  lie. 

It  is  clear  from  the  cases  refenvd  to  in  the  last  few  pages,  that  there  was  no  such 

rule  as  that  one  partner  could  not  sue  another  at  law,  in  respect  of    ^         ,      , 

,     ,  .       .       General  rale 

a  debt  arising  out  of  a  partnership  transaction,  and  that  this  cir-    that  one  part- 

cunistance  alone  afforded  no  reason  why  an  action  should  not  be   anotifer'at'^"^ 

brought  bj'  one  partner  against  another,  (hi)     Except,  however,  in    ^"^^ 

an  action  of  account,  it  was  a  general  rule  that  between  partners, 

whether  they  were  so  in  general  or  for  a  particular  transaction  only, 

no  account  could  be  taken  at  law  (h);  nor  (except  in  an  action  of 

account)  could  one  partner  sue  another  at  law,  unless  the  cause  of 


in  respcf^t  of 
any  matter  in- 
vi>lvinK  the 
partiHTship 

uuDcjunt. " 


(m)  See  Worrall  v.  Grayson,  1  M.  & 
W.  166. 

(n)  Bovill  r.  Hammond,  6  B.  &  C. 
151;  and  see  Scott  v.  Mclnto.sh,  2Camp. 
238. 

*  Beach  v.  Hotchkiss,  2  Conn.  425; 
Tolford  V.  Tolford.  44  Wis.  547;  Dewit 
V.  StanifonI,  1  Root,  270;  Lamolere  v. 
Caze,  1  Was^h.  4:J5;  Kennedy  v.  M 'Fa- 
don,  3  Har.  it  J.  104;  Ozeas  v.  Tolman, 
1  Binn.  191;  Young  v.  Brick,  3  N.  J. 
L.  663;  Murray  v.  Bogert,  14  Johns. 
318;  Springer  v.  Cabell,  10  Mo.  640; 
McKnight  V.  McCutchen,  27  Mo.  436; 
Robinson  r.  Green,  5  HaiT.  115;  Smith 
r.  Smith,  33  Mo.  557;  Ives  v.  Miller,  19 
Barb.  196;  Lower  v.  Denton,  9  Wis. 
268;  Towle  v.  Meserve,  38  N.  H.  9; 
Wescott  r.  Price,  Wright,  220;  Chaser. 
Garvin,  19  Me.  211;  Burley  r.  Harris,  8 
N.  H.  233;  Estes  v.  .Whipple,  12  Vt. 
373 r  Graham  v.  Holt,  3  Ired.  L.  300; 
Stalhert  v.  Knox,  5  Mo.  112;  Davenport 
r.  Gear,  2  Scam.  495;  Coui-se  v.  Prince, 

I  Mill  Const.  413;  Austin  v.  Yaughan, 
14  La.  Ann.  43;  Collamer  v.  Foster,  26 
Vt.  754;  Holyoke  r.  Mayo,  50  Me.  385; 
Goldsborough  r.  McWilliams,  2  Cranch 
C.  Ct.  401;  Bariyr.  Barry,  3  id.  120; 
Pot€  V.  Philips,  5  id.  154;  Riggs  v. 
Stewart,  2  id.  171;  Chadseyr.  Harrison, 

II  111.  151;  Gomersall  v.  Gomersall,  14 
Allen,  60;  Spear  v.  Newell,  13  Vt.  288; 
Riarl  i\  Wilhelm,  3  Gill.  356;  Purvines 
r.  Champion,  67  111.  4--)9;  Robinson  r. 
Bulloch,  58  Ala.  618;  Bncll  r.  Cole,  54 
13arb.  353;  Succession   of  Dolhoude,  21 


La.  Ann.  3;  Marx  r.  Bloom,  id.  6;  Sewell 
V.  Cooper,  id.  582;  Bums  r.  Nottighaus; 
60  111.  531;  Page  r.  Thompson,  '■io  Ind. 
137;  Stanton  v.  Buckner,  24  La.  Ann. 
3<J1;  Ross  V.  Comell,  45  Cal.  133;  Allen 
r.  Davis,  13  Ark.  28.  See  Periey  v. 
Brown,  12  N.  H.  493;  Russell  v.  Minne- 
sota Outfit,  1  Minn.  162;  Myrick  v. 
Dawe,  9  Cush.  248;  Murdockv.  Martin, 
20  Miss.  660;  Welt  v.  Bird,  7  Blackf. 
258;  Cuviz  r.  Burnett,  36  Ind.  103; 
Scott  V.  Caruth,  50  Mo.  120;  Leidy  v. 
Messenger,  71  Pa.  St.  177;  Sproat  r. 
€rowley,  30  Wis.  187;  Dehorityr.  Nel- 
son, 56  Ind.  414;  Colville  v.  Giknan, 
13  W.  Ya.  315;  Lazar  v.  Pearson,  59 
Me.  561;  Learned  r.  Ayers,  41  Mich. 
677;  Heavilon  r.  Heavilon,  29  Ind.  509; 
Shalter  f.  Caldwell,  27  id.  376;  Wallace 
V.  Hull,  28  Geo.  ^JS;  Hall  r.  Log;in,  34 
Pa.  St.  a31;  Jeimison  v.  Walsh,  30  Ind. 
167. 

Equity  and  not  assumpsit  is  the  ap- 
propriate remedy  for  one  whose  mem- 
bership and  consequent  rights  in  the 
profits  of  a  partnership  are  denied,  and 
to  whom  no  portion  of  the  profits  have 
been  set  apart.  Pray  v.  Mitchell,  60 
Me.  430. 

If  commission  merchants,  having  in 
their  hands  a  balance  in  favor  of  part- 
ners who  have  consigned  goods  to  them 
for  sale,  refuse  to  pay  the  whole  or  any 
part  of  the  amount  to  either  partner 
without  the  consent  of  the  other,  and 
afterwards  of  their  own  motion  transfer 
the   balance   upon   their  books   to  the 

1347 


'■1029     WHEN  KOT  MAINTAINABLE  BEFORE  JUDICATURE  ACTS.    [bOOK  HT. 


action  was  so  distinct  from  the  partnership  accounts  as  not  to  involve  their  consicL 


credit  of  one  of  the  partners,  without 
his  knowledge,  this  will  not  authorize 
the  other  partner  to  maintain  an  action 
against  his  associate  to  whom  this  trans- 
fer was  made,  to  recover  one  half  of  the 
amount;  nor  can  such  action  be  sus- 
tained by  proof  that  subsequently  to  its 
commencement  the  defendant  received 
of  the  commission  merchants  the  whole 
amount  so  transferred  to  him.  Hill  v. 
Clarke,  7  Allen,  414. 

Where  partnership  accounts  remain 
unsettled  after  dissolution,  and  it  is 
questionable  which  of  the  partners  will 
be  found  indebted  to  the  other,  this  can 
not  be  settled  by  a  trustee  process,  nor 
can  that  process  be  maintained  against 
one  partner  to  get  at  a  balance  which  it  is 
supposed  will  be  found  due  to  the  other 
on  an  adjustment  of  the  accounts. 
Burnham  v.  Hopkinson,  17  N.  H.  259. 
In  Iowa  it  is  held  that,  where  a  party 
was  garnished  who  had  been  a  partner 
of  the  defendant  and  held  unpaid  ac- 
counts belonging  to  the  firm,  judgment 
should  not  be  rendered  against  him  ab- 
solutely for  the  amount  of  the  defend- 
ant's interest  in  the  accounts,  but  that 
he  should  be  du-ected  to  pay  over  the 
sum  to  which  the  partner  was  entitled 
as  it  should  be  collected.  Cox  v.  Rus- 
sell, 44  Iowa,  556. 

In  the  same  State  it  is  held  that  if 
a  partner  is  garnished  in  an  action 
agamst  his  co-partner,  he  has  a  right 
to  deduct  from  the  amount  he  may  owe 
the  latter  any  liability  which  he  could 
claim  against  the  co-partner  in  a  settle- 
ment with  him.  Cox  v.  Russell,  4-1  Iowa, 
556. 

x\  and  B  were  partners,  and  A  ovnied 
a  steamboat.  The  partnership  furnished 
materials  and  labor  to  repair  and  fur- 
nish the  boat.  B,  as  sm-ving  partner, 
instituted  proceedings  m  rem  (against 
the  boat)  to  procure  compensation: 
Held,  that  such  a  proceeding  could  not 

1348 


be  sustained  in  such  a  case.  Thomp- 
son V.  Steamboat  Morton.  2  Ohio  St.  26. 
As  no  action  can  be  brought  by  one 
partner  against  his  co-partner  upon  any 
partnership  transaction,  unless  there 
has  been  a  settlement  of  the  whole  con- 
cern or  of  the  claim  in  question,  and  a 
promise  of  payment,  the  unsettled  deal- 
ings of  either  partner  with  the  firm 
cannot  be  set-off  in  an  action  at  law, 
by  one  partnor  against  the  other. 
Odiorne  j;.  Woodman,  ;39  N.  H.  541; 
Finney  v.  Turner,  10  Mo.  207;  Wiggin 
V.  Goodwin,  63  Me.  389;  Wright  v. 
Jacobs,  61  Mo.  19;  Leabo  v.  Renshaw, 
id.  292;  Elder's  appeal,  39  Mich.  474. 
See  Roberts  v.  Filler,  13  Pa.  St.  205; 
Foulks  V.  Rhodes,  12  Nev.  225. 

One  of  the  owners  of  a  steamboat, 
who  were  held  to  be  partners  in  its 
earnings,  became  indebted  to  the  firm 
for  services  rendered  him  in  his  private 
business;  the  managing  partner  assign- 
ed the  dabt  to  a  stranger,  who  sued 
on  it;  the  defendant  set  up  that  the  as- 
signment was  without  his  knowledge  or 
consent  and  that  he  had  received  no 
part  of  the  proceeds  thereof:  Held, 
that  he  was  liable  to  the  plaintiff  in  an 
action  brought  in  his  own  name,  and 
that  as  the  allowance  of  a  set-off  claim':'d 
by  him  would  involve  a  general  set- 
tlement of  the  whole  account,  and  as  it 
did  not  appear  that  he  could  be  injured 
by  its  disallowance,  that  it  should  be 
disallowed.  RusseU  v.  Minnesota  Out- 
fit, 1  Minn.  162. 

If,  after  the  dissolution  of  a  partner- 
ship between  A  and  B,  the  parties  agree 
that  A  shall  pay  with  his  own  funds, 
cei-tain  debts  of  B's  and  certain  debts 
of  the  fii-m,  in  discharge  of  a  note 
which,  previously  to  such  agreement, 
had  been  given  by  A  to  B.  and  the  pay- 
ments be  accordingly  made,  such  pay- 
ments to  the  amount  of  the  private  debts 
of  B,   and  of  half  of  the    part.iership 


CIIAl' 


X.] 


ACTIONS   BETWEEN    PARTNERS,    ETC. 


^1030 


eration  (o);  nor  unless   the  plaintiff  if  he  recovered  would  be  justified  in  keciiintj 

what  he  might  get  without  afterwards  having  to  account  to  his  co-pai-t- 

ners  for  any  part  of  it.  (p)    Hence  one  'partner  could  not  sue  another     *1030 

at  law  for  work  and  labor  done  for  the  firm,  and  therefore  on  account  as 

well  of  the  plaintiff  as  of  the  defendant  (q);^  .nor  for  monti-y  had  and  received  for 

the  firm,  for  it  must  be  properly  shared  between  the  parties  to  the  action  (r):  nor 

for  money  paid  to  the  use  of  the  defendant,  if  the  question  whether  he  ought  to 


debts,  thus  paid,  constitute  a  good  de- 
fense to  a  suit  at  law  on  the  note. 
Griffith  V.  Hill,  7  Blackf.  324. 

A  purchased  the  interest  of  B,  a  part- 
ner in  a  mercantile  concern,  became  a 
member  of  it,  undertook  to  pay  all  the 
liabilities  of  B  as  such  partner,  and  to 
occupy  his  situation  in  respect  to  the 
partnership.  Afterwards  A  acquired  a 
note  made  by  the  firm  previous  to  his 
admission:  Held,  that  it  was  compe- 
tent for  A  to  maintain  an  action  against 
any  of  the  makers  in  virtue  of  the  in- 
dorsement to  him,  exciipt  B.  Penn.  v. 
Stone,  10  Ala.  209. 

A  member  of  a  firm  which  consists 
of  more  than  two  persons,  is  liable  to  his 
partners  jointly  for  a  sum  which,  upon 
settlement,  he  is  fomid  to  have  with- 
drawn from  the  joint  funds  in  excess  of 
his  share;  and  one  of  them  cannot  main- 
tain an  action  therefor  in  his  ovm.  name 
alone,  although  he  has  an  assignment 
of  all  the  light  and  interest  of  his  asso- 
ciates in  the  assets  of  the  firm.  Wig- 
gin  V.  Cumings,  8  Allen,  ^')'■^. 

The  fact  that  a  partner  who  has  pur- 
chased a  negotial)le  security  against  the 
finn  cannot  enforce  the  obligation  at 
law,  affects  only  the  remedy,  and  not  the 
right;  and  a  third  person,  not  a  partner, 
to  whom  he  indorses  the  same,  may 
maintain  an  action  thereon  against  the 
firm.  Kipp  r.  McChesney,  66  111.  4f)0; 
Davis  V.  Briggs,  39  Me.  304;  Hazle- 
hurst  V.  Tope,  2  Stew.  &  Port.  259; 
Pike  r.  Hart,  3  La.  Ann.  868.  See,  also, 
Russell  V.  Minnessota  outfit,  1  Minn. 
162.  Roberts  v.  Ripley,  14  Conn.  543. 

The  individual  members  of  a  com- 
mercial fimi  may  execute  a  valid  note, 
and    a  valid  mortgage   securing   said 


note  on  their  individual  property  in  fa- 
vor of  the  firm,  and  any  third  person, 
acquiring  the  note  from  the  firm  in  good 
faith  for  viilne  and  before  maturity  may 
enforce  its  payment.  Pike  v.  Hart,  30 
La.  An.  868. 

A  note  by  a  partnership  to  one  of  its 
members  for  money  boiTOwed  may  be 
enforced  at  law  in  the  name  of  an  in- 
dorsee not  a  member  of  the  partnership, 
although  the  payee  be  a  party  defend- 
ant, and  the  real  owner  of  the  note,  in 
case*no  rea.son  appears  why  a  judgment 
at  law  would  not  do  legal  justice  be- 
tween the  real  parties.  Walker  v. 
Wait,  50  Vt.  668;  Roberts  v.  Ripley,  14 
Conn.  54^3. 

[o]  See  note  (n)  si{2)ra,  and  see  the  ca.ses 
in  the  six  following  notes.  This  rule 
was  held  to  prevent  the  cestui  que  trust 
of  a  partner  from  suing  the  other  part- 
ners. See  Goddart  r.  Hodges,  1  Cr.  k 
M.33.  Sedqucdre.  The  same  rule  would 
probably  have  prevented  a  person  en- 
titled to  a  share  of  profits  from  suing 
at  law  for  them  wh;n"e  they  had  not 
been   a-soei-tained. 

{2>)  Milburn  r.  Codd,  7  B.  il:  C.  421; 
Bedford  r.  Brufton,  1  Bing.  N.  C.  405; 
Caldicott  V.  Grithths,  8  Ex.  898. 

(q)  Goddart  r.  Hodges,  1  Cr.  &  .M. 
33;  Holmes  v.  Higgins,  1  B.  &  C.  74; 
Milbum  V.  Codd,  7  B.  &  C.  419;  Lucas 
r.  Beach,  1  Man.  &  Gr.  417. 

iCauster  v.  Burke,  2  Harr.  &  G.  295; 
Taylor  r.  Smith,  3  Cranch   C.  Ct.  241. 

{)•)  Bovill  f.  Hammond,  6  B.  <Sr  C. 
149;  Smith  r.  Barrow,  2  T.  R.  476;  Fro- 
mont  r.  Coupland,  2  Bing.  170.  See, 
too,  Lewis  r.  Edwards,  7  M.  &  W.  300; 
Thomas  r.  Thomas,  5  Ex.  28. 

1340 


•1030 


ACTIONS    BETWKKJ^    TAliTNERS,    ETC. 


[UOOK  III. 


repay  it  or  not  turned  on  the  state  of  the  partnership  accounts  (s);  nor  for  money 
lent  to  the  firm  of  which  the  plaintiff  was  himself  a  member,  for  the  advance  only 
formed  an  item  in  the  partnership  account  it);  ^  nor  on  a  bill  or  note  drawn,  accept- 
ed, or  endorsed  in  such  a  manner  as  to  bind  the  firm  jointly  and  not  its  members 
severally  also,  for  in  such  a  case  not  only  must  the  plaintiff  as  one  of  the  firm  have 
contributed  to  payment  of  the  instrument,  but  he  ought  also  to  have  been  a  de. 
fendant  to  the  action,  (m)  For  similar  reasons,  if  partners  became  indebted  to  a 
third  person  who  died,  and  appointed  one  of  them  his  executor,  this  one  could  not 
even  as  executor  sue  his  co-partners  for  the  debt  due  to  the  deceased  [x)  ;^  and  if 
there  were  two  firms  with  a  partner  common  to  both,  one  firm  could  not  sue  the 
other  at  law  (y) ;  neither  was  there  any  mode  by  which  at  law  one  partner  coul  d 
sue  the  j^rm  or  be  sued  by  it.  (z)    But  upon  a  joint  and  several  promissory  note,  a 


(s)  Robson  V.  Curtis,  1  Stark.  78.  Bi  t 
see  Townsend  v.  Crowdy,  8  C.  B.  N.  S. 
477,  noticed  ante,  p.  1028. 

{t)  Perring  v.  Hone,  4  Bing.  28; 
CoUey  V.  Smith,  2  Moo.  &  Rob.  96. 

^One  member  of  a  firm  cannot  sue  the 
others  for  advances  made  by  him  on  ac- 
count of  the  firm;  and,  in  such  cjtse,  a 
bill  in  equity  is  as  necessary  to  settle  the 
Recount,  as  in  the  case  of  any  other  part- 
nership account.  Mickle  v.  Peet,  43 
Conn.  65;  Bracken  v.  Kennedy,  3  Scam. 
r)')S;  Hennegin  v.  Wilcoxon,  13  La.  Ann. 
576;  Crottes  v.  Frigerio,  18  id.  283; 
Gridley  v.  Dole,  4  N.  Y.  486;  Merre- 
wether  v.  Hardeman,  51  Tex.  436;  Hal- 
derman  v.  Halderman,  1  Hempst.  559; 
Seighortner  v.  Weissenborn,  20  N.  J. 
Eq.  172. 

An  action  will  not  lie  upon  a  written 
instrument  executed  by  the  defendant 
acknowledging  receipt  from  the  plain- 
tiff of  money  "placed  to  the  credit  of 
our  account,"  unless  the  plaintiff  proves 
that  no  unsettled  partnership  existed  at 
the  time.  Houston  v.  Bro^vn,  23  Ark. 
333. 

In  case,  however,  of  an  express  prom- 
ise by  one  partner  to  repay  to  the  other 
his  share  of  advances  made  by  the  latter 
on  account  of  partnership  business,  the 
amount  of  such  share  becomes  the  debt 
of  the  promisor,  recoverable  by  direct 
action  therefor,  without  dissolution  of 
the  partnership  or  adjustment  of  the 
partnership  accounts.  Ganger  t\  Pantz, 
45  Wis.  449;  Sprout  i>.  Crowley,  30  id.  187. 

1350 


(h)  See  Neale  v.  Turfcon,  4  Bing.  149; 
Mainwaring  v.  Newman,  2  Bos.  &  P. 
120;  Teague  v.  Hubbard,  8  B.  &  C.  345, 
and  2  Man.  &  Ry.  369;  Tibaldi  v.  El- 
lerman,  6  Dowl.  &  L.  71. 

(x)  Moffatt  V.  VanMillingen,  cited,  2 
Bos.  &  P.  124. 

*  The  executrix  of  a  deceased  member 
of  a  firm  caimot  recover  the  amount  of  a 
note  given  by  the  firm  assigned  to  her, 
or  foreclose  a  mortgage  given  by  another 
member  of  the  firm,  as  security  for  the 
note.     Lindell  v.  Lee,  34  Mo.  103. 

The  relation  of  debtor  and  creditor 
between  the  surviving  partner  and  the 
representative  of  the  deceased  partner 
does  not  arise  until  the  affairs  of  the 
partnership  are  wound  up  and  a  balance 
is  struck.  Such  balance  is  to  be  struck 
after  all  the  partnership  affairs  are  set- 
tled. Gleason  v.  White,  34  Cal.  258; 
White  V.  Waide,  1  Miss.  263;  Ozeas  v. 
Johnson,  4  Dall.  434;  Smgiser's  appeal, 
28  Pa.  St.  524;  Howard  v.  Patrick,  38 
Mich.  796.  See  Frederick  v.  Cooper.  3 
Iowa,  171;  Shields  v.  FuUer,  4  Wis. 
102. 

(y/)  PeiTing  v.  Hone,  2  Car.  &  P.  401, 
and  4  Bing.  28;  Mainwaring  ti.  New- 
man, 2  Bos.  &  P.  120;  Bosanquet  v. 
Wray,  6  Taunt.  597;  Jacaud  v.  French, 
12  East,  317. 

(z)  See,  in  addition  to  the  cases  cited 
in  the  last  note,  DeTastet  v.  Shaw,  1  B. 
&  A.  664,  and  Richardson  v.  The  Bank 
of  England,  4  M.  &  Cr.  171,  172,  2)er 
Lord  Cottenham. 


CllAl'.  X.]     WHEN  NOT  MAlNTAINABLi;  UKl-UKK  .1  LDK'ATfKE  ACTS.     *1031 


Actions  for 
improper  sale. 


partner  might  be  sued  by  his  co-partners  or  by   a   firm  of  which  they  were  mem- 
ber.s.  (a) 

Again,  as  one  tenant  in  common  of  personalty  could  not  sue  his  co-tenant  for 
the  recovery  of  that  property,  it  follows  that  one  partner  could  not,  Actions  for  re- 
by  action  at  law,  obtain  from  his  co-partner  property  of  the  firm  nc-rslup^goods, " 
wrongfully  detained  by  him.  {h)  <^c. 

It  was  not,  however,  so  clear  that  if  one  partner  wrong- 
fully sold  property  *of  the  firm,  his  co- partner  could  not      *1031 
sue  him  at  law,  either  for  the  wrongful  conversion  or  for  a 
share  of  the  produce  of  the  sale,     l-'or  although  the  older  decisions  were  opposed  to 
imy  such  right  (c),  it  was  held  in  Mayhew  v.  Herrick  {d),  that  a    jfayiicw  v. 
sheriff  who,  under  a//,  fa.  against  one  partner,  sold  goods  of  the    Hfrrick. 
lirm,  was  answerable  at  law  to  the  assignees  of  the  other  partner  for  one-hi;lf  of 
the  proceeds  of  the  sale;  and  it  was  previously  held,  in  Barton  r.    ]i„rton  v. 
Williams  (e),  that  a  sale  by  one  tenant  in  conunon  of  the  common    ^vilIiams. 
propeiiy  gave  the  other  a  right  to  sue  him  at  law  for  a  wrongful  conversion.  (/  ) 
'I'he  question,  therefore,  whether  if  one  partner  wrongfully  sold  the  goods  of  th  • 
firm,  he  could  or  could  not  be  sued  at  law  by  his  co-partners,  seems  to  have  turned 
on  whether  a  demand  in  resp3ct  of  this  wrongful  sale  could  or  could  not  be  regard- 
ed as  independent  of  any  question  of  account,  so  as  to  bring  the  case  within  the 
exception  already  noticed. 

Moreover,  a  partner  could  not  maintain  an  action  on  a  bill  of  exchange  di-awn 
by  himself  on  a  firm  of  which  he  was  a  member  {g),  and  this  rale  applied  to  all 
unincorporated  companies. 

Nor  could  an  action  be  brought  by  one  firm  against  another  finn  where  one  or 
more  persons  were  partners  in  both  firms.  (/*)'      Even  where  the    Actions  be- 
common  partner  was  dead,  the  one  firm  could  not  sue  the  other  in    tween  two 
respect  of  contracts  entered  into  between  the  two  finns  when  he  was    commou 
a  partner  in  each  of  them;   for  no  legal  contract  could  subsist  be-    P'^'"'"'^'"- 


(«)  See  Beocham  v.  Smith,  E.  B.  & 
E.  442,  and  ante,  p.  1028. 

ib)  See  Fox  v.  Hanbury,  Cowp.  445. 
In  Sharp  V.  Warren,  6  Price,  131,  it 
was,  however,  held  that  the  steward  of 
a  friendly  society  was  entitled  to  recover, 
at  law,  a  box  of  money  belonging  to  the 
society,  but  mn  oft'  with  by  one  of  its 
members. 

(c)  Graves  v.  Sawcer,  SirT.  Raym.  15- 

(rf)  7  C.  B.  229.  See,  too,  Buddcy  v. 
Barber,  6  Ex.  164;  and  compare  Morgan 
V.  Marquis,  9  Ex.  145. 

(e)  B.  &  A.  395,  affirmed  on  appeal, 
Williams  v.  Barton,  3  Bmg.  139.  See, 
too,  Farrar  r.  Beswick,  1  M.  &  W.  682. 

(/)  Agi-eed  to  by  Maule,  J.,  in  May- 
hew  V.  Herrick,  7  C.  B.  247;  and  by 
Wood,  V.-C.  in  Frazer  v.  Kershaw,  2 
K.  &  J.  500;  but  see  per  Coltman,  J., 


7  C.  B.  246,  and  Jacobs  v.  Seward,  L* 
R.  5  H.  L.  464. 

(g)  Neale  v.  Turton,  4  Bing.  149.  See, 
too.  Teague  v.  Hubbard,  8  B.  &  C.  345, 
and  2  Mun.  &  Ry.  369. 

{h)  See  Moffat  v.  Van  Millingen,  3 
Bcs.  &  P.  124,  note;  Main  waring  v. 
Newman,  ib.  120;  Bering  v.  Hone,  2  C. 
it  P.  401,  and  4  Bing.  28;  Jacaud  r. 
French,  12  East,  317;  DeTastet  v.  Shaw, 
1  B.  &  A.  664. 

»See  Haven  v.  Wakefield,  39  111.  509; 
Englis  V.  Furniss,  4  E.  D.  Smith,  587; 
Calvit  V.  Markham,  4  ]\Iiss.  343;  Rogei^ 
V.  Rogers,  5  Ired.  Eq.  31. 

See,  also,  Penrock  r.  Swayne,  6  W.  & 
S.  239;  Blaisdell  v.  Pray,  6S  Me.  269. 

Wheiv  A  A:  B  are  partners  in  one 
firm,  and  B«V:  C  are  partners  in  another, 
and  A  &  B  execute  a  negotiable  note  to 
1351 


*1032 


ACTIONS    BETWEEN    PARTNERS,    ETC. 


[book  III. 


tween  a  person  and  those  connected  mth  him  on  the  one  side,  and  himself  aiid 
others  connected  with  him  on  the  other  side,  {if 

Fox  V.  Hanbury  [k)  was  the  leading  authority  for  the  rule  that  one  partner  could 
Fox  V.  ^ot  sue  another  at  law  on  the  ground  that  the  other  detained,  and 

Hanbury.  used  for  his  own  exclusive  purposes,  personal  property  belonging  to 

Trover.  the  firm;    and  for  the  further  rule  that  if  one   partner  sold  sueli 

property,  neither  the  other  partners  nor  their  assignees  in  bankruj)tcy  could  main- 
tain an  action  against  the  purchaser  in  respect  of  his  detention  of  the  goods  pur- 
chased. (/) 
1032         *Where  a  partnership  had  been  dissolved,  and  the  winding  up  of  its 
affairs  had  been  entrusted  to  one  or  two  individuals,  and  they  had  taken 
Action  for  upon  themselves  the  duty  of  getting  in  the  assets,  and  paying  the 

pte  M^/d  s-"^'  debts,  and  dividing  the  sm-plus,  they  could  not,  under  ordinary  cir- 
solution.  cumstances,  be  compelled  by  proceedings  at  law  to  pay  over  that 

surplus  to  those  entitled  to  it.  (»<)  If  indeed,  the  accounts  had  all  been  taken,  and 
the  net  balance  payable  to  any  particular  partner  had  been  ascertained,  and  if  such 
balance  clearly  ought  to  be  paid  over  at  once,  then  an  action  for  it  might  be 
brought  («);  but  in  other  cases  recourse  must  have  been  had  to  a  court  of  equity. 

the  finn  of  B  &  C,  B  &  C  cannot  main- 
tain an  action  against  A.  Banks  v. 
MitcheU,  8  Yerg.  111.  See,  also,  Pen- 
rock  V.  Swayne,  supra. 

Where,  however,  one  who  is  a  mem- 
ber of  two  firms  makes  a  note  in  the 
name  of  one  of  the  firms,  payable  to  a 
member  of  the  other  fii-m,  the  payee 
may  sue  and  recover  upon  it  in  his  own 
name.     Moore  v.  Gano,  12  Ohio,  300. 

The  Pennsylvania  act  of  April  14, 
1838,  which  allows  the  same  person  to 
be  a  plaintiff  and  defendant  m  a  cause,  is 
restricted  to  cases  in  which  the  same  in- 
dividual is  a  member  of  two  distinct  co- 
partnerships. Hence,  one  partner  can- 
not bring  assumpsit  against  himself  and 
his  co-partners,  instead  of  account  ren- 
der against  them.  Miller  v.  Knauff,  2 
Pa.  Law  Jour.  Rep.  11;  Hall  v.  Logan, 
34  Pa.  St.  331.  See,  also,  Gibson  v. 
Ohio  Farina  Co.  2  Disney,  499. 

If  A  be  a  partner  in  both  the  firms,  A 
&  B  and  A  &  C,  and  A  &  C  be  indebted 
to  A  &  B,  A  &  B  cannot  sue  C  alone  for 
the  partnership  debt,  under  the  Penn- 
sylvania act  of  1838.  Pennrock  v. 
Swayne,  6  W.  &  S.  239. 

The  Pennsylvania  act  of  1838,  giving 
a  remedy  at  law  to  parties  who  are  pait- 
1352 


ners  of  several  firms  against  each  other, 
did  not  take  away  the  previously  exist- 
ing remdy  in  equity,      Wentworth  r. 
Raigvel,  9  Phil.  275. 
(/)  Bosanquet  v.  Wray,  6  Taunt.  597. 
■■'Miller  v.  Thorn,  R,  M.  Charlt.  180. 
See,  however,  Lacy  v.  Le  Bruce,   6 
Ala.  904. 

(A-)  Cowp.  445.  This  case  was  always 
followed  with  approbation.  See  Smith 
V.  Stokes,  1  East,  363;  Smith  v.  Oriell, 
ib.  36S;  Harvey  v.  Crickett,  5  M.  &  S. 
836;  Buckley  v.  Barber,  6  Ex.  184; 
Harper  v.  Godsell,  L.  R.  5  Q.  B.  422. 

(?)  It  seems  from  Morgan  v.  Marquis, 
9  Ex.  145,  that  if  a  solvent  partner  sells 
goods  of  the  firm,  the  purchaser,  if  he 
afterwards  sells  the  goods,  cannot  be 
compelled  to  hand  over  any  part  of  the 
proceeds  to  the  trustee  of  the  insolvent 
partners.  Compare  this  with  Mayhew 
V.  Herrick,  7  C.  B.  229,  and  Buckley  v. 
Barber,  6  Ex.  164. 

{m)  Lyon  v.  Haynes,  5  Man.  &  Gr. 
504,  and  see  Lewis  v.  Edwards,  7  M.  Ar 
W.  300,  as  to  a  receiver  suing  for  money 
withheld  from  him  by  those  who  agreed 
that  he  should  receive  and  distribute  it. 
(n)  Ante,  p.  1027. 


CU.W.  X.J  ACTIONS    FOli    CALLS.  *10;33 

3.     Actions  hetioeen  companies  and  their  shareholders. 

With  rei^|)Oct  to  ordinary    actions  V)etween  companies  and  tlu-ir 
shareholders,  little  remains    to   be  added  to  what  lias   Actions be- 
been  said  in  previous  cha])ters.     The  following  subjects   nJe^^uJiVui'^'Sr 
liave,  in  fact,  been  already  considered,  liz. : —  meuibcr.-,. 

1.  Actions  between  the  ])rom<>ters  of  companies  and  by  and 
against  ])ersons  who  have  subscribed  for  shares,  (o) 

2.  Applications  by  shareholders  to  liave  a  company's  register 
rectified.  (j»>) 

3.  Actions  bj  shareholders  whose  shares  have  been  illegally 
forfeited,  {q) 

4.  Actions  between  the  buyers  and  sellers  of  shares,  and  be- 
tween them  and  the  brokers  employed  by  them.  (?') 

There  only  remains  for  consideration  in  the  present  place  a  few- 
rules  relating  to  actions  for  calls  and  dividends,  and  the  remedy  by 
mandamus  in  the  case  of  the  non-performance  by  com])anies  of 
their  duties  toward  their  shareholders. 

*  Actions  for  calls.  lOoo 

An  action  for  calls  (.*?)  mnst  be  brought  in  the  name  of  the  com- 
pany, if  it   is  incorporated;  and   in   the  name  of  the   xcAunsioT 
]iublic  officer  if  the  company  is  em]>owered   to  sue  its   '^■""*- 
shareholders  in  that  manner,  {t)     In  cost-book  companies  the  pur- 
ser now  can  sue.  {u) 

Several  of  the  modern  acts  of  Parliament  relating  to  companies, 
contain  provisions  having  for  tlieir  object  the  simplitica-   statutory  en- 
tion  of  the  pleading  and  proofs  in  actions  for  calls,  (a?)  actments. 
Their  general  effect  is  to  render  it  necessary  for  a  statement  of 
claim  in  an  action  for  calls  to  state  merely  that  the  defendant,  as  a 
shareholder,  is  indebted  to  the  company  in  so  much  money  for  calls, 

(o)  Aute,   p.  117 f?  seq.  and  p.  1019.  5  M.  k  W.  355;  Smith  r.  GoUlsworthy. 

\p)  Ante,  pp.  142,  171.  4  Q.  B.  430.      See  a  declaration  in  an 

{q)  Ante,  pp.  144,  751.  action  for  calls,  by  a  company   incor- 

()•)  Ante,  p.  710  et  seq.  porated   by  the   Canadian    legishituiv. 

(.S-)  As  to  which,  see  ante,  p.  623  et  seq.  Welhuid  Rail.  Co.  v.  Blake,  6  H.  &  N. 

(/)  Chapman  r.    Milvain,   5  Ex.  61;  410. 

Wills  t'.  Sutherland.  4  Ex.  211,  affirmed  (»)  .32  &  3:3  Vict.  c.  19,  §  13. 

in  error,  5  Ex.  715;  Skinner  r.  Lambert.  (.r)  See  8  &  9  Vict.   c.  16,  §§26-28, 

4  Maji.  it  Gr.  477;  Lawn-nce  r.  Wvnn,  '25  .V  -20  Vict.  c.  89.  §70. 

1353 


*1034     ACTIONS  BETWEEN  COMPANIES  AND  THEIR  MEMBERS.      [boOK  III. 


omitting  all  statements  respecting  the  making  of  the  calls  in  que- 
stion, (y/)  As  regards  proof,  the  general  effect  of  the  provisions  re- 
ferred to  is  to  render  it  necessary  to  show  merely  three  things;  viz., 
first,  tliat  the  calls  sued  for  were  made  in  point  of  fact;  secondly,  that 
the  defendant  is,  or  was,  a  shareholder  when  the  call  was  made (,2}; 
and,  thirdly,  that  he  has  liad  proper  notice  of  the  making  of  the  call. 
Time  for  bring-  ^^^^^  ™^^^^  payable  by  statute  (a),  or  by  deed,  are 
iug action.  specialty  debts  ;  and  an  action  for  tlieir  recovery 
is  not,  therefore,  barred  by  the  lapse  of  less  than  twenty 
years,  {d) 

*1034         *T]ie  usual  grounds  of  defense  to  an  action 
for  calls  have  all  been  considered  in  pi'evious 
chapters.     They  may  be  reduced  to:— 

1.  A  denial  that  the  defendant  is  a  poi-son  liable  to  pay  the  call,  (c) 

2.  A  denial  of  the  making  of  the  call  in  point  of  fact. 

3.  A  denial  that  the  call,  admitted  to  have  been  made  in  point 
of  fact,  was  authorized  (^),  was  made  by  competent  persons  (e),  or 
in  the  proper  manner  (/"),  or  for  proper  purposes,  [g) 

4.  A  denial  of  any  notice  of  the  call. 

5.  A  denial  of  such  notice  as  the  defendant  was  entitled  to  re- 
ceive. (A) 

6.  Set  oflF.  (^) 

7.  Infancy,  {k) 

8.  Fraud.  {I) 


(y)  See,  as  to  the  necessity  of  adopt- 
ing the  statutoiy  forms,  Wolverhamp- 
ton, &c.  Waterw.  Co.  v.  Hawksford,  6 
C.  B.  N.  S.  336;  7  ib.  795,  and  11  ib. 
546;  Dundalk,  &c.  Rail.  Co.  v.  Tapster, 
1  Q.  B.  667;  Newport,  &c.  Rail.  Co.  v. 
Hawes,  3  Ex.  476;  Wilson  v.  Birken- 
head, &c.  Rail.  Co.  6  Ex.  626,  and  as  to 
actions  against  executors,  Birkenhead, 
&c.  Rail.  Co.  V.  Cotesworth,  5  Ex.  226. 

(z)  See,  as  to  this,  ante,  p.  138,  etc. 

(a)  Calls  made  under  a  colonial  act  are 
simple  contract  debts  only.  See  Wet- 
land Rail.  Co.  V.  Blake,  6,H.  &  N.  415. 

{b)  Cork  and  Bandon  Rail.  Co.  v. 
Goode,  13  C.  B.  826.  Compare  Robin- 
son's case,  6  DeG.  M.  &  G.  572. 

(c)  See  ante,  p.  634  et  seq.,  and  as  to 
estoppel  by  conduct,  ante,  p.  635. 

1354 


(d)  Ante,  p.  629. 

(e)  Ante,  p.  624. 
if)  Ante,  ip.  629. 
ig)  Ante,  p.  625. 
{h)  Ante,  p.  632. 


In  an  action  for 


calls  against  a  contributory  of  a  limited 
company  being  wound  up  vokmtarily,  it 
is  no  defense  that  the  defendtmt  had  no 
notice  that  his  name  was  placed  upon 
the  list  of  contributories,  see  Brighton 
Arcade  Co.  v.  Dowling,  L.  R.  3C.  P.  175. 

(?)  Ante,  p.  511,  and  infra,  under 
Winding-up.  As  to  setting  off  calls  not 
yet  due  where  a  shareholder  sues  a  com. 
pany,  Ryland  v.  DeHsle,  L.  R.  3  P.  C.  17. 

(A-)  Ante,  pp.  81,  636. 

(/)  Ante,  p.  636,  and  Smith  v.  Reese 
River  Co.  2  Eq.  264. 


C'll.Vl'.  X.J  ACTIONS   FOR    DIVIDENDS.  *lt)35 

It  must  be  borne  in  mind,  that  if  a  shareholder  does  not  avail 
liiuiselfof  such  defense  as  he  may  have  at  the  proper  time,  he  will 
be  precluded  from  afterwards  disputing  either  the  validity  of  the 
call,  or  his  liability  to  pay  it.  (m) 

Evidence  of  the  making  of  a  call  is  usually  given  by  proving  the 
resolution  by  which   it  was   made;  and    this  may   be 

•^  11  Evidence. 

done  either  by  the  testimony  ot  the  company  s  secre- 
tary, or  some  other  person  having  actual  knowledge  of  the  fact,  or 
by  the  company's  minute  books,  which,  as  was  seen   in  a  former 
cliapter,  are  in  many  cases  made  admissible  as  evidence  of  the  facts 
stated  in  then),  (n) 

Evidence  that  the  defendant  is  or  was  a  shareholder  is 
usually  *given  by  the  production  of  the  company's  register,     *1035 
the  effect  of  which  has  been  considered  already,  (o) 

Evidence  that  the  defendant  received  due  notice  of  the  making 
of  the  call  must  be  given  by  showing  that  the  requisite  advertise- 
ments (if  any)  were  published,  and  that  such  notice  as  he  was  enti- 
tled to  receive  either  actually  reached  him,  or  was  so  sent  to  him  as 
to  have  probably  reached  him.  This  will  be  sufficient,  in  default 
of  evidence  that  what  was  so  sent  him  did  not  reach  him.  (j)) 


Actions  for  dividends. 

Dividends  [q\  which  are  actually  declared  and  payable  by  an  in- 
corporated company,  are  recoverable  by  action  brought  ^^c,io„sfoi. 
by  the  person  having  the  legal  title  to  receive  them,  ^videuds. 
against  the  company.  The  plaintiff  must  prove  that  the  dividend 
sought  to  be  recovered  has  been  declared,  and  has  become  payable, 
and  that  he  has  the  legal  title  to  the  dividend  payable  in  respect 
of  the  shares  by  virtue  of  which  he  claims  it.  The  circumstance 
that  he  is  not  a  registered  shareholder  will  not  prejudice  him  if  he 
has  been  wrongfully  removed  by  the  company  from  the  register  (;•); 
nor  will  the  circumstance  that  the  plaintiff"  is  a  married  woman  be 
fatal  to  her  claim  if  she  might  have  sued  with  her  husband,  (s) 

(»i)  See  Thames  Haven,  &c.   Co.  v.  onds  5  Ex.  237. 

Hall,  5  Man.  &  Gr.  274;  Thames  Haven,  (?)  As  to  which,  see  ante,  p.  790  et  scq. 

&c.  Co.  V.  Rose,  4  ib.  552.  (r)  Dalton  r.  Midland  Rail.  Co.  12  C. 

(»)  See  ante,  p.  550.  B.  458,  and  13  ib.  474. 


(o)  See  ante,  p.  138.  (*■)  Ibid. 

(p)  Eastern  Union  Rail.  Co.  v.  Syra- 


1355 


*1036      ACTIONS  BETWEEN  COMPANIES  AND  THEIR  MEMBEES.      [bOOK  III. 

As  was  seen  in  the  chapter  on  dividends,  the  non-payment  of 
calls  is,  in  most  companies,  an  answer  to  an  action  for  dividends: 
and  even  where  it  is  not  so,  calls  and  dividends  may  be  set  oil' 
against  each  other. 

Except  where  an  action  would  lie  by  one  partner  against  another 
Dividends  of      for  money  in  the  hands  of  the  latter  payable  to  the 

unincorporated     ,.  '  .,.  t     •  i        i    ^ 

companies.  lormei',  ail  action  tor  a  dividend  due  to  a  member  of  an 
unincorporated  com])any  would  not  lie  before  the  passing  of  the 
Judicature  acts,  [t) 

'"lOoo  *  Of  the  IV)  H  of  mandamus. 

Prior  to  the  Common   law  procedure  act,  1854,  which  greatly 
enlarged  the  jurisdiction  of  the  Courts  with  respect  to 

Mandamus.  ,       .         .  J;        .  ,.  ,  '^ 

the  issuing  oi  writs  ot  mandamus,  it  was  a  rule  not  to 
allow  a  mandamus  to  go  for  the  purpose  of  enforcing  a  mere  pri- 
vate right.  It  was  only  issued  to  compel  the  specific  observance 
of  some  public  dutj",  for  the  non-performance  of  which  there  was 
not  at  law  any  other  adequate  remedy.  The  older  cases  upon  this 
subject  are  not,  however,  so  uniform  as  might  be  desired;  for  whilst 
there  was  authority  for  saying  tliat  a  mandamus  would  go  to  an 
incorporated  trading  company  to  compel  it  to  admit  persons  to 
offices  to  wliich  they  had  been  duly  elected  (-m),  a  mandamus  has 
been  refused  to  compel  a  company  to  pay  a  shareholder  dividends 
wrongfully  withheld  from  him  (a;);  to  compel  a  company  to  regis- 
ter a  transfer  of  its  stock  (y);  to  compel  it  to  produce  its  books  to 
the  shareliolders  for  the  purpose  of  enabling  them  to  consider 
whether  a  dividend  should  or  should  not  be  declared  paid  (s);  to 
compel  it  to  make  calls  for  the  payment  of  a  debt.  («) 

The  Common  law  procedure  act  1854  (Z*),  however,  authorizes 
17 &  18  Vict.  ^^^^  issuing  of  a  mandamus  to  enforce  the  fulfillment 
c.  125,  g68.  ^f  j^,-,.^,  duty  the  fulfillment  of  which  the  person  applv- 
ing  for  the  writ  is  personally  interested;  and  although  it  has  been 
Where  the  writ  ^^^'^  ^^^^^  ^^^°  ^^'^'^^  ought  not  to  issue  for  the  purpose  of 
will  go.  compelling    the    specific   performance  of  an  ordinaiy 

{t)  See  Lyon  t'.  Haynes,  5  Man.  &  Gr.  524;   R.  v.  London  Ins.  Co.  5  B.  &  A. 

504.  899. 

(«)  Anon.  2  Str.  696;  DaCosta  v.  Rus-  {z)  R.  v.  Bank  of  England,  2  B.  k  A. 

sia  Co.  ib.  788;  Com.  Dig.  Mand.  B.  2.  620. 

{x)  R.  V.  Whitstable  Co.  7  East,  358.  (a)  R.  v.  Victoria  Park  Co.  1  Q.  B.  288. 

ly)  R.  V.  Bank  of  England,  2  Doug.  {h)  17  &  18  Vict.  c.  125,  §  68. 

1356 


CHAP,   X.]  MANDAMUS.  *l()a~ 

ai;rGcincnt(<?),  it  lias  been  allowed  to  go  to  compel  a  cliartercd  coiii- 
])any  to  register  as  a  sliarcliulder,  a  pei'son  entitled  to  be  so  regis- 
tered by  the  provisions  of  the  company's  deed  of  settlement,  {d)  It 
may,  therefore,  it  is  conceived,  be  sai'ely  stated  that  wherever  a 
company  refuses  to  perforin  a  duty  imposed  upon  it  by  its 
"'special  act,  charter,  or  deed  of  settlement,  or  l)y  any  general  *1037 
statute  by  which  its  proceedings  are  governed,  a  niandamus 
to  compel  it  to  perform  such  dut}'  will  be  issut  d,  whether  the  duty 
is  ])ublic  or  j)rivate.  In  support  of  this  view  it  may  be  observed 
that,  notwithstanding  the  cases  above  referred  to,  modern  autliorities 
show  that  even  the  prerogative  writ  of  mandamus  will  go  to  compel — 

The  production  of  a  compan3''s  register  to  a  creditor,  (e) 

The  entry  on  the  register  of  the  jirobate  of  the  will  of  a  deceased 
shareholder,  (y) 

The  registry  of  transfers  of  shires  (</); 

The  production  to  a  shareholder,  for  a  proper  purpose  and  at  a 
proper  time,  of  such  books  as  he  has  a  right  to  inspect  (A); 

The  election  of  directors  and  officers  required  to  be  appointed;  (/) 

The  appointment  of  a  })ublic  officer  by  a  company  empowered  to 
sue  and  be  sued  by  one  (k); 

The  payment  by  such  a  company  of  a  debt  for  which  judgment 
has  been  obtained  against  its  officer  {I); 

The  making  of  a  call  for  the  payment  of  a  creditor  having  no 
other  remedy  {m); 

These  cases  clearly  show  a  tendency  in  modern  times  to  grant  a 
mandamus  where    formerly    it  would   have    been    re-   niseretion  of 
fused,  (m  7n)  But  the  granting  of  a  prerogtitive  writ  be-  ^^^  '^'^"''^• 

(c)  Benson  r.  Paull,  6  E.  &  B.  273.  was  refused. 

((7)  NoiTis  V.  Irish  Land  Co.  8  E.  &  B.  (»)  See  per  Tindal,  C.  J.,  in  Tliames 

512.  HavenDockCo.r.  Rose,  4  Man.it  Gr..V)9. 

(e)   R.  V.  Derbyshire,  &c.    Rail.    Co.  {k)  See  per  Parke,  B.,  in  Steward  v. 

?,  E.  &  B.  784.  Graves,  10  M.  &  W.  721. 

(  f)  R.  V.  Worcester  Canal  Co.  1  Man.  (7)  Corps  v.  Glyn,  3  B.  &  C.  801 ;  R.  r. 

&  Gr.  529.  St.  Katherine  Dock  Co.  4  B.  S:  Ad.  360. 

ig)   See  R.  v.  Londondcriy,  &c.  Rail.  (»')  See  R.  r.  Victoria  Bark  Co.  1  Q.  B. 

Co.   13  Q.  B.  99S;  R.  v.  Wing,  16  ib.  2^8,  where  the  wandamHs  wa-s  n-fused, 

645;  R.  V.  General  Cemeterj'  Co.  6  E.  the  creditor  being  in  a  position  to  issue 

&  B.  415,  and  see  ante,  p.  142.  execution  against  the  company,  though 

{h)  R.  V.  Saddlers'  Co.  10  W.  R.  87.  not  to  get  satisfaction  by  so  doing. 

See,  also,  R.  v.  Wilts,  &c.  Canal  Co.  3  (mm)  Paris  Skating  Rink  Co.  6  Ch. 

A.  &  E.  477,  and  R.  v.  Maraquita,  &c.  D.  731,  shows  tliat  a  mandamus  may  be 

Mining  Co.  5   Jur.  N.  S.  725,  Q.  B.     In  granted  by  the  Chancery  Division  of  the 

the  two  last  cases,  however,  the  writ  High  Court. 

1 357 


^1038      ACTIONS  BETWEEN  COMPANIES  AND  TIIEIK  MEMBERS.      [boOK  III. 


msr^  within  certain  limits  a  matter  of  discretion  with  the  Court,  no 
mandamus  is  allowed  to  go  unless  the  applicant  has  been 
*1038  denied  the  right  *he  seeks  to  enforce  {n)',  npr  unless  he  a]i- 
plies  for  the  writ  within  a  reasonable  time  after  such  de- 
nial (o);  nor  unless  the  Court  is  satisfied  that  its  interference  is 
sought  for  a  proper  purpose  (p);  nor  unless  the  applicant  having  a 
legal  right  has  no  other  adequate  legal  remedy,  (q)  The  last  rule 
is  held  to  applj  to  actions  for  a  mandamus  under  the  Common  law 
procedure  act,  1854  (r);  and  probably  the  other  rules  are  also  ap- 
plicable to  them.  It  is  worthy  of  remark,  that  notwithstanding  the 
tendency  to  extend  the  application  of  the  prerogative  writ  it  has  very 
recently  been  held  that  such  writ  only  goes  to  enforce  the  perform- 
ance of  acts  required  to  be  done,  and  not  the  undoing  of 
acts  already  done  ;  and  that  consequently,  although  a  corpo- 
ration may.  be  compelled  by  a  mandamus  to  affix  its  seal  to  a 
document  (s),  it  cannot  be  thus  compelled  to  remove  its  sea\fro)/t, 
a  document,  (i)  How  far  this  distinction  applies  to  actions  under 
the  statute  remains  to  be  seen;  but  it  is  submitted  that  the  ditfei-- 
ence  between  doing  and  undoing,  is,  in  such  a  case  as  that  alluded 
to,  a  difference  in  words  rather  than  in  substance.  Registers  of 
shareholders  may  be  rectified  both  by  inserting  names  wrongfully 
omitted  and  by  striking  out  names  wrongfully  inserted,  as  has  been 
seen  already,  {u) 


(n)  R.  V.  Wilts,  &c.  Canal  Co.  3  A. 
&  E.  477. 

(o)  R.  V.  Cockermouth  Inclosure  Com- 
missioners, 1  B.  &  Ad.  378. 

ip)  R.  V.  Wilts,  &c.  Canal  Co.  3  A. 
&  E.  477;  R.  V.  Liverpool,  Manchester, 
&c.  Rail.  Co.  21  L.  J.  Q.  B.  284. 

iq)  See  R.  V.  Chester,  1  T.  R.  396;  R. 

1358 


V.  StafFord,  3  ib.  646;  R.  v.  Victoria 
Park  Co.  1  Q.  B.  288. 

(r)  Bush  V.  Beavan,  1  H.  &  C.  500. 

(s)  R.  V.  Windham,  Cowp.  377;  R.  v. 
Cambridge,  3  Burr.  1647;  R.  v.  York,  4 
T.  R.  699. 

(0  Ex  parte  Nash,  15  Q.  B.  92. 

(t()  A7ite,  p.  142. 


BOOK    IV.]  WINDING-UP   OF    PARTNERSHIPS.  *l039 


*BOOK  IV.  "1030 

ON  THE  WINDING-UP  OF  PARTNERSHIPS  AND  COMPANIES. 


GENERAL  OBSERVATIONS. 


The  duration  of  a  contract  of  partnership,  the  events  which  give 
rise  to  a  dissolution  of  such  contract,  and  those  other  events  which, 
without  dissolving  the  contract,  confer  a  riglit  to  liave  it  dissolved, 
were  all  considered  in  the  eighth  chapter  of  the  first  book. 

In  order  to  wind  up  the  affairs  of  a  dissolved  partnership,  it  is 
Tiecessarj  first  to  pay  its  debts;  secondly,  to  settle  all  windinp  up  of 
questions  of  account  between  the  partners;  and,  third-  r'lrtuerships. 
ly,  to  divide  the  unexhausted  assets  (if  any)  between  the  partners 
in  proper  proportions;  or,  if  the  assets  are  insufficient  to  pay  the 
debts,  then  to  make  up  the  deficiency  by  a  proper  contribution  be- 
tween the  partners.  This  can  be  done  by  the  partners  themselves, 
or  their  representatives  {a);  but  if  disputes  arise,  then  recourse 
must  almost  always  be  had  to  the  Chancery  Division  of  the  High 
Court,  for  it  is  under  its  superintendence  only  that  the  assets  of  a 
partnership  can  be  properly  sold  and  applied,  that  the  partnershp 
accounts  can  be  satisfactorily  taken,  and  that  contribution  can  be 
enforced,  {b) 

The  consequences  of  a  dissolution  of  partnership,  both  as  regards 
creditors  and  as  regards  the  partners  themselves,   have  consequences 
been  pointed  out  in  earlier  parts  of  the  treatise,  and  of  dissolution, 
only  require  to  be  shortly  recapitulated. 

I.  As  regards  the  creditors  of  the  Jirm,  it  has  been  i.  Asrepards 
seen — 

(a)  See  Lyon  r.  Haynes,  5  Man.  &  Gr.      rily  clihsolved. 
hO'\  wliere  a  banking  company  govern-  [h]  See  book  iii.  c.  10,  §  6. 

od  bv  7  Geo.  4,  c.  4G,  had  been  volunta- 

1359 


"1041  CONSEQUENCES    OF    DISSOLUTION.  [doOK  IV. 

1.  Tliat  a  dissolution  of  partnersliip,  whether  ^-eneral  or 

1040*     ^partial  does  not  dischari^e  any  of  the  partners  from  liabilities 

incurred  bj  them  previously  to  the  time  of  dissolution  (c); 

2.  That  in  order  that  a  member  of  a  firm,  wholly  or  partially  dis- 
solved, may  be  freed  from  his  liability  to  a  person  who  was  a  creditor 
of  the  firm  at  the  time  of  its  dissolution,  such  creditor  must  either 
have  been  paid,  or  satisfied,  or  must  have  accepted  some  fresh  obliga- 
tion in  lieu  of  that  which  existed  when  the  firmwas  dissolved,  (c/) 

3.  That  (except  in  a  few  special  cases)  (e)  notice  of  dissolution  or 
retirement  is  requisite  to  determine  the  responsibility  of  each  part- 
ner in  respect  of  such  future  acts  of  his  late  co-partners,  as  would 
be  imputable  to  the  firm  if  no  change  in  it  had  taken  place  {f)\ 

4.  That  notice  of  dissolution  generally,  as  by  advertisemen.t,  is 
not  sufficient  to  affect  an  old  customer,  unless  it  can  be  brought  to 
his  knowledge  {g)\ 

5.  That  notice  of  dissolution,  is  notice  that  the  former  partners 
are  no  longer  each  other's  agents  as  before  (Ji)\ 

6.  That  after  dissolution  and  notice,  partners  cease  to  be  respon- 
sible for  the  future  acts  of  each  other  (f),  unless  they  continue  to  hold 
themselves  out  as  partners,  in  which  case  the  notice  is  of  no  avail.  (Jc) 

II.  As  regards  the  jKii'tners  themselves.  Upon  the  dissolution  of 
2  As  re  ards  ^  partnership,  and  in  the  absence  of  any  agreement  to 
the  partners.       i\^q  coutrarj'',  it  has  been  seen — 

1.  That  each  partner  has  a  right  to  have  the  partnership  assets 
applied  in  liquidation  of  the  partnersliip  debts,  and  to  have  the  sur- 
plus assets  divided.  [T) 

2.  That  the  right  of  eacli  pai-tner  is  to  insist  on  a  sale  of  the 
partnership  assets;  there  being,  in   the  al)sence  of  special  circum- 
stances, no  right  in  any  partner  to  have  the  value  of  his  own  or  of 
any  co-partner's  share  determined  by  valuation,  or  to  have  the  part- 
nership property,  or  any  portion  of  it,  divided  in  specie  (w); 

*1041         *3.  That  each  partner  has  a  right  to  i.si;t   that  noth- 
ing further  shall  be  done,  save  with  a  view  to  wind  up  the 
concern  {p)\ 

[c]  Ante  p.  417  et  seq.  (k)  Ante,  p,  409. 

{d)  Ibid.  (/)  Ex  parte  Ruffin,  6  Ves.  127. 

(e)  Ante,  p.  403  etseq.  (m)  Ante,  p.  1015. 

(/)  Ibid.  {j})  Wils.in  i'.  Greenwood,  1  Swanst. 

(g)  Ante,  p.  415.  481 ;  Crawshay  v.  Maule,   ib.   507;  Ex 

{h)  Ante,  pp.  403,  406.  ^urte  Williams,  11  Ves.  3. 

(t)  Ibid. 

1CC0 


BOOK  IV.]  WINDING- UP    OF    PARTXERSIIII'S.  *1042 

4.  That,  for  the  purposes  of  windmi^  up,  tlie  partncrslup  is  deemed 
to  continue  iq);  the  i^ood  faith  and  honorable  conduct  due  from 
evorv  partner  to  liis  co-])artners  during  the  continuance  of  the  part- 
nership, Ijeini,' equally  due  so  luni^as  its  affairs  remain  unsettled  (/■); 
and  that  which  was  ]>artnership  property  before,  continuing  to  be 
so  for  the  purpose  of  dissolution,  as  the  rights  of  the  partners 
require  (s); 

r.  That  the  right  on  a  dissolution  to  wind  up  the  partnership 
aft'aii-s,  i.e.,  to  get  in  its  credits,  convert  its  assets  into  money,  |)ay 
its  debts,  and  divide  the  residue,  belongs  as  much  to  one  of  the  late 
partners  as  to  another;  and  if  they  cannot  agree  amongst  them- 
selves, recourse  must  be  had  to  the  Court,  wliich  will,  if  necessar}-, 
appoint  a  receiver,  direct  a  sale  of  the  assets  and  payment  of  the 
partnership  debts,  and  restrain  a  partner  from  interfering  with  the 
proper  winding  up  of  the  partnership,  (t) 

6.  That  the  right  to  wind  up  the  affairs  of  a  dissolved  partner- 
ship is,  however,  personal  to  the  members  of  the  late  firm;  and 
that,  therefore,  on  the  death  or  baidcruptcy  of  one  of  them,  his  ex- 
ecutors or  trustee  will  not  be  permitted  to  take  the  management  of 
the  affairs  of  the  partnershi])  out  of  the  hands  of  the  other  part- 
ners (ti) ; 

T.  That  if  the  partnership  assets  are  insufficient  to  pay  the  part- 
nership debts,  the  deficiency  must  i)e  made  good  by  the  partners  in 
proportion  to  their  respective  shares  (x); 

8.  That  after  a  partnership  has  been  dissolved,  any  one  of  the  late 
partners  has  a  right  to  have  that  dissolution  duly  notified, 
80  that  a  stop  may  be  put  to  the  power  of  his  *co-partners  *1042 
to  bind  him.  (y)  It  seems  that  he  has  also  a  right  to 
restrain  them  from  carrying  on  business  under  the  old  name,  if 
such  name  is  or  includes  his  own;  for  although  their  continued 
use  of  the  old  name,  even  with  his  knowledge,  is  not  sufficient  to 
render  him  liable,  by  virtue  of  the  doctrine  of  holding  out  f^),  such 
use  undoubtedly  exposes  him  to  the  risk  of  having  actions  brought 

iq)  See  ante,  p.  411.  (0  See  ante,  book  iii.  cli.  10,  §6. 

(r)  Ante,  p.  569.  (c)  Allen  r.  Kilbre,  4  Madd.  4()4;  ^.r 

(s)  See  Ex  jyarte  Williams,  11  Ves.  5  ;)a/7f  Finch,  1  D.  &  Ch.  274;  Frasor  v. 

and  6;  Crawshayr.  Collins,  2  Russ.  o42,  Kershaw,  2  K.  &  J.  496. 

843;  Nerot  v.   Burnand,  4  Kiiss.   247;  (r)  See  a///?,  p.  805. 

Payne  v.  Hornby,  25  Beav.  280.     See,  (//)  Troiigliton  r.  Hunter,    18  Boav. 

too,  Ex  parte  Trueman,  1   D.   &   Ch.  470. 

464,  as  to  partnership  books.  (~)  Newsome  v.  Coles,  2  Camp.  617, 

8«  1361 


*1043  CONSEQUENCES    OF    DISSOLUTION.  [bOOK  IV. 

against  him  if  he  still  belonged  to  the  linn,  and  his  co-partners 
have  no  right  to  expose  him  to  that  risk,  {a) 

9.  That  each  partner  has  a  right  to  commence  a  new  business  in 
the  old  line,  and  in  the  old  neighborhood;  either  alone,  or  in  part- 
nership with  other  people.  (Jj) 

Such,  in  general  terms,  are  the  consequences  of  dissolution.     In 

order,  however,  to  obtain  a  complete  view  of  these  con- 
Matters  in-  '  '  1  1  •      •    1 
voivodin  the      senueiices,  it  is  necessary  to  attend  to  the  principles 

■winding  up  of  i  ''  i  i  )• 

a  partnership,  upyn  wliicli  partnership  accounts  are  taken;  to  the  dis- 
tinction between  the  joint  estate  of  the  firm,  and  the  separate 
estates  of  the  partners  composing  it;  to  the  doctrines  of  contribu- 
tion and  indemnity;  to  the  rules  wliich  relate  to  appointing  a  re- 
ceiver and  granting  an  injunction;  and  lastly,  to  the  special  agree- 
ments, if  any,  into  which  the  partners  may  have  entered.  All 
tlicse  matters  were  discussed  in  the  third  buok,  and  it  is  not  nec- 
essary further  to  allude  to  them.  But  the  complicated  questions 
which  arise  in  the  event  of  a  dissolution  by  death  or'  bankruptcy, 
have  necessarily  been  reserved  for  separate  examination,  and  they 
will  form  the  subject  of  the  first  two  chapters  of  the  present  book. 
The  causes  and  consequences  of  the  dissolution  of  companies, 
,    and   the  mode  of  winding  up  their  afftiirs,  have  also 

Winding  up  of  .  ,  .  .  ,  i.  v.       1 

companies.        bccu   reserved  for  consideration   in  the  present  book. 
Tiie  law  upon  this  subject  may  be  properly  said  to  have  been  de- 
veloped by  legislative  enactment  from   general  principles  of  the 
law  of  partnership;  and  although  it  is  true  that  many  of  the  princi- 
ples which  govern  the  dissolution  and  winding  up  of  partnerships 
liave  no  application  to  the  dissolution  and  winding  np  of  compa- 
nies, still  it  will  be  found  that  others  of  those  principles 
1043*     *have  carefully  been  preserved,  and  foi-m  the  basis  on  which 
the  statutory  law  of  winding  up  may  truly  be  said  to  rest. 
Pursuino-,  therefore,  with  respect  to  the  present  branch 

Subject  of  prcs-  ,  ,       i       •  .    i     i  i  i  i 

enthook.  of  the  law,  the  Same  method  wiiicli  has  been   observed 

with  respect  to  those  branches  which  have  already  been  disposed  of, 
it  is  proposed  first  to  examine  the  consequences  of  death  and  bank- 
ruptcy, both  as  regards  partners  and  as  regards  shareholders;,  and 
then  to  pass  to  the  modern  statutory  enactments  relating  to  the  dis- 
solution and  winding  up  of  companies,  under  what  are  commonly 
called  the  Winding-up  acts. 

(a)  See  ante,  p.  999.  (&)  See,  as  to  this,  ante,  p.  854. 

1362 


CHAP.  I,]         OF  DEATH  AND  ITS  CONSEQUENCES.  *1044 


*CHAPTER  I.  *1044 

OP  DEATH  AND  ITS  CONSEQUENCES. 

The  consequences  of  the  death  of  a  member  of  a  partnership  or 
company  will  be  most  conveniently  pointed  ont  in  the  course,  of  an 
examination  of  the  position  of  the  surviving  members,  and  of  the 
executors  of  the  deceased  member — 

1.  As  between  themselves; 

2.  As  regards  the  creditors  of  the  firm;  and 

3.  As  regards  the  separate  creditors  and  legatees  of  the  deceased. 


SECTION  I.— CONSEQUENCES  AS  REGARDS  THE   SURVIVING  PART- 
NERS AND  THE  EXECUTORS  OF  THE  DECEASED. 

1.  In  the  case  of  ordinary  partnerships. 

The  death  of  any  one  member  of  a  firm  operates  as  a  dissolution 

thereof  as  between  all  the  members,  unless  there  is  some  ncnth  of  a  part- 
ner dissolves 

agreement  to  the  contrary  (a);  and  the  mere  tact  that  the  firm. 
the  partnership  was  entered  into  for  a  definite  term  of  years,  which 
was  unexpired  when  the  death  occurred,  is  not  sufficient  to  prevent 
a  dissolution  by  such  death.  (J) 

Unless  all  the  partners  have  agreed  to  the  contrary,  when  one 
of  them  dies,  his  executors  have  no  right  to  l)ecome   p,e(.„,orsof 
partners  with   the  surviving  partners  (c);    nor  to  in-   no^ilecome 
terfere  with  tlie  partnership  business;    but  the  execu-   P'""""^"^- 
tors  of  the  deceased  represent  him  for  all  purposes  of  account,'  and, 
unless  restrained  by  special  agreement,  they  have  the  power,  by 

(fl)  See  ante,  p.  281.  (c)  Tcarcer.  Chamberlain,  2  Ves.  S. 

\b)  Crawford  v.  Hamilton,  3  Madd.      33. 
251.  >  See  a»(/f,  945,  note. 


=1045 


DEATH   AND    ITS   CONSEQUENCES   AS   BETWEEN         [bOOK  IV. 


*10-J:5  *'.ji'ingmg  au  action  to  have  the  affairs  of  the  partnership 
wound  up  in  a  manner  which  is  generally  ruinous  to  the 
other  partners.* 

The  maxim  ji(s  accrescendi  inter  mercatores  locum  non  hahet, 
Jus  accresceadi,  ^i^s  been  already  examined,  and  need  not  be  again  no- 
^''-  '  ticed.  {d) 

On  the  death  of  a  partner  the  surviving  members  of  the  firm 
Position  of  are  the  proper  persons  to  get  in  and  pay  its  debts,  [ef 
partiiurs.  But  the  debts  they  get  in  must  be  placed  to  the  debit 


^A  will  provided  that  the  balance  of 
capital  due  the  testator  in  a  firm  of 
which  he  was  meniher  might  remain 
with  the  sui-viving  partners  for  a  certain 
time  at  interest:  Held,  that  the  execu- 
tors were  barred  during  that  time  from 
recovering  the  same,  and  that  security 
could  not  be  required  by  the  court  in  a 
suit  to  which  one  of  the  surviving  part- 
ners was  not  party.  Vernon  v.  Vernon, 
7  Lans.  493. 

(f?)  Anie,  p.  664. 

(e)  Ante,  p.  490. 

^  On  a  dissolution  of  a  co-partnership 
by  the  death  of  one  of  the  partners,  the 
survivor  has  a  right  to  take  possession 
of  the  co-partnership  assets,  and  settle 
up  the  affairs  of  the  joint  concern: 
Marlatt  v.  Scantland,  19  Ark.  443;  Al- 
len V.  Hill,  16  Cal.  113;  Tillotson  v.  Til- 
lotson,  34  Conn.  335;  Florida  Tenitory  «. 
Redding,  1  Fla.  242;  Miller  v.  Jones,  39 
111.  54;  Murray  v.  Mumford,  6  Cow. 
441;  Walker  t>.  House,  4  Md.  Ch.  39; 
Dwinal  v.  Stone,  30  Me.  384;  BaiTy  v. 
Briggs,  22  Mich.  201;  Teigley  v.  Whit- 
aker,  22  Ohio  St.  606;  Price  v.  Hicks, 
14  Fla.  565.     See  ante,  665,  666,  notes. 

A  surviving  partner  having  the  legal 
right  to  the  possession  of  partnership 
property,  the  court  will  not  deprive  him 
of  that  right,  unless  upon  proof  of  mis- 
management, or  danger  to  the  partner- 
ship effects.  Connor  v.  Allen,  Harr. 
Ch.  371. 

A  sole  surviving  partner  has  the  entire 
legal  title  to  all  the  partnersliip  assets 

1364 


(see,  ante,  pp.  665,  666,  notes).  He  has 
a  right,  acting  honestly  and  with  rea- 
sonable discretion  and  diligence,  to  dis- 
pose of  them  as  he  pleases,  to  settle  all 
debts  against  the  concern,  to  make  any 
compromise  he  may  deem  necessaiy, 
and  to  turn  the  assets  into  an  available 
and  disti-ibutable  form.  Barry  v.  Briggs, 
22  Mich.  201. 

A  sui-viving  partner  is  entitled  to  the 
exclusive  possession  and  control  of  all  the 
partnership  assets,  including  choses  in 
action,  and  may  assign  the  latter  in  the 
legitimate  settlement  of  the  partnership 
business,  notwithstanding  such  partner- 
ship and  its  individual  members  may  be 
insolvent.  Willson  v.  Nicholson,  61 
Ind.  241.  See,  also,  Roys  v.  Villas,  18 
Wi  c.  169;  Pinckney  v.  Wallace,  1  Abb. 
Pr.  82. 

See,  however,  Hill  v.  Treat,  67  Me. 
501;  Cook  V.  Lewis,  36  id.  340;  Cavitt  v. 
James,  39  Tex.  189;  Mutual,  &c.,  Insti- 
tution V.  Eushn,  37  Mo.  453. 

In  an  action  by  the  assignee  on  a  chose 
in  action  of  an  insolvent  partnership, 
which  has  been  assigned  by  a  surviving 
partner,  it  is  presumed,  where  the  con- 
trary does  not  appear  that  such  assign- 
ment was  made  in  the  bond  fide  settle- 
ment of  the  partnership  busmess ;  and 
where  in  such  action  creditors  of  the 
insolvent  partnership  apply  to  be  made 
parties  to  the  action  and  file  a  counter- 
claim asking  application  of  the  proceeds 
of  such  chose  in  action  to  the  payment 
of  their  debts,  and  the  counter-claim 


CIlAl'.  I.]        THE   DECEASED    AND   THE    SUKVIVING    PARTNERS. 


no4i 


of  the  late  firm,  and  the  debts  tliey  pay  must  be  placed  to  its 
credit.  Whilst,  therefore,  the  executors  of  the  deceased  partner 
are  entitled  to  have  payments  made  to  the  survivc^rs  by  a  debtor  to 


does  not  allege  that  such  assignment 
was  made  in  bad  faith,  in  which  the 
assignee  participated,  it  is  insuflicient 
and  may  be  struck  out  on  motion. 
Willson  r.  Nicholson,  61  Ind.  242. 

The  sole  sunavor  of  a  firm  may  assign 
a  promissory  note,  payable  to  the  late 
fiiTU,  by  indorsement,  so  as  to  vest  the 
legal  title  in  the  assignee,  as  effectually 
as  if  the  note  had  been  made  payable  to 
him.  Johnson  v.  Berlizheimer,  84  111. 
54.    See  Cavitt  v.  James,  39  Tex.  189. 

A  surviving  partner  has  the  right  to 
apply  partnership  funds  to  release  real 
estate  of  the  firm  from  incumbrance, 
and  to  fulfill  contracts  for  the  purchase 
of  real  estate.  Shearer  v.  Shearer,  98 
Mass.  107. 

A.  surviving  partner  cannot  bind  the 
finn,  nor  transfer  the  partnership  effects 
to  pay  a  debt  of  his  own,  nor  pay  the 
debt  of  one  firm  of  which  he  is  sui-vivor 
with  the  debt  of  another  firm  of  which  he 
is  sui-vivor;  but  he  may  transfer  the 
assets  of  a  firm  of  which  he  is  survivor 
to  pay  the  debts  of  that  fii-m.  Scott  v. 
Tupper,  IG  Miss.  280. 

After  the  death  of  one  partner,  an  as- 
signment of  the  partnership  funds,  by 
the  surviving  partner,  for  the  payment 
of  a  separate  debt  of  the  deceased  part- 
ner in  preference  to  the  partnership 
debts,  is  void.  Hutchinson  v.  Smith,  7 
Paige,  26.     See,  ante,  Assignments. 

The  surviving:  member  of  a  firm  may 
give  preferences  among  the  partnership 
ci-editors,  under  his  g  'neral  authority  to 
wind  up  the  business  of  the  firm.  Loes- 
chigk  V.  Hatfield,  5  Robt.  26;  4  Abb. 
Pr.  N.  S.  210.  See,  however,  Barcroft 
V.  Snodgrass,  1  Cold.  430.  See,  ante, 
Assignments. 

The  surviving  partners  have  power  to 
sell  and  convey  the  firm  real  estate, 
without  regard  to  whether  this  be  neces- 


sary to  pay  debts.     Solomon  v.  Fitz- 
gerald, 7  Heisk.  552. 

A  surviving  partner  cannot  bind  co- 
survivors  by  signing  the  firm  name 
without  their  express  authority  or  ratifi- 
cation. Jenness  v.  Carleton,  40  Mich. 
34:j;  Matteson  v.  Nathanson,  38  id.  377; 
Castle  V.  Reynolds,  10  Watts,  51  (a 
judgment  notej ;  Bank  of  Port  Gibson  r. 
Baugh,  17  Miss.  290.  See,  however, 
Dundass  v.  Gallagher,  4  Pa.  St.  205. 

A  surviving  partner  and  liquidator 
cannot  release  the  partnership's  recourse 
for  accommodation  acceptances  againtt 
a  party,  so  as  to  make  him  a  competent 
witness.  Bookout  v.  Anderson,  2  La, 
Ann.  246. 

Delivery  by  the  surviving  partner  of 
a  note  then  assets  of  the  firm,  which 
had  been  indorsed  in  the  name  of  the 
firm  by  the  deceased  partner  in  his  life- 
time, is  not  sufficient  to  pass  the  legal 
title  to  the  purchaser.  Glasscock  v. 
Smith,  25  Ala.  474. 

A  surviving  partner  cannot  bind  the 
estate  of  a  deceased  member  of  the  firm 
for  debts  incurred  bj'  him  subsequently 
to  its  dissolution  by  the  death  of  such 
member.    Cook  v.  Carson,  45  Tex.  429. 

Where  a  leas3  to  a  co-partnership 
gives  a  privilege  to  the  lessees  of  con- 
tinuing the  lease  for  an  additional  term, 
upon  giving  notice  of  their  intention  to 
continue,  prior  to  the  termination  of  the 
original  term,  in  case  of  the  death  of 
one  of  the  partners  the  survivor  can,  as 
such,  give  the  required  notice  and  en- 
force a  fulfillment  of  the  covenants  of 
the  lease  for  the  extended  term.  Betts 
V.  June,  51  N.  Y.  274. 

If  goods  shipped  and  consigned  to  a 
firm  doing  a  commission  business,  to  be 
sold  on  account  of  the  shipper,  are  re- 
ceived, but  before  they  are  sold  one  of 
the  partners  dies,  the  survivor  may  sell 

1365 


^1045 


DEATH    AND   ITS    CONSEQUENCES   AS    BETWEEN         [cOOK  IV. 


the  old  firm,  applied  in  pa^-aicnt  of  his  debt  to  it  {/)  tlie  surviv- 
ors have  a  right,  if  they  pay  more  than  their  share  of  the  debts  of 
the  old  firm,  to  be  reimbursed  out  of  the  estate  of  their  deceased 
co-partner,  [g)     They    are   creditors  against  that  estate  for  wliat 


such  goods,  and  in  such  case,  the  claim 
cf  the  shippei'  on  account  of  such  sale 
is  properly  against  the  firm,  and  not 
iigainst  the  survivor  individually.  Of- 
futt  V.  Scott,  47  Ala.  104. 

Where  there  is  an  executory  agree- 
ment Ijetween  partners  for  the  sale  of 
the  firai  assets  to  one  of  them,  unac- 
companied by  any  actual  transfer,  and 
the  purchasing  partner  dies  before  the 
time  fixed  for  the  deliveiy,  firm  assets 
subsequently  found  in  the  hands  of  the 
surviving  partner,  who  is  also  executor 
of  the  deceased,  v^^ill  be  presumed  to  be 
held  by  him  in  his  character  of  surviv- 
ing partner,  and  not  as  executor.  Kreis 
V.  Gorton,  23  Ohio  St.  468. 

A  agreed  with  a  surviving  partner 
that  if  he  would  apply  the  firm  property 
to  the  decedent's  private  debts,  A  would 
l)ay  the  firm  debts.  The  agreement  was 
held  good  in  a  suit  thereon  against  A  by 
the  survivor,  and  the  amount  to  have 
Iieen  paid  by  A  was  the  measure  of 
damages  against  him.  Weddle  v.  Stone, 
12  Ind.  625. 

A  surviving  partner,  who  administers 
ppon  the  partnership  aifairs,  may  be 
allowed  a  credit  on  his  inventoi-y  for  a 
debt  due  by  the  deceased  partner  to  the 
firm,  and  for  a  debt  due  by  himself  to 
the  firm  at  the  same  time,  both  debtors 
appearing  insolvent;  and  he  is  not  re- 
quired to  class  the  partnership  debts  and 
pay  them  ^jro  7'ata,  but  may  pay  them 
all  in  full;  as  section  63  of  article  1  of 
the  administration  act  does  not  apply  to 
him.     Crow  r.  Weidner,  36  Mo.  412. 

In  New  York,  under  section  244  of  the 
Code  of  Procedure,  as  amended  in  July, 
1851,  a  partner,  who  by  his  answer  ad- 
mits that  he  has  in  his  hands  partner- 


ship funds,  which  on  his  statement 
appear  to  belong  to  the  administrators 
of  his  deceased  partner,  will  be  ordered 
to  pay  over  such  funds  to  them,  although 
there  are  outstanding  contested  claims 
against  the  firm,  and  it  has  claims  to 
enforce  which  will  require  time  and  dis- 
bursements. Roberts  v.  Law,  4  Sandf. 
642. 

Where  one  partner  dies  insolvent,  and 
is,  at  the  time  of  his  death,  indebted,  in- 
dividually, to  the  surviving  partner,  in- 
dividually, and  the  surviving  partner 
afterwards  collects  funds  of  the  partner- 
ship, he  cannot  apply  the  share  of  the 
deceased  partner  to  the  individual  debt 
due  to  himself;  such  share  must  be  paid 
to  the  representative  of  the  deceased 
partner  to  be  applied  to  his  debts. 
Moffat  V.  Thomson,  5  Rich.  Eq.  155. 

Under  the  provisions  of  N.  H.  Gen. 
'tat.  ch.  106,  upon  the  death  of  either 
partner,  the  co-partnership  affairs  may 
be  fully  adjusted  and  settled  in  the  pro- 
bate court,  either  by  the  sui-viving  part- 
ner, or  the  representative  of  the  deceased 
partner,  or  by  arbitration.  But  if  not 
thus  settled,  they  may  be  adjusted  in  a 
court  of  equity  the  same  as  before  such 
statute  was  enacted.  Scott  v.  Bufibm, 
52  N.  H.  345. 

A  sui-viving  partner  has  no  right  to 
use  machinery  upon  his  own  personal 
account  to  the  detriment  of  the  estate  of 
the  deceased  partner,  and  will  be  en- 
joined, whether  the  machinery  is  re- 
garded as  realty  or  personalty.  Stan- 
hope V.  Suplee,  2  Brewst.  455. 

Where  the  surviving  partner  of  a  firm 
collected  demands  of  the  firm  in  Con- 
federate money,  he  was  held  liable  to 
account  to  the  representatives  of  the  de- 


(/)  Lees  V.  Laforest,  14  Beav.  250. 
136G 


{g)  Musson  r.  May,  3  V.  &  B.  194. 


CHAP.  I.]        THE    DECEASED    AND    TOE    SURVIVING    PAKTNEKS.  *1046 

may  be  due  to  them  from  their  deceased  partner,  on  taking  tlie 
partnersliip  accounts,  and  they  may  as  creditors  bring  an  action 
for  tlie  administration  of  his  estate.  (A)  If  he  lias  no  legal  per- 
sonal representative,  the  Probate  division  of  the  High  Court  will 
grant  a  limited  administration  to  a  nominee  of  the  surviving  part- 
ners, so  as  to  enable  them  to  institute  proceedings  to  have  the 
])art.nership  accounts  properly  taken,  {i) 

A  surviving  ])artner,  if  a  creditor  of  the  deceased,  may  sue  either  in 
that  character  for  a  common  adininistration  ludgment,  Artionshysur- 

„  viviiiK  imrtiiers 

or,  in  the  character  of  a  partner,  for  a  judgment  for  a  ^^j'/j",^  J,f y^^. 
j)artner»hip  account,  and  for  payment  of  what  is  due  on  ceased  partner, 
that  account;  and  if  assets  are  not  admitted,  then  for  a  judgment  for 
the  administration  of  the  estate  of  the  deceased.  An  action  in  the 
alternative  may,  it  is  conceived,  now  be  sustained,  (j)  Tlie  legal  per- 
sonal representative  of  the  deceased  must  be  a  party  if  an 
account  of  his  estate  is  sought.  If  there  is  no  such  *repre-  *104:6 
sentative,  but  the  assets  of  the  deceased  or  of  the  ])artner- 
ship  are  in  danger,  and  the  object  of  the  plaintiff  is  to  have  them 


ceased  partner  in  lawful  money,  it  being 
his  duty  to  have  collected  in  lawfu' 
money.  Succession  of  Wilder,  21  La. 
Ann.  371. 

Where  one  of  two  partners  dies,  tb 
survivor  is  entitled  to  the  possession  and 
disposition  of  all  the  partnership  prop- 
erty, and  in  a  suit  by  him  instituted  for 
the  purpose  of  closing  up  the  affairs  of 
the  co-partnership,  and  to  recover  from 
the  estate  of  the  deceased  partner  am 
amount  due  him  from  the  deceased,  it 
will  be  improper  to  include  in  a  decree 
in  favor  of  the  survivor  any  amount  in- 
vested by  the  partnere  in  real  or  per- 
sonal property,  unless  such  property  had 
been  disposed  of  by  the  deceased  part- 
ner, or  for  his  use,  in  his  lifetime.  The 
fact  that  the  title  to  land  purchased  by 
partners  with  partnership  funds,  was 
taki^n  in  the  name  of  the  wife  of  one  of 
the  partners,  since  deceased,  or  that  any 
of  the  property  of  the  co-partners  has 
been  disposed  of  by  the  widow,  or  that 
she  has  collected  money  due  on  partner- 


ship accounts,  affords  no  ground  for 
charging  the  estate  of  the  deceased 
partner  at  the  suit  of  the  survivor.  A 
surviving  partner  cannot  charge  the  es- 
tate of  the  decea-sed  partner  for  a  share 
of  the  earnings  of  the  co-partnersliip 
which  remain  in  open  account  against 
their  customers,  or  which  were  not  paid 
to  or  realized  by  the  deceased  in  his  life- 
time.    Price  V.  Hicks,  14  Fla.  5G5. 

(h)  See  Robinson  r.  Alexander,  2  CI. 
&  Fin.  717;  Addis  v.  Knight,  2  Mer. 
119.  If  the  deceased  has  pledged  his 
leal  estate  to  his  co-partners  for  a  debt 
due  from  him  to  them,  they  cannot  en- 
force their  security  in  the  absence  of  liis 
legal  personal  representative.  Schole- 
field  r.  Heafield,  7  Sim.  667. 

(j)  Cawthome  v.  Chalie,  2  Sim.  & 
Stu.  127.  The  Court  of  Chancery  would 
not  in  such  a  case  appoint  a  person  to 
represent  the  estate  of  the  deceased. 
Rowlands  r.  Evans,  3:3  Beav.  202. 

{J)  Ord.  xvi.  r.  G. 

1367 


*104G  DEATEI    AND    ITS    CoNSEQUKNCES   AS    DETVVEEN  [bO(;::  IV. 

protected,  he  should  confine  his  claim  for  relief  accordingly,  and 
not  seek  for  an  account,  (k)  * 

In  the  absence  of  an  express  agreement  to  tliat  effect,  the  surviving 
No  right  to  partners  have  no  right  to  take  the  share  of  the  deceased 
of'^rfewlifed  It  P'^i'tner  at  a  valuation ;'  nor  to  have  it  ascertained  in  any 
Evaluation.  (jther  manner  than  by  a  conversion  of  the  partnership 
assets  into  money  by  a  sale  {I);  nor  have  they  any  right  of  preemp- 
tion, (m)  Even  the  good-will  of  the  business,  if  saleable,  must  be  sold 
for  the  benefit  of  the  estate  of  the  deceased;  althoujch  the  survivino- 
partners  are  under  no  obligation  to  retire  from  business  themselves, 
and  cannot,  it  seems,  be  prevented  from  recommencing  business  to- 
getlier  in  the  name  of  the  old  firm  unless  the  good-will  has  been  sold.(?i) 

In  as^certaining  the  share  of  the  deceased,  the  surviving  ])artnero 
Accounting  for  uiust  uot  Only  bring  into  account  the  assets  of  the  firm 

subsequent  i   •    i  ^       n  •         i  ^  •  .1.1,, 

profits.  which  actually    existed  at   the  time   of  his  death,  but 

also  whatever  has  been  obtained  by  the  employment  of  those  assets 
up  to  the  time  of  the  closing  of  the  account;  for  so  long  as  profits 
are  made  by  the  employment  of  the  capital  of  the  deceased  partner, 
so  long  must  such  profits  be  accounted  for  by  the  surviving  part- 
ners. (0)  The  executors  of  the  deceased  have,  however,  the  option 
of  taking  interest  at  51.  per  cent.  (pY 

On  the  other  hand,  the  surviving  partners  are  entitled,  if  they 
Allowance  for     Carry  ou  the  business  for  the  benefit  of  the  estate  of  the 

carrying  on 

business.  deceased  partner,  to  an  allowance  for  so  doing;  '  unless 

{k)  Rawlings  v.  Lambert,  IJ.  &  H.  458.  est.     If  no  profits  were  made  or  even  if 
Under  the  new  practice  a  claim  for  an  a  loss  is  incurred,  they  must  be  charged 
account  would  probably  be  harmless.  with  interest  on  the  funds  they  use  and 
1  See  Ogdent'.  Astor,  4  Sandf.  311.  they  must  bear  the  whole  loss.     Brown's 
(0  Crawshay  v.  Collins,  15  Ves.  226,  appeal,   89  Pa.  St.   139;   Goodbum  v. 
229  ;  Feathersfconhaugh  v.  Fen  wick,  17  Stevens,   1   Md.    Ch.   420;   Millard    v. 
Ves.  808.     See,  as  to  unsaleable  assets  Ramsdell,  Harr.   Ch.   373.     See,   also, 
and  pending  contracts,  ante,  p.  1018.  Ogden  v.  Astor,  4  Sandf.  311. 
(m)  Brown  v.  Gellatly,  31  Beav.  243.  But  profits  cannot  be  claimed  for  one 
{n)  See  ante,  p.  854  et  seq.  period  and  mterest  for  another.     Good- 
Co)  See  ante,  p.  976.  burn  v.  Stevens,  supra. 
{]})  Ante,  p.  983.  Where  the  iiaterest  of  the  deceased 
^  If  the  survivors  of  a  partnership  car-  partner  had  become  vested  in  one  of  the 
ry  on  the  concern  and  enter  into   new  surviving  partners,  who  consented  to  the 
transactions  with  the  partnership  funds,  continuance  of  the  co-partnership,  the 
they  do  so  at  their  peril,  and  the  rep-  rule  first  above  stated  was  held  not  to 
resentatives  of  a  deceased  partner  may  apply.     Millard  v.  Ramsdell,  supra. 
elect  to  call  on  them  for  the  capital  ^Griggs  v.  Clark,  23  Cal.  427;  Newell 
with  a  share  of  the  profits  or  with  inter-  v.  Humphrey,  37  Vt.  265. 

1368 


CIIAr.  I.]        THE   DECEASED    AND    THE    SURVIVING    rAKTNEKS.  ■^'HUt 


tliey  are  also  his   executors,    in    whicli    case   tliey    can    make   no 
charge  for  their  trouble,  {q) 

The  right  of  the  executors  as  against  the  surviving  partners  is, 
simply,  to  have  the  share  of  the  deceased  as-  position  of 

certainedand  *paid;  but  this  frequently  cannot     *10J:7  onhede"'^" 
be  done  without  a  general  sale  and  winding  up  ceased, 

of  the  partnership. 

A  hand  fide  sale,  however,  by  the  executors  to  the  surviving 
partners  can  generally  be  made  with  safety  if  no  surviving  partner 
is  an  executor,  (r)  *     Where,  however,   a  sale  of  the  share  of  the 


Where  the  business  of  a  trading  part- 
nership is  continued  for  a  considerable 
lime  after  the  death  of  one  of  the  part- 
ners, whos.3  personal  representative,  in 
seeking  a  settlement  of  the  partnership 
accounts  in  equity,  elects  to  have  a  re- 
port and  decree  for  the  profits  which  ac- 
crued during  that  time,  the  surviving 
partner  is  entitled,  at  least,  to  an  allow- 
ance and  deduction  for  "tavern  bills  and 
other  expenses  incun-ed  in  the  adjust- 
ment and  settling  up  the  affairs  of  the 
partnership.  "  Oreilly  t.  Brady,  28  Ala. 
530. 

Whore  plaintiff  and  decedent  were 
parfneis,  and  plaintiff  paid  debts  and 
performed  other  services  in  winding  up 
the  affairs  of  the  firm,  commissions 
were  allowed  on  money  collected  and 
interest  on  the  decedent's  share  of 
moneys  advanced  by  the  plaintiff,  it 
having  been  agreed  that  he  should  col- 
lect "  at  the  proper  cost  and  charges  of 
the  two "  individually.  Wood  v. 
Wood,  26  Barb.  356. 

The  natm-al  tutor  who  supervises  the 
interest  of  his  minor  child  in  the  liqui- 
dation of  a  partnership  of  which  the  de- 
ceased mother  of  the  minor  was  a  part- 
ner, cannot  claim  for  services  rendered 
the  partnership;  he  has  only  a  claim 
against  his  ward  in  his  account  of  tutor- 
ship. McMichael  v.  Raoul,  14  La.  Ann. 
307. 

{q)  Ibid. 

(r)  See  infra,  §  3. 


*An  administrator  of  a  deceased 
partner  has  power  to  settle  with  the 
surviving  partners  on  such  terms  as  in 
the  exercise  of  good  faith  and  reason- 
able dilig.Mice  he  may  choose  to  accept. 
He  is  the  pei-sonal  representative  of  the 
deceased  iiartner,  and  has  all  his  powers 
of  settlement  except  that  being  trustee 
for  the  next  of  kin,  he  cannot  give  away 
anythmg.  Hoyt  v.  Sprague,  12  Chicago 
Leg.  News,  25;  Sage  v.  Woodin,  66  N. 
Y.  578. 

Such  settlement  is  conclusive  upon 
the  parties  and  upon  all  persons  claim- 
ing through  them,  including  the  cred- 
itor of  the  deceased  partner.  Sage  v. 
Woodin,  supra. 

A  hand  fide  ag^reement  by  the  admin- 
istrators of  a  member  of  a  partnership 
for  buying  and  selling  land,  to  relin- 
quish the  deceased  partner's  right,  in 
an  executoiy  contract  to  buy  some  land, 
to  the  sun-iving  partner,  rather  than 
pay  their  share  of  the  price  then  coming 
due,  will  be  vahd,  and  will  not  be  over- 
thrown after  a  lapse  of  time  at  the  ap- 
plication of  the  heirs  of  the  deceased 
partner.  Ludlow  v.  Cooper,  4  Ohio 
St.  1. 

Money  belonging  to  a  firm,  plnc^d  in 
bank  in  the  name  of  the  firm  by  a  part- 
ner who  is  an  executor  of  the  deceased 
l)artner,  and  by  him  checked  out  in  pay- 
ment of  debts  of  the  firm,  with  his 
co-executor's  consent,  will,  as  to  the 
payees,  be  considered  as    fii-m  assets, 

1309 


■^1048  DEATH   AND    ITS    CONSEQUENCES    AS    BETWEEN         [BOOK  IV. 

deceased  cannot  be  effected  by  private  arrangement,  the  executors 
must  enforce  a  general  sale  and  winding  up  for  their  own  safety, 
unless  the  persons  interested  in  the  estate  of  the  deceased  assent 
to  the  adoption  of  some  other  course.  And  even  if  they  do,  it 
must  not  be  forgotten  that  the  executors  may  not  be  able,  without 
risk  to  themselves,  to  continue  the  share  of  the  deceased  in  the 
business,  and  take  the  profits  accruing  in  respect  of  it;  for  by  shar- 
ing profits  made  after  the  death  of  the  deceased,  the  executors,  al- 
though they  are  only  trustees  for  others,  may  become  liable  as  part- 
ners with  the  surviving  partners;  and  may  therefore  become  liable 
to  be  adjudicated  bankrupt  and  to  be  compelled  personally  to  pay 
debts  contracted  in  carrying  on  the  business.  (*')  The  position  of 
the  executors  of  a  deceased  partner  is,  in  fact,  often  one  of  consid- 
erable hardship  and  difficulty;  if  they  insist  on  an  immediate 
winding  up  of  the  firm,  they  may  ruin  those  whom  the  deceased 
may  have  been  most  anxious  to  benefit;  whilst  if  for  their  advan- 
tage the  partnership  is  allowed  to  go  on,  the  executors  may  run  the 
risk  of  being  ruined  themselves.  With  a  view  to  obviate  this,  it 
Effect  of  mak-  is  uot  unusual  for  ouc  partner  to  make  his  co-partner 
nLlirexIcu-  his  exccutor;  but  the  difliculty  of  the  executor's  posi- 
*'"^"  tion  is  thus  rather  increased   than  diminished;  for  his 

own  personal  interest  as  a  surviving  partner  is  brought  into  direct 
conflict  with  his  duty  as  an  executor.  Everything  therefore  which 
he  does  is  liable  to  question  and  misconstruction  on  the  part  of  the 
persons  beneficially  entitled  to  the  estate  of  the  deceased;  and  he 
is  practically  much  more  fettered  in  the  discharge  of  his  duties,  and 
in  the  exercise  of  his  rights,  than  if  he  had  not  to  act  in  the 
*1048  double  character  *imposed  upon  him.  {t)  This  will  a])pear 
in  the  section  in  which  it  is  proposed  to  examine  the  rights 
of  the  separate  creditors  and  legatees  of  the  deceased  against  his 
executors  and  his  surviving  partners. 

Where  a  deceased  partner's  estate  is  administered  under  the  de- 
Actions  for        cree  of  the  Court,  his  executors,  if  they  act  properly, 

indemnifying  ,       ,     i    /•  n  i 

executors.  are  personally  protected  trom  all  cpnsequences,  and  no 

notwithstanding  a  private    agreement  10  Ves.  119.     But  see  now  Holme  v. 

between  the  executors  that  it  belongedto  Hammond,  L.    R.   7  Ex.  218,  noticed 

the  estate.     Kreis  ij.  Gorton,  55  Mo.  468.  ante,  p.  AO. 

{s)  Formerly  they  always  did  incur  (/)  See  some  general  remarks  on  th-s 

this  liability.    See  £■  J?  ^wr/c  Holds  worth,  subject  in  Hutton   v.    Ros-siter,   7DeG. 

1  M.  D.  &  D.  475;  Wig^tman  r.  Town-  M.  &  G.  12. 
roe,  1  M.  &  S.  412;  Ex  i^cu-te  Garland, 

1370 


CHAP.  I.]        A   DECEASED   SHAREHOLDER    AND   THE    COMPANY.  *104'> 

action  can  be  sustained  against  tlieni  in  respect  of  which  they  so 
do.  (u)  If  tliere  are  liabilities  which  will  have  to  be  met,  the 
Court  will  order  part  of  the  assets  to  be  set  aside  to  meet  them  when 
they  arise,  {x)  But  if  the  liabilities  are  remote  and  contingent, 
and  may  possibly  never  arise  at  all,  the  utmost  that  the  executors 
can  obtain  in  the  shape  of  indemnity,  in  addition  to  that  atlurded 
by  the  orders  of  the  Court  itself,  is  a  covenant  from  the  testator's 
legatees  or  next  of  kin.  (y) 

No  succession  duty  is  payable  by  surviving  partners  on  the  death 
of  a  member  of  the  firm,   even    although  they   may    ^^^^ 
benefit  thereby.  (2)  <^"'>'- 


iccessiun 


2.  In  the  case  of  companies. 

The  position  of  the  executors  of  a  deceased  shareholder  relatively 
to  the  company  will,  after  the  foregoing  observations,   Execntorsof 
be  readily  understood.  siiarehoiders. 

1.  The  executors  are  entitled  to  be  paid  by  the  company  whatever 
is  payable  by  it  in  respect  of  the  shares  of  the  deceased  at  the  time 
of  his  death;  and  also  whatever  becomes  payable  in  respect  of 
those  shares  whilst  they  form  part  of  his  estate. 

2.  The  assets  of  the  deceased  are  liable  to  make  good  whatever  is 
at  the  time  of  his  decease  pa3'able  by  him  to  the  com-   Ljabiuiy  to 
])any,  and  also  whatever  afterwards  becomes  payable  by  caiLs^&c. 

his  rejiresentatives  by  virtue  of  the  contract  into  which  he 
entered.  *Consequently,  if  a  person  becomes  a  shareholder  *104rl) 
in  a  company  and  then  dies,  and  afterwards,  and  whilst  his 
shares  are  part  of  his  estate,  a  call  is  made  by  the  compan}'  on  its 
shareholders,  his  assets  will  be  liable  to  the  payment  of  such 
calL  {a)  Moreover,  a  call  made  by  a  company  in  pursuance  of  its 
act,  charter,  or  deed  of  settlement,  constitutes  a  specialty  debt  {h)\ 

(«)  Waller  V.  Barrett,  24  Beav.  4i;i.  Ra.  Ca.  813;  Blakeley's  case,    13  Btuv. 

[x]  Fletcher  i\  Stevenson,  3  Ha.  360;  133,  and  3  Mac.  &   G.   726;  Heward  r. 

Brewer  v.  Poeock,  23  Beav.  310.  Wheatley,  3  DeG.  M.  &  G.  62S,  and  at 

(y)  See  Dean  v.   Allen,  20  Beav.  1;  law,  Wills  v.  Murray,  4  Ex.  843.    Corn- 
Waller  d.  Barrett,  24ib.  413;  Addams  pare  Weald  of  Kent  Canal  Co.  r.  Robin- 
V.  Ferick,  26  Beav.  384;  Bennett  v.  L>-t-  son,  5  Taunt.  801. 
ton,  2  J.  &  H.  155.  {h)  Cork  and  Bandon  Rail.  Co.  r.Goode, 

(z)  Oldfleld  V.  Preston,  3   DeG.    F.  Sc  13  C.  B.  826.     In  Morris  r.  Sadlier,  Ir.  L. 

J.  398.  R.  6  Eq.  580,  a  covenant  by  a  deceased 

(a)  See,  in   equity,   Fyler  v.  Fyler,  2  shareholder  with  an  officer  of  the  com- 

]371 


■■'-0^0  DEATU    A^■D    ITS    CONSEQUEXCES.  [bOOK  IV. 

and  all  calls  made  under  the  winding  up  provisions  of  tlie  Companies 
act,  1862,  are  also  specialty  debts,  (c)  But  specialty  debts  are  no 
longer  entitled  to  priority  of  payment  over  simjile  contract  debts  (J); 
and  even  before  the  law  was  altered  in  this  respect,  executors  who 
paid  the  simple  contract  debts  of  their  testator  before  a  call  was 
made,  were  allowed  those  payments  as  against  the  company  seeking 
to  make  them  liable  for  a  devastavit  {e)\  and  no  part  of  the  testa- 
tor's assets  could,  as  against  his  simple  contract  creditors,  be  sec 
apart  for  the  payment  of  calls  which  had  not  been  made,  {f) 

3.  It  follows  from  the  foregoing  observations,  that  when  a  com- 
Liabiiity  to  be    pany  IS  being  wound  up,  the  executors  of  a  deceased 

made  contribu-  "       tii 

tones.  shareholder  are  liable  to  be  made  contribntories  as  ex- 

ecutors in  respect  of  his  shares  so  long  as  they  remain  untrans- 
ferred.  From  this  again  it  follows,  that  the  executors  of  a  deceased 
shareholder  are  entitled  to  petition  for  an  order  to  wind  up  the 
company,  although  they  may  not  be  themselves  shareholders  there- 
in.    This  subject  will  be  alluded  to  hereafter,  {g) 

4.  In  most  companies  executors  have,  as  between  themselves 
Necessity  for  ^"^  ^^^^  Company  in  which  their  testator  was  a 
became  share-  ^^^^^  '^shareholder,  a  right  to  become  shareholders  in 
^°^*^'^''^-  his  stead.  But  if  an  executor  does  become  a 
shareholder,  his  liability,  as  well  to  the  company  as  to  its  creditors, 
is  a  personal  liability;  and  such  liability  is  in  no  way  qualified  or 
limited  by  the  circumstance  that  as  between  himself  and  those  who 
are  benelicially  entitled  to  the  testator's  assets,  the  executor  is  not 
the  owner  of  the  shares  standing  in  his  name.  {Ji)  Executors, 
therefore,  should  not  become  shareholders,  if  they  can  avoid  doing 
so;  and  generally  it  will  be  found  that  they  can  transfer  their  tes- 
tator's shares  without  first  becoming  shareholders  themselves. 
Whether,  however,  this  can  or  cannot  be  done,  and  the  manner  in 
which  it  is  to  be  done,  depend,  in  each  case,  upon  the  constitution 
of  the  company  in  which  the  shares  are  held.     By  the  Companies 

pany  to  pay  what  sliould  be  demanded  (e)  Hendersons.  Gilchrist,  17  Jnr.  570. 

of  him,  was  held  not  to  create  a  specialty  (/)  Wentworth  v.  Chevcll,  3  Jur.  N. 

debt  in  respect  of  moneys  due  from  his  S.  805.     As  to  the  legatees  and  next  of 

estate,  but  not  demanded  in  his  lifetime.  kin,  see  supra. 

(c)  The  Companies  act,  1862,  §  16.  [g)  See  infra,  the  section  on  wind- 
It  was  not  so  under  the  older  winding  ing  up. 

up  acts.  See  Robinson's  Executors' case,  {h)  See  Spence's  case,  17  Beav.  203; 

6  DeG.  M.  &  G.  572.  Fenwick's  case,  1  DeG.  &  S.  557;  Arm- 

{d)  32  &  33  Vict.  c.  46.  strong  v.  Burnet,  20  Beav.  424. 

1372 


OnAP.  I.]  AS   REGARDS   JOINT   CREDITORS.  *1051 

act,  1SG2,  ])rovision  is  expressly  made  for  transfers  by  executors, 
althougli  tliey  may  not  themselves  be  members.  {()  The  transfer 
by  executors  of  shares  in  companies  governed  by  the  Companies 
Chuises  consolidation  act,  is  also  specially  provided  for  (k);  but  by 
this  act  the  executors  must  apparently  be  themselves  re<jistered  as 
shareholders  before  they  can  transfer.  (Z) 


SECTION    IT.-CONSEQUENCES  AS  REGARDS  JOINT   CREDITORS. 
1.  In  the  case  of  ordinary  partnerships, 
a.   With  reference  to  what  occurred  hefore  death. 
The  position  of  the  executors  of  a  deceased  partner,  „   ... 

•    .  .  .  r  '    Position  of  ex- 

with  reference  to  the  creditors  of  the  firm,  has,  to  a  eeutors of  de- 

'  '  ceased  partner 

considerable  extent,  been  already  ascertained.     For  it  «« regards cred- 

'  •/  itors  ijl  tlic 

has  been  seen :—  firm. 

1.  That,  notwithstanding   the  death   of  a  partner,   his  estate  is 
liable  to  the  creditors  of  the   firm  ;  and  not   only   in  respect  of 
debts  contracted   in  his  lifetime,  in   the  ordinary   wav  of 
^business,  but  also  in  respect  of  debts  arising  from  breaches     *10yl 
of  trust  committed   in  his  lifetime  by  himself  or  his  co- 
partners, and  imputable  to  the  firm  (m);  * 

2.  That  this  liability  cannot  be  got  rid  of  hj  any  arrangement 
between  tne  executors  of  the  deceased  and  the  surviving  partners; 
and  that,  notwithstanding  subsequent  dealings  between  the  cred- 
itors and  the  surviving  partners,  the  liability  of  the  executors  con- 
tinues, until  it  can  be  shown  that  the  creditors  have  abandcmed 
their  right  to  obtain  payment  from  the  estate  of  the  deceased,  or 
that  their  demands  have,  in  fact,  been  paid  or  discharged  (;i); 

3.  That  this  liability  does  not  extend  to  ordinary  torts,  for  as  to 
them  actio  personalis  moritur  cum  persona,  {p) 

(0  25  &  26  Vict.  c.  89,  §24,  and  see  Wm.  4,   c.  42,   §2,    gives    a  romedv 

Table  A,   No.=!.   12-16.    The  Table  B.  against  the  executors  of  a  person  who 

.o  the   Companies  act,  1806,  contained  commits  a  tort  within  six  months  of  liis 

iimilar  provisions.  death,  provided  such  tort  effects    the 

(A-)  8  &  9  Vict.  c.  16,  §§  18,  19,  20.  real  or  personal  property  of  the  person 

(0  Compare  §§3,  14,  18.  injured.    As  to  frauds,  see  New  Som- 

(»n)  Ante,  p.  369  et  seq.  brero  Phosphate  Co.  v.  Erhxnger,  5  Ch. 

1  See  post,  153,  note.  D.  73;  Teek  r.  Gurney,  13  Eq.  79;  Da- 

(n)  Ante,  p.  435  et  seq.  yidson  v.  Tulloch,  3  McQu.  783. 

(o)  Ante,  p.  373  et  seq.     The  3  and  4 

1373 


*1052  DEATH    AND    ITS    CONSEQUENCES  [boOK  IV. 

These  propositions  have  been  already  so  fully  illustrated  in  various 
snmraa  f  portions  of  the  present  treatise,  that  it  is  unnecessary 
casei.  jjgj.g  to  do  more  than  collect  the  cases  establishing  them. 

Estate  of  1.  Cuses  in  wMch  hy  death  dloTie  a  partner's  lidfjil- 

discharged        Uy  has  been  extinguished: — 

Sumner  v.  Powell,  2  Mer.  30,  and  Turn.  &  R.  423  [ante,  p.  372). 
Clarke  v.  Bickers,  14  Sim.  639  {ante,  p.  372). 
Wilmer  v.  Currie,  2  DeG.  &  Sm.  347  [ante,  p.  373). 
Hiirs  case,  20  Eq.  585.    Joint  holders  of  shares. 

Estate  of  2.  Cases  in  which  the  estate  of  a  deceased  partner 

discharged.        has  been  held  liable  {p)i — 
Liability  in  respect  of  contracts. 

Beresford  v.  Browning,  20  Eq.  564  {ante,  p.  370). 
Lane  v.  Williams,  2  Vern.  292. 
Simpson  v.  Vaughan,  2  Atk.  31. 
Darwent  v.  Walton,  ib.  570. 
Clavering  v.  AVesley,  3  P.  W.  402. 
*1052      *Bishop  V.  Church,  2  Ves.  S.  100  and  371  {ante,  p.  370). 
Jacomb  v.  Harwood,  ib.  265. 
Bum  V.  Burn,  3  Ves.  573  {ante,  p.  371). 
Thomas  v.  Frazer,  3  Ves.  399. 
Orr V.Chase,  1  Mer.  729. 
Harris  v.  Farwell,  13  Beav.  403. 
Devaynes  v.  Noble,  1  Mer.  539,  and  2  R.  &  M.  495. 
Wilkinson  v.  Henderson,  2  M.  &  K.  583. 
Thorpe  v.  Jackson,  2  Y.  &  C.  Ex.  553. 
Hills  V.  McRae,  9  Ha.  297. 

Brett  V.  Beckwith,  3  Jur.  N.  S.  31,  M.  R.  {post,  p.  1055). 
Cheetham  v.  Crook,  McCl.  &  Y.  307. 

Liability  in  respect  of  frauds  and  breaches  of  trust. 

New  Sombrero  Phosphate  Co.  v.  Erlanger,  5  Ch.  D.  73  {ante,  p.  583). 
Blair  v.  Bromley,  2  Ph.  354  {ante,  p.  305). 
Sadler  v.  Lee,  6  Beav.  324  {ante,  p.  304). 
VuUiamy  v.  Noble,  3  Mer.  619. 
Devaynes  v.  Noble. 

Clayton's  case,  1  Mer.  576  {ante,  pp.  304,  431). 

Baring's  case,  ib.  612  {ante,  p.  304). 

Ward's  case,  ib.  624. 

( p)  See  the  celebrated  judgment  in      R.  &  M.  495. 
Devaynes  v.  Noble,  1  Mer.  539,  and  2 

1374 


CHAP.  I.]  AS    KKGAKDS    JOINT    CUEUITOKS.  *1053 


3.  Cases  in  ivhich  the  estate  of  a  deceased  partner  Kstnteof 
has   heen  held  liable^  notivithstandliuj   dealings   he-   di'suV.arKed'uy 
tween  the  creditors   of  the  Jinn   and.  the  surviving  ocowrrc^i  since 

,  "  his  death. 

partners: — • 

Devaynes  v.  Xoble. 

Sleech's  case,  1  Mer.  539. 

Clayton's  case,  ib.  579  {ante,  pp.  304,  431). 

Palmer's  case,  ib.  623. 
Braithwaite  v.  Britain,  1  Keen,  206. 
Winter  v.  Innes,  4  M.  &  Cr.  101  (a  very  important  case). 
Harris  v.  Farwell,  15  Beav.  31  {ante,  p.  446). 
Daniel  v.  Cross,  3  Ves.  277. 
Jacomb  v.  Harwood,  2  Ves.  S.  265. 

4.  Cases  in  which  the  estate  of  a  deceased  partner  ■g.^maot  - 
has  been  held  discharged  by  what  has  taken  place  be-  chargedby'^ 
ticeen  the  creditor  and  the  surviving  partners: —  ^umd'^nce' 

By  general  dealings.  ^^  '^''''^■ 

Oakley  v.  Pasholler,  10  Bli.  548,  and  4  Q.  &  Fin.  207  {ante,  p.  447). 
Brown  «.  Gordon,  16  Boav.  302  {ante,  p.  448). 

Wilson  V.  Lloyd,  16  Eq.  60  j  which  cannot,  however,  be  relied  on,  (sec 
ante,  pp.  435,  447). 

*By  payment.  *1053 

Devaynes  v.  Noble. 

Clayton's  case,  1  Mer.  572  {ante  p.  422). 
Merriman  v.  Ward,  1  J.  &  H.  371.     This  case  is  important  as  showing: 

that  w^here  a  debt  of  a  deceased  partner  has  been  discharg-t'd  by  the 

application  of  the  rule  in  Clayton's  case,  it  is  not  competent  for  his 

executors  to  revive  such  a  debt  against  his  estate. 

Tlie  estate  of  a  deceased  partner  may  be  discharged  b}'  the  stat- 
iiie  of  limitations;  and  now,  by  the   Mercantile  law  <:,n„jtpof 
amendment   act  payments  by   the  surviving  partners  iiui'i"t>ons. 
will  not  keep  alive  the  creditor's  claim  against  the  executors  of  the 
deceased,  {q)     The  effect  in  equity  of  such  payments  before  the 

{q)  19  &  20  Vict.  c.  97,  §  14.  See  retrospective  operation  of  the  act  (Jack- 
riiompson  V.  Waithman,  3  Drew.  628,  son  t- .  Woolley,  8  E.  &  B.  778).  is  in 
which,  although  wrong  as  regards  the      other  respects  correct,  ante,  p.  459. 

1375 


*1053 


DEATH    AXD    ITS    CONSEQUENCES 


[r.OOK  IV. 


passing  of  the  act  in  question  wa's  by  no  means  clearly  settled  (/■); 
but  whatever  doubt  there  may  formerly  have  been 
Sf  firm^lfbe  upoTi  the  subjcct,  it  was  clearly  settled  before  the  Jiidi- 
^ulSa^d"-^  catnre  acts  that  a  creditor  of  the  firm  could  proceed 
ceased  partner.  ^^^^^^^^^  ^j^^  ^^^^^^  ^f  ^  deccascd   partner  witliout  first 

having  recourse  to  the  surviving  partners,  and  without  reference  to 
the  state  of  the  accounts  between  them  and  the  deceased,  {s)'     But 


(r)  Compare  Winter  v.  Innes,  4  M.  ^ 
Cr.  101,  and  Braithwaite  v.  Britain,  1 
Keen,  206,  with  Way  v.  Bassett,  5  Ha. 
55,  and  Brown  v.  Gordon,  16  Beav.  302. 
See,  also,  ante,  p.  457. 

(s)  Wilkinson  v.  Henderson,  1  M.  & 
K.  582;  Devaynes  v.  Noble,  2  R.  &  M. 
495;  Thorpe  v.  Jackson,  2  Y  &  C.  Ex. 
553. 

^  Except  in  case  of  death  of  a  co-part- 
ner, creditors  of  a  partnership  can  en- 
force their  claims,  which  are  purely 
legal,  against  the  property  of  the  part- 
nership, only  at  law.  Parish  v.  Lewis, 
1  Freem.  (Miss.)  Ch.  299. 

The  death  of  one  partner  is  not  alone 
sufficient  to  entitle  a  creditor  of  the 
partnership  to  go  into  chancery  to  en- 
force the  collection  of  his  debt.  Pearson 
V.  Keedy,  6  B.  Mon.  12S. 

The  estate  of  a  deceased  partner  can- 
not be  pursued,  in  law  or  equity,  while 
the  surviving  partner  is  solvent.  Alsop 
V.  Mather,  8  Conn.  584;  Troy  Iron  & 
Nail  Factory  v.  Winslow,  11  Blatchf. 
513.    See,  ante,  665,  note. 

It  is,  however,  in  equity  liable  for 
partnership  debts,  if  the  surviving  part- 
ner be  insolvent.  Caldwell  v.  Stileman, 
1  Rawle,  212;  Sale  v.  Dishman,  3  Leigh, 
548;  Storer  v.  Hinkley,  Kirby,  147; 
Stahl  V.  Stahl,  2  Lans.  60;  Philson  v. 
Bampfield,  1  Brev.  202;  Emanuel  v. 
Bird,  19  Ala.  596.  See,  ante,  665,  note. 
See  Waldron  v.  Simmons,  28  Ala.  629; 
Freeman  v.  Stewart,  41  Miss.  138;  Mc- 
Lain  v.  Carson,  4  Ark.  164. 

A  partnership  creditor  recovered  judg- 
ment on  his  claim  against  the  surviving 
partner,  who  died,  and  his  administra- 

1376 


tors  exhausted  his  personal  assets  in 
paying  other  debts;  whereupon  he  filed 
a  bni  against  such  administrators  and 
the  heirs  of  the  surviving  partner,  and 
made  the  representatives  of  the  deceased 
partner,  parties,  to  subject  the  land  pos- 
sessed at  his  decease  by  the  sm-viving 
partner,  some  of  which  belonged  to  the 
fh-m,  in  the  first  instance,  and  then  to 
charge  the  representatives  of  the  partner 
who  first  deceased:  Held,  that  equity 
had  jurisdiction  in  the  case,  and  that  the 
representatives  of  the  deceased  partner 
were  properly  made  parties.  Jackson 
V.  King,  8  Leigh,  689. 

Administrators  of  A  brought  a  bill  to 
foreclose  a  mortgage  made  by  B,  a  late 
partner  of  A,  to  the  administrators  to 
secure  an  inchvidual  debt  between  them, 
and  also  to  secure  to  A's  estate  the  share 
of  the  property  of  the  firm  the  business 
of  which  B  had  undertaken  to  settle  up: 
Held,  that  this  mortgage  belonged  to 
A's  estate,  and  that  the  firm  creditors 
were  not  entitled  to  have  the  proceeds 
of  it,  while  B  was  solvent.  Wimpee  v. 
Mitchell,  29  Ga.  276. 

A  claim  on  a  judgment  recovered 
against  a  survivmg  partner  can  be  en- 
forced against  the  estate  of  the  deceased 
partner  in  equity  only,  and  must,  there- 
fore, be  subject  to  such  equitable  rules 
as  obtain  m  reference  to  the  payment  of 
partnership  and  individual  debts.  Weyer 
V.  Thomburgh,  15  Ind.  124. 

M.  and  P.  were  in  partnership  as  attor- 
neys at  law.  The  firm  received  and  re- 
ceipted for  claims  for  collection  by  suit 
or  otherwise.  Suits  were  instituted  and 
judgments  recovered  upon  them  in  the 


CHAP.  I.] 


AS   REGARDS   JOINT    CREDITORS. 


1053 


it  was  necessary  to  make  the  surviving  partners  parties  to  the  suit, 
for  they  were  interested  in  the  issues  raised  between  him  and  the 
executors,  (t) 


lifetime  of  M . ;  and  after  his  death  the 
money  was  collected  by  P.,  but  was  not 
paid  to  the  claimants.  P.  subsequently 
died  insolvent.  There  were  no  assets 
of  the  firm  of  M.  and  P.  to  be  applied  to 
the  payment  of  the  claims:  Held,  that 
the  separate  estate  of  M.  wa8  liable  for 
their  payment.  McGill  v.  McGill,  2 
Mete.  (Ky.)  258.  See,  also,  Hebertson  f, 
Jepherson,  10  Pa.  St.  124. 

The  creditor  of  a  partnership  cannot 
proceed  in  equity  against  the  estate  of  a 
deceased  partner  without  first  exhaust- 
ing liis  remedy  at  law  against  the  sur- 
viving partners,  or  showing  that  legal 
process  against  them  would  be  unavail- 
ing. Slatter  v.  Carroll,  2  Sandf.  Ch. 
573;  Lawrence  r.  Ti-ustees,  2  Den.  577; 
Voorhis  r.  Child,  17  N.  Y.  354;  Copcutt 
V.  Merchant,  4  Bradf.  18.  See  Nelson 
r.  Hill,  5  How.  127;  Fillyall  v.  Laverty, 
3  Fla.  72;  Postlewait  v.  Howes,  3  Iowa, 
365;  Creswell  r.  Blank,  3  Grant  Cas. 
320;  Moore's  Appeal.  34  Pa.  St.  411; 
Maxey  v.  Averill,  2  B.  Mon.  107. 

Where  a  surviving  partner  is  insolv- 
ent, it  is  not  necessary  to  obtain  a  judg- 
ment against  him  before  proceeding 
against  the  equitable  assets  of  a  deceas- 
ed partner's  estate.  Vance  v.  Cowing, 
13  Ind.  460.  See,  also,  Horsey  v.  Heath, 
5  Ohio,  353, 

Where  one  of  two  partners  dies,  and 
judgment  is  recovered  against  the  sur- 
viving partner  for  a  partnership  debt, 
and  he  becomes  a  bankrupt  before  the 
judgment  is  satisfied,  tin-  executors  of 
the  other  may  be  compelled  in  cliancery 
to  make  satisfaction.  Storer  v.  Hinkley, 
Kh-by,  147. 


Upon  the  dissolution  of  a  partnership, 
the  debts  due  the  partnei-ship  were  as- 
signed to  one  of  the  partners,  who  after- 
wards died,  and  the  surviving  partner 
removed  out  of  the  State,  and  his  resid- 
ence was  unknown  to  the  representatives 
of  the  deceased  partner :  Held,  that  they 
might  come  into  equity  to  recover  the 
debts.    Drake  r.  Blount,  2  Dev.  Eq.  353. 

A  sheriff's  return  on  an  execution 
against  two  surviving  paitaers  of  nulla 
bond,  that  he  could  not  find  one  either 
in  his  precinct  or  the  State,  and  that  the 
other  was  too  sick  to  be  committed  to 
jail  without  danger  of  life,  shows  a  suf- 
ficient compliance  with  the  statute  pre- 
scribing that  surviving  partners  shall  be 
pursued  to  final  judgment  and  execu- 
tion, before  a  claim  against  the  firm 
shall  be  valid  against  a  i*epresentative 
of  a  deceased  co-partner.  Shaw  v. 
Knowles,  3R.  I.  112. 

An  accommodation  indorscr  of  the  note 
of  a  firm,  after  the  death  of  one  of  the 
partners,  indorsed  a  new  note  in  the 
same  capacity,  made  by  the  surviving 
partner  imd  the  administratrix  of  the 
deceased  partner,  for  the  purpose  of 
continuing  the  sixme  indebtedness,  the 
first  note  being  taken  up;  the  holder  of 
the  second  note  recovered  judgment 
thereon  against  the  indorser  who  satis- 
fied the  same,  and  filed  his  bill  to  charge 
the  estate  of  the  decea-sed  partner,  upon 
the  allegation  that  the  makers  of  the 
note  were  insolvent:  Held,  that  the 
estate  of  the  deceased  was  relieved  from 
the  payment  of  the  debt,  and  that  the 
only  equity  of  the  complainant  in  his 
estate  was  to  subject  the  interest  of  the 


[t)  See,  in  addition  to  the  cases  in  the 
last  note.  Hills  t'.  McRae,  9  Ha.  297; 
Devaj'nes  v.  Noble,  Sleech's  case.  1  Mer. 
539;  Stephenson  ».  Chiswell,  3  Ves.  566. 


As  to  the  plaintiff  availing  himself  of 
the  equities  subsisting  between  the  de- 
fendants, see  ante,  note  (r). 

r-T7 


*1054 


DEATH    AND    ITS    CONSEQUENCES 


[book  IV. 


The  rii^ht  of  a  creditor  of  a  firm  to  institute  a  suit  for  the  admin- 
istration of  the  estate  of  a  deceased  member  of  the  firm,  and  for 
payment  of  his  debts,  joint  as  well  as  separate,  was  plain,  (w)  If 
Creditor's  suit  a  snit  had  already  been   instistituted  for  the 

tration^lfdl'-      *1054     *administration  of  the  estate  of  the  deceased, 
uer'Testa'te^  a  Creditor  of  the  firm  conld  go  in  and  prove 

against  the  estate  without  beini,^  compelled  to  take  any  preliminary 
steps  himself,  {x)     If  he  had  to  institute  a  suit  himself,  he  could 


surviving  partner,  and  the  administra- 
trix therein,  to  the  payment  of  his  debt. 
Brown  v.  Lang,  4  Ala.  50. 

The  laches  of  a  creditor  of  a  partner- 
ship will  bar  his  remedy  against  the 
estate  of  a  deceased  partner,  but  what 
shall  amount  to  laches  in  prosecuting 
his  claim  will  depend  upon  the  circum- 
stances of  each  particular  case.  Jackson 
v.  King,  12  Gratt.  499. 

A,  B  and  C  being  partners  in  a  man- 
ufacturing business,  A  made  his  will,  by 
which  he  directed  his  interest  in  this 
establishment,  viz:  the  buildings,  ma- 
chinery, stock,  privileges  and  profits 
thereof,  to  be  continued  therein,  for  the 
term  of  four  years  after  his  decease; 
and  that  at  the  expiration  of  that  term, 
this  property  and  the  profits  accruing 
thereon,  together  with  all  the  testator's 
other  estate,  real  and  personal,  should 
be  divided  and  distributed  to  D  and 
others.  B,  the  executor  of  A,  after  A's 
death,  carried  on  the  business  in  the 
partnership  name,  for  the  term  speci- 
fied. It  proved  to  be  a  losing  conceni. 
A  large  sum  was  due  from  A's  estate  to 
the  company  beyond  his  share  of  the 
partnership  property.  A  large  sum  was 
also  due  from  the  company  to  C,  who 
had  paid  a  part,  and  would  be  obliged 
to  pay  the  residue,  of  the  outstanding 
debts  of  the  company,  which  were  con- 
siderable in  amount,  B  having  failed 
and  absconded.  Previous  to  the  expi- 
ration of  the  four  years,  the  time  limited 
by  the  court  of  probate  for  the  exhibi- 
tion of  claims  against  the  estate  of  A, 
had  expired,  and  the  executor  had  pro- 

1378 


ceeded  in  the  settlement  of  the  estate 
without  reference  to  the  partnership 
fund,  and  had  caused  distribution  to  be 
made  according  to  the  provisions  in  the 
will.  On  a  bill  in  chancery,  brought 
by  C  against  the  executor  and  devisees 
of  A,  seek'ng  satisfaction  of  his  claims 
out  of  the  general  assets  of  A,  it  was 
held,  1,  that  the  partnership  creditors 
had  no  lien  on  the  estate  in  the  hands 
of  the  devisees,  by  reason  of  their  right 
to  participate,  eventually,  in  the  profits 
of  the  trade;  2,  that  the  general  assets 
were  not  liable  to  the  plaintiff's  claim, 
by  virtue  of  the  testator's  last  will;  and 
3,  that  the  plaintiif 's  remedy  was  not  in 
chancery,  but  by  a  demand  on  the  exec- 
utor, to  be  pursued  like  other  claims  of 
a  general  nature  against  the  testator's 
estate.     Pitkin  v.  Pitkin,  7  Conn.  807. 

A  bill  in  equity  by  a  surviving  part- 
ner, to  administer  lands  bought  with 
partnership  funds  should  be  framed  on 
the  theory  of  a  settlement  of  the  accounts 
between  the  complainant  and  the  intes- 
tate, and  between  them  and  the  credit- 
ors, so  that  all  the  creditors  may  have 
an  opportunity  to  present  their  claims, 
and  a  proper  distribution  of  the  proceeds 
of  the  sale  of  the  land  can  be  made. 
Whitney  v.  Gotten,  53  Miss.  689. 

(i()  In  Rice  v.  Gordom  11  Beav.  265^ 
one  of  the  casfs  of  this  class,  the  debt 
due  to  the  plaintiff  arose  out  of  a  trans- 
action in  which  he  had  en  jaged  as  surety. 

[x)  Cowell  V.  Sikes,  2  Russ.  191;  Gray 
V.  Chiswell,  9  Ves.  118.  In  the  former 
there  was  a  petition,  but  this  is  now  un- 
necessary. 


CHAP.  I.] 


AS    REGARDS   JOINT   CREDITORS. 


^1054 


file  a  bill  (y);    or,  if  the  case  was  very  simple  perhaps  proceed  by 
summons  in  chambers. 

Since  the  Judicature  acts  a  creditor  can,  it  is  apprehended,  sue 
both  the  surviving  partners  and  the  executors  of  the  deceased  part- 
ner, and  obtain  judgment  against  them  all;  the  judgment  airainst 
the  executors  being,  however,  of  course  limited  to  the  assets  of  tlie 
deceased. 

The  right  of  creditors  of  the  firm  to  obtain  i)ayment  Right ofcred- 
of  their  debts  out  of  the  assets  of  a  deceased  partner  cumrS"'with 
being  thus  established,  their  position,  as  regards  the  {h«sSnue 
other  creditors  of  the  deceased,  has  next  to  be  deter-  the'^dec'i^^eti. 
mined. 

From  the  doctrine  that  partnersliip  debts  are  several  as  well  as 
joint,  it  would  logically  follow  that  the  creditors  of  a  partnership 
should  be  entitled  to  rank  against  the  assets  of  the  deceased  j9rt;'i 
passu  with  his  separate  creditors.  (2)  But  as  will  be  seen  hereafter, 
it  is  a  rule  in  l)ankrn]>tcy  that  the  debts  of  a  firm  shall  be  paid  out 
of  the  assets  of  the  firm,  and  the  separate  debts  of  each  partner 
out  of  his  se])arate  estate:  and  in  administering  the  insolvent 
estate  of  a  deceased  partner  the  same  rules  have  now  to  be  adopt- 
e  1.  {a)  Accordingly  the  separate  estate  of  a  deceased  partner  must 
be  applied  in  payment  of  all  principal  and  interest  due  to  his  sep- 
arate creditors  before  any  part  of  such  estate  can  be  touched  by  the 
creditors  of  the  firm  (5);'  and   this  rule  applies  even  although  the 


(//)  Hills  V.  McRae,  9  Ha.  297,  is  an 
instance  of  a  claim;  but  claims  are  now 
abolished.     See  Cons,  onler  8,  rule  4. 

[z)  See  ace.  Burn  v.  Bum,  3  Ves.  573, 
where  a  bond  creditor  of  the  firm  ob- 
tained a  payment  as  if  he  had  been  a 
separate  specialty  creditor  of  the  de- 
ceased. 

(a)  Jud.  Act,  1S7.-.,  §  10.  Even  be- 
fore they  wore  adopted  to  some  extent. 
See  Lodge  r.  Prichard,  1  DeG.  J.  Si  Sm. 
GIO. 

{h)  See  Lodge  r.  Trichard,  1  D.^G.  J. 
&  Sm.  610,  and  4  Gift".  294;  Whitting- 
stall  r.  Grover,  10  W.  R.  53;  Gray  v. 
Chiswoll,  9  Ves.  118;  Addis  v.  Knight, 
2  Mer.  117;  Croft  v.  Pyke,  3  P.  W.  182. 

*  Partnership  creditors  have  a  prima-y 
claim  upon  partnership  ab-sjts  to  the  ex- 


clusion of  creditors  of  individual  part- 
ners, until  all  the  partnership  debts  are 
paid;  and  this  rule  exclude.s  firm  credi- 
tors from  participation  in  assets  of  indi- 
vidual partners  until  their  individual 
debts  are  paid.  Union  Natl.  Bank  r. 
Bank  of  Commerce,  94  111.  271;  Black's 
Appeal,  44  Pa  St.  .")(i3;  Buchan  r.  Sum- 
ner, 2  Barb.  Ch.  IG-i;  Hardy  v.  Mitchell, 
67  Ind.  485;  Filley  r.  Phelps,  18  Conn. 
294;  Conkling  r.  Washmgton  Univers- 
ity 2  Md.  Ch.  497;  Bond  v.  Nave,  62  Ind. 
505;  Conant  v.  Frary,  49  Ind.  530; 
Bainey  r.  Nance,  54  111.  29;  Bass  r. 
Estill,  50  Miss.  300;  Crooker  r.  Crooker, 
46  Me.  2.50:  Sniffer  r.  Sass,  14  Rich.  20, 
n.;  HouseaPs  Appeal,  4-5  Pa.  St.  484; 
Motrison  r.  Kurtz,  15  111.  193;  Moline 
i';.-c.  .Mauufg.  Co.  r.  Webst4^r,  26  111.  2:3.'3; 

1379 


•1054 


DEATH    AND    ITS   CONSEQUEXCES 


[book  IV. 


Palilmiati  I?.  Cranes,  id.  iOo;  Thornton 
V.  Bussey,  28  Ga.  302;  Toombs  r.  Hill, 
id.  371;  Bevan  v.   Allee,   3  HaiT.  80; 
Chase  v.  Steel,  9  Cal.  64;  Collins  v.  But- 
ler,   14  Cal.  223;   Burpee  v.  Bunn,  22 
Cal.    194;    Wintersmith  v.   Pointer,   2 
Mete.  (Ky.)  457;  North  River  Bank  v. 
Stewart,     4    Bradf.    254;     Ganson    v. 
Lathrop,  25  Barb.  455;  Kirby  v.  Car- 
penter, 7  id.  373;  Smith  v.  Mallory,  24 
Ala.  628;  Bridge  v.  McCullough,  27  Ala. 
661;  Van  Wagner  t>.  Chapman,  29  Ala. 
172;  Lucas  v.    Atwood,    2  Stew.  378; 
McCulloh  V.  Dashiell,  1  Har.  &  G.   96; 
Gleen  v.  GUI,  2  Md.  1  ;   Foster  v.  Hall, 
4  Humph.  346;  Fleming  v.  Billings,  9 
Rich.  Eq.  149;  Gadsden  v.   Carson,  id. 
252;  Wilson  v.    McConnell,     id.    500; 
Woddrop  V.    Ward,    3    Dessaus.  203; 
Christian  v.  Ellis,  1  Gratt.  396;  Pierce 
r.  Jackson,  6  Mass.  242;  Fisk  v.  Herrick, 
6  id.   271;  Phillips  v.  Bridge,    11    id. 
242;  Goodwin  v.   Richardson,    id.  469; 
Rice  V.  Austin,  17  id.  197;  Adams  v. 
Paige,  7  Pick.  542;  Wilson  v.  Conine,  2 
Johns.  280;    Smith  v.   Baker,    10  Me. 
458;  Jarvis  v.   Brooks,   23  N.  H.  136; 
Crockett  v.  Crain,  33  N.  H.  542;  Holton 
V.  Holton,   40  N.   H.  77;  Tread  well  v. 
Brown,  41  N.  H.  12;  Matleck  v.  James, 
13  N.  J.  Eq.  126;   Hill  v.  Beach,  12  id. 
31;   Wilder  v.    Keeler,    3  Paige,   167; 
NicoU  V.  Mumford,  4  Johns.  Ch.  522; 
Muir  V.  Leitch,  7  Barb.  341;   Oakey  v. 
V.  Rabb,  1  Freem.  (Miss.)  Ch.  546;  Ar- 
nold V.  Hamer,  id.  509;  Teny  v.  Butler, 
4:3  Barb.  395;  MuitUI  v.  Neill,  8  How. 
414;  Be  Warren,  Dav.  320;   Hubble  v. 
Perrin,  3  Ohio,  287;   White  v.   Union 
Ins.  Co.  1  N.  &  McC.  556;  Washburn  «j. 
Bank  of  Bellows    Falls,    19  Vt.    278; 
Willis  V.  Freeman,  35  Vt.  44;  Converse 
V.  McKee,  14  Tex.  20;  Rider  v.  Gilbert, 
16  Hun,  163;  ante,  655,  note. 

See  Irley  f .  Graham,  46  Miss.  425; 
Whipple  V.  Hill,  14  La.  Ann.  437;  Bank 
of  Kentucky  v.  Keizer,  2  Duv.  169; 
Wliitehead  v.  Chadwell,  id.  432;  Bell 
V.  Newman,  5  Serg.  &  R.  78;  White  v. 

1380 


Dough tery,  1  Mart.  &  Yerg.  309; 
Owens  r.  Davis,  15  La.  Ann.  22;  Gros- 
venorr.  Austin,  6  Ohio,  103;  Daniel  v. 
Townsend,  21  6a.  155;  Scott  v.  Duns- 
ley,  12  Ala.  714;  Egery  v.  Howard.  64 
Me.  68;  Davis  v.  Grove,  2  Robt.  1)34, 
635. 

In  cases  of  co-partnership,  the  equity 
in  favor  of  separate  creditors  wiU  not 
be  enforced  to  control  or  take  away  a 
right  acquired  by  legal  execution  on  the 
part  of  joint  creditors  against  the  sep- 
arate estate.  It  is  only  when  the  legal 
recourse  of  joint  creditors  against  the 
separate  estate  is  terminated,  and  they 
have  no  claim  against  these  assets  ex- 
cept in  equity,  as  m  cases  of  bankruptcy, 
or  death  of  a  partner,  that  the  joint 
creditors  are  postponed.  Baker  v.  Wim- 
pee,  19  Ga.  87;  Cleghom  v.  Ins.  Bank, 
9  Ga.  319.  See  HaskDl  v.  Johnson,  24 
Ga.  625  ;  Allen  v.  Wells,  22  Pick.  450; 
Kuhne  v.  Law,  14  Rich.  18;  Wisham 
V.  Lippincott,  9  N.  J.  L.  353. 

However,  where  land  of  one  partner 
is  set  off  on  execution  for  a  debt  of  the 
firm,  and  afterwards  the  same  land  is 
set  off  for  a  separate  debt  of  the  part- 
ner, the  separate  creditor  will  hold  the 
land.  It  has  been  held  that  Jarvis  v. 
Brooks,  23  N.  H.  136;  Crockett  v.  Crain, 
33  id.  542;  Holton  v.  Holton,  40  id.  77; 
Treadwelli'.  Brown,  41  Id.  12. 

As  a  general  rule,  a  partnership  cred- 
itor cannot  be  compelled  in  equity  by 
one  of  the  partners,  to  whose  separata 
estate  he  has  resorted,  to  proceed  agamst 
the  joint  estate  instead.  Wisham  v. 
Lippincott,  9N.  J.  Eq.  353. 

The  priority  of  lien  of  a  judgment  on 
a  partnership  debt,  rendered  after  one 
partner  had  died,  which  lien  attached 
to  the  real  estate  of  the  survivor,  held 
in  his  individual  right,  will  not  be  re- 
lieved against  in  equity,  in  favor  of  a 
subsequent  judgment  against  the  survi- 
vor for  his  individual  debt,  even  though 
there  be  no  assets  to  satisfy  the  latter 
judgment,   and  though    the    deceased 


CHAP.  I.] 


AS    REGARDS   JOINT    CRF:DIT0RS. 


*1054 


partner  has  left  suiTicient  assets  to  sat- 
isfy the  pai-tnership  juclginent.  Meech 
V.  Allen,  17  N.  Y.  3U0. 

The  doctrine  that  the  separate  debt  of 
one  partner  should  not  be  paid  out  of 
the  partncrshiij  estate  until  all  the  debts 
of  the  firm  are  discharged,  does  not 
apply  until  the  partners  cease  to  have  a 
legal  right  to  dispose  of  their  property 
as  they  please.  It  is  applicable  only 
when  the  principles  of  equity  are  brought 
to  interfere  in  the  distribution  of  the 
partnership  property  among  the  credi- 
tors. McDonald  v.  Beach,  2Blackf.  55; 
SchaefFer  v.  Titliian,  17  Ind.  463;  Dun- 
ham V.  Hanna,  18  Ind.  270.  See  Dean 
V.  Phillips,  17  Ind.  406. 

The  right  of  partnership  creditors  to 
claim  a  preference  over  the  creditors  of 
the  individual  members  of  the  fii-ra,  in 
the  distribution  of  the  partnersliip  prop- 
erty, is  wholly  dependent  upon  the  right 
of  the  individual  partners  to  enforce  a 
hen  upon  the  partnership  funds  for  the 
pajunent  of  the  partnership  liabilities, 
before  individual  debts;  and  if  the  con- 
tract of  co-partnership  be  of  such  a  na- 
ture, that  the  co-partners  can  enforce  no 
such  right,  as  between  themselves,  the 
partnership  creditors  can  claim  no  such 
preference.  Rice  r.  Barnard,  20Vt.  479. 
See,  also,  Schmidlapp  r.  Currie,  55  Miss. 
592;  Waterman  v.  Hunt,  2  R.  I.  298. 

Ordinarily  a  partnership  estate  is  lia- 
ble to  the  payment  of  the  debts  of  the 
firm  in  preference  to  the  individual  debts 
of  the  prrtners.  This  is  the  right  of 
the  partnei-s  inter  se.  The  creditors  of 
the  partnei-ship  have  no  such  right  of 
priority  over  the  creditors  of  the  part- 
ners individually;  but  only  by  suljstitu- 
tion  to  the  rights  of  the  partners  infer 
se.  The  partners  may  release  this  right, 
and  the  creditors  of  the  co-partnership 
cannot  complain;  for  it  is  not  their 
right,  except  subject  to  the  disposition 
and  control  of  the  partnei-s  themselves, 
to  whom  it  belongs.  Shackleford  v. 
Shacldeford,  32  Grat.  481;    Schmidlapp 


V.  Currie;  Waterman  r.  Hunt,  .lupra. 

Where  one  partner,  in  good  faith,  as- 
Bigned  all  his  interest  to  the  other,  who 
in  turn  made  a  bond  fide  assignment  for 
the  payment  of  debts,  giving  some  of 
his  separate  debts  a  preference :  Held, 
that  the  partnership  creditors  could  not 
sustain  a  bill  for  satisfaction  of  their 
debts  out  of  the  assigned  property,  until 
executions  at  law  for  those  debts  had 
been  issued  and  returned  unsatisfied. 
Robb  V.  Stevens,  1    Clark  (N.  Y.),  191. 

Partners  have  the  power,  while  the 
partnership  assets  remain  under  their 
control,  to  appropriate  any  portion  of 
them  to  pay  or  secure  their  individual 
debts.  A  mortgage  given  by  them  to 
secure  individual  debts  fairly  due.  is  not 
rendered  void  by  the  mere  fact  that  it 
operates  to  give  individual  debts  a  pref- 
erence over  demands  against  the  finn; 
nor  will  such  mortgage  be  set  aside  for 
that  reason  by  a  court  of  equity,  unless, 
perhaps,  when  created  in  contemplation 
of  insolvency  to  give  an  improper  pre- 
lerence.  National  Bank  of  Metropolis 
V.  Sprague,  20  N.  J.  Eq.  13.  See  ante, 
655,  note. 

The  partnei"ship,  while  it  is  solvent, 
may  sell  its  property  or  give  its  note 
secured  by  mortgage,  to  one  of  the  part- 
ners, and  if  the  sale  be  made  or  the  note 
and  mortgage  given  in  good  faith  and 
for  valuable  consideration,  they  will  be 
valid  against  the  claims  of  the  partner- 
ship creditors,  and  although,  if  such 
note  and  mortgage  be  retained  by  the 
pai-tner  until  the  bankruptcy  of  the  firm, 
he  will  not  be  allowed  to  enforce  them 
against  the  company  assets  to  the  ex- 
clusion of  the  partnership  creditors,  be- 
cause he  is  himself  liable  to  these  cred- 
itors, yet  the  assignee  of  such  note  and 
mortgage,  who  has  received  them  in 
good  faith  and  for  valuable  considera- 
tion during  the  solvency  of  the  firm, 
holds  them  unatfocted  by  the  claims  of 
the  partnership  creditors.  Waterman  p 
Hunt,  2  R.  1.  298.     See  ante,  655,  note. 

1381 


4054 


DEATH    AND    ITS    CONSKQUENCliS 


[book  IV. 


Where  the  trustee  under  a  deed  of 
trust  made  by  the  surviving-  partners 
after  the  dissolution  of  an  insolvent  firm 
by  the  death  of  a  member,  had  appro- 
priated money  of  the  firm  realized  by 
him  before  the  service  of  an  attachment 
in  a  suit  in  which  the  deed  was  declared 
unauthorized,  to  the  payment  of  his  own 
and  other  preferred  debts,  in  violation 
of  the  right  of  partnership  creditors  to 
be  paid  before  creditors  of  individual 
partners,  and  to  share  ratably:  Held, 
that  the  payments  could  not  be  al- 
lowed to  stand.  Barcroft  v.  Snodgrass, 
1  Coldw.  430. 

At  a  time  when  a  debtor  was  allowed 
to  give  preferences,  one  who  was  a 
member  of  an  insolvent  partnership  con- 
veyed his  separate  real  property  in  satis- 
faction of  his  debt  to  a  separate  cred- 
itor. Its  value  exceeded  the  debt:  Held, 
that  the  firm  creditors  had  an  interest 
in  the  excess,  and  that,  in  equity,  the 
property  conveyed  would  be  held  as  a 
security,  first  for  the  debt  due  to  the 
grantee,  and,  as  to  the  excess  of  value, 
for  other  debts.  But  the  real  estate 
conveyed  being  the  separate  property 
of  the  co-partner,  the  excess  of  value 
was  bound  first,  for  his  separate  debts, 
and  only  after  satisfying  these  was  it 
applicable  to  the  debts  of  the  partner- 
sliip.     Bailey  v.  Kennedy,  2  Del.  Ch.  12. 

An  assignment  by  co-partners  of  their 
individual  property,  as  well  as  their 
partnership  property,  to  pay  the  joint 
debts  of  the  firm,  is  not  on  that  account 
void.  VanRossmn  v.  Walker,  11  Barb. 
237. 

The  members  of  an  insolvent  part- 
nership assigned  their  partnership  prop- 
erty together  with  certain  real  estate, 
which  they  owned  as  tenants  in  com- 
mon, in  trust  for  the  payment  of  their 
partnership  debts,  with  a  reservation  to 
themselves  of  the  surplus,  if  there  should 
be  any:"  Held,  thai  the  assignment 
was  void  as  to  individual  creditors  of 
the  assignors,  on  account  of  this  reser- 

1382 


vation.     Collomb  v.  Caldwell,  16  N.  Y. 
484.     See  anfe.  Assignments. 

Equity  will  not  susta'n  an  agi-eement 
made  by  partners  for  thg  purpose  of 
giving  the  separate  creditors  of  one 
partner  a  preference  to  the  creditors  of 
the  firm,  if  the  firm  be,  at  the  tune 
of  making  such  agreement,  insolvent. 
Collins  v.  Hood,  4  McLean,  186. 

One  partner  has  no  right  to  assign  to 
his  separate  creditors  any  portion  of  the 
effects  of  the  partnership,  to  the  pre- 
judice of  the  partnership  creditors. 
Black  V.  Bush,  7  B.  Mon.  210.  See 
ante.  Assignment. 

A  creditor  of  one  of  several  partners 
has  no  right,  even  under  an  express  con- 
tract with  such  partner,  to  apply  part- 
nership effects  to  the  satisfaction  of  a 
debt  against  such  partner,  unless  the 
other  partner  consents  to  the  contract. 
Broaddus  r.  Evans,  63  N.  C.  633. 

A  partner  sold  bis  interest  in  the  firm 
to  his  co-partner,  who  agreed  to  pay  the 
firm  debts.  The  firm  was  at  the  time 
insolvent.  After  the  sale,  continuing 
partner  gave  a  deed  of  trust  on  all  the 
assets  of  the  late  firm,  to  secure  the 
payment  of  an  individual  indebtedness 
of  his  own,  which  accrued  prior  to  the 
dissolution.  In  a  contest  between  a 
creditor  of  the  firm  and  the  individual 
creditor, — held,  that  the  right  of  the 
former  to  be  paid  out  of  the  firm  assets 
in  preference  to  the  latter  was  not  im- 
paired by  the  dissolution,  and  as  against 
him  the  deed  of  trust  was  a  nullity. 
Phelps  V.  McNeely,  66  Mo.  554. 

In  Jones  v.  Lusk,  2  Mete.  (Ky.)  3";6. 
it  was  held  that  the  only  insolvency 
which  will  give  the  chancellor  jurisdic-' 
tion  to  decree  priority  of  payment  in  fa- 
vor of  partnership  debts,  is  that  which  ii; 
ascertained  and  established  by  a  judg- 
ment, execution,  and  return  of  "  no 
property"  against  one  or  more  of  the 
partners.  In  Levy  v.  Ley,  6  Abb.  Pr. 
89;  S.  C.  15  How,  Pr.  395,  it  was  held 
that  proof  that  the  defendants  have  sus- 


CHAP.  1. 


AS    RKGAl.DS    JOINT    CillDITOnS. 


4054 


pcnded  payment  on  their  liabilities,  and 
pay  nothing  in  full  except  such  small 
claims  as  would  be  pressed  to  judgment 
■if  not  settled,  and  which  are  paid  to 
prevent  the  assets  from  being  sacri- 
ficed,— is  sufficient  proof  of  insolvency 
to  authorize  an  injunction  and  appoint- 
ment of  a  receiver,  in  an  action  by  a 
creditor  of  a  partnership  on  an  indebt- 
edness of  the  firm. 

Where  a  partnership  is  insolvent,  or 
where  its  solvency  is  doubtful,  a  court 
of  equity  will  restrain  a  sale  and  the 
taking  of  possession  of  the  partnership 
property  under  an  execution  against  an 
individual  member  of  the  firm  until  the 
settlement  of  the  partni'rshij)  affairs,  in 
order  to  ascertain  whether  the  debtor- 
partner  has  a  real  and  valuable  interest 
over  and  above  the  liabilities  of  the 
fii-m.     Hubbard  v.  Curtis,  8  Iowa.  1. 

Property  attached  in  a  suit  against  a 
partnership,  prima  facie,  in  the  absence 
of  contrary  showing,  will  be  presumed 
to  be  partnership  property;  and  before 
individual  property  can  be  afterward 
taken,  it  behooves  plaintiff  to  show  that 
this  first  has  been  exhausted,  or  that, 
for  some  good  reason,  it  was  exempt. 
Lewis  V.  Conrad,  11  Iowa,  153. 

Where  a  firm  has  become  insolvent 
and  an  application  has  been  made  for 
receivers,  a  special  partner  in  the  insol- 
vent firm  is  entitled  to  come  in  and 
claim  as  a  creditor  of  the  partnership, 
and  to  receive  a  dividend  out  of  the  as- 
sets pro  rata  with  the  other  creditors. 
White  V.  Hackett,  24  Barb.  290. 

A  partner  mortgaged  his  private  prop- 
erty for  a  firm  debt,  and  on  that  mort- 
gage the  property  was  sold  and  the  debt 
satisfied,  after  the  firm  assets  had  gone 
into  the  hands  of  an  assignee  for  credit- 
ors: Held,  that  the  separate  estate  of 
the  partner  stood  on  the  same  footing  as 
other  general  creditors  of  the  firm. 
KendaU  v.  Rider,  35  Barb.  100. 

Where  a  sui-viving  partner  has  paid 
the  partnership  debts  of  a  losing  con- 


cern, he  is  entitled  to  be  substituted  for 
the  amount  that  the  estate  of  the  de- 
ceased partner  is  indebted  to  him  on 
that  account,  to  the  rights  of  the  credit- 
ors of  the  fiiTu  whose  debts  he  has  paid. 
Moms  V.  Morris,  4  Graft.  293. 

Where  a  person  becomes  a  member  of 
a  firm,  purchasing  an  interest  in  a  mill 
and  the  ground  upon  which  it  stands, 
and  there  is  a  prior  encumbrance  by 
mortgage  upon  the  premises,  which  the 
former  owners  agreed  to  remove,  and 
also  a  mechanic's  lien,  of  which  the 
purchasing  pai'fner  had  no  notice,  the 
real  estate  becomes  partnership  property, 
,  and  upon  an  adjustment  of  the  rights 
of  the  partners  and  partnership  credi- 
tors, and  creditors  of  individual  pait- 
ners,  the  purchasing  partner,  as  against 
the  separate  creditors  of  the  partners, 
will  be  considered  a  creditor  of  the  firm, 
and  as  such,  entitled  to  be  reimbursed 
out  of  the  joint  fund,  to  the  exclusion 
of  such  separate  creditore,  to  the  extent 
of  those  prior  liens  which  had  been  sat- 
isfied on  a  sale  of  the  firm  property. 
Ramey  v.  Hance,  54  lU.  29. 

Where,  in  a  suit  against  two  partners, 
for  a  partnership  debt,  one  of  them  is 
discharged  upon  his  plea  of  infancy, 
and  judgment  is  taken  against  the 
adult  partner,  the  judgment  is  still  a 
partnership  debt,  to  which  the  partner- 
ship funds  must  be  aiijtlied  in  preference 
to  debts  of  the  individual  partners. 
Gay  V.  Johnson,  32  N.  H.  1G7. 

Sureties  on  a  bond  given  to  dissolve 
an  attaclmient  in  a  suit  against  part- 
ners, can  recover  from  the  firm  the 
amount  paid  by  them  on  such  bond, 
although  the  judgment  was  recovered 
against  one  partner  only,  the  suit  hav- 
ing been  discontinued  against  fheothei*s 
for  want  of  jurisdiction.  Inbusch  r. 
Farwell,  1  Black,  566. 

In  the  United  States  courts,  partner- 
ship property  may  be  held  for  partner- 
ship debt,  though  judgment  can  be  ob- 
tained   only    against  one    partner,    by 

1383 


•1054 


DEATH    AND    ITS    CONSEQUENCES 


[book  IV. 


reason  of  the  other's  being  out  of  the 
jurisdiccion.  Inbusch  v.  Farwell,  1 
Black,  566. 

Where  the  same  partners  carry  on  the 
same  business  at  ditferent  places,  under 
diiferent  partnership  names,  there  are 
not  two  distinct  firms,  and  the  assets  of 
both  nominal  firms  are  equally  applica- 
ble to  the  payment  of  all  the  creditors 
of  both.     In  re  Williams,  3  Wood,  493. 

B  and  C  were  partners  under  the 
firm  name  of  B  &  C,  and  also  co-part- 
ners with  A,  under  the  firm  name  of  A, 
B  &  C.  The  demandant,  a  partnership 
creditor  of  the  firm  of  A,  B  &  C,  having 
attached  and  levied  on  the  real  estate  of 
B  &  C,  purchased  by  them  with  part- 
nership funds  and  for  heir  partnership 
use,  but  held  by  them  as  tenants  in 
common,  the  same  was  subsequently  at- 
tached and  levied  on  by  the  tenant, 
who  was  a  creditor  of  the  firm  of  B  & 
C,  as  their  partnership  property,  and 
the  demandant  brought  his  writ  of  entry 
to  recover  the  same:  Held,  that  the 
demandant  by  his  previous  attach- 
ment and  levy  acquired  the  better  title 
at  li  w  to  the  premises,  and  was  entitled 
to  judgment,  but  judgment  was  with- 
held to  await  the  result  of  a  suit  in 
equity  then  pending  to  subject  the  land 
to  the  partnership  debts  of  B  &  C. 
Peck  V.  Fisher,  7  Cush.  387. 

The  legal  priority  obtained  against  a 
firm  composed  of  two  partners,  by  a 
partnership  creditor  of  a  firm  consisting 
of  the  same  individuals,  joined  with  a 
third,  will  be  postponed  in  equity  to  the 
claims  of  the  partnership  creditors  of 
the  former.  Shedd  v.  Wilson,  27  Vt. 
478. 

Where  a  person  is  a  member  of  two 
partnerships,  his  separate  creditors  have 
a  preference  over  his  interest  in  the 
property  of  one  of  the  firms  as  against 
creditors  of  the  other  firm.  Weaver  v. 
Weaver,  46  N.  H.  188. 

Where  a  partnership  is  changed  by 
the  admission  of  a  new  partner,  the 

1384 


creditors  of  both  the  old  and  new  firms 
wiD  in  equity  be  allowed  to  share  alike 
in  the  partnership  property.  Shedd  v. 
Bank  of  Brattleboro',  32  Vt.  709. 

A  and  B,  partners,  gave  a  joint  and 
several  bond  and  warrant  of  attorney  to 
T.  for  a  partnership  debt.  Judgment 
was  entered  and  execution  issued  Feb. 
7,  1876.  Feb.  20,  A  and  B  made  an  in- 
solvent assignment,  B  being  also  indi- 
vidually insolvent.  The  judgment  being 
only  partly  satisfied,  and  A  having  made 
an  assignment,  it  was  held  that  T  might, 
under  A's  assignment,  share  equally  the 
personal  effects  of  A,  and  was  not  to  be 
subordinated  to  his  individual  creditors. 
Howell  V.  Teel,  29  N.  J.  Eq.  490. 

On  the  1st  day  of  June,  1842,  A,  B 
and  C  entered  into  partnership  in  the 
business  of  keeping  a  livery  stable,  and, 
as  such  partners,  purchased  of  D,  prop- 
erty necessary  for  conducting  such  busi- 
ness, to  the  amount  of  $8,200,  for  which 
they  gave  their  joint  and  several  prom- 
issory notes,  payable  on  the  1st  day  of 
February,  in  the  years  1843,  1844,  1845 
and  1846,  respectively.  In  August, 
1842,  C  died;  and  the  business  of  the 
business  of  the  partnership  was  con- 
tinued by  A  and  B,  with  the  partnership 
capital,  without  any  (adjustment  of  the 
partnership  concerns  until  May,  1844; 
during  which  time  they  paid  from  the 
partnership  funds  two  of  the  not6s  to 

D,  amounting  to  $4,200,  the  other  two 
being  still  unpaid.  At  the  tune  of  C's 
death,  the  partnei-ship  yjroperty  was  suf- 
ficient to  pay  the  partnership  debts,  but 
the  business  was  afterwards  ruinous.  A 
being  appointed  administrator  of  C,  sold 
in  May,  1844,  by  order  of  the  court  of 
probate,  and  with  the  consent  of  C's 
heirs,  one  undivided  third  part  of  the 
partnership  property  then  remaining  to 

E,  for  the  use  and  benefit  of  A;  and  A 
thereupon  assumed  the  payment  of  that 
portion  of  the  notes  to  D,  which  it  be- 
longed to  C  in  his  life-time  to  pay.  On 
the  19th  of  June  following,  A  settled 


CIIAIV 


!•] 


AS    REGARDS    JOINT    CREDITORS. 


noo4: 


his  administration  account,  charpring 
C's  estate  with  $o,002,  on  account  of  the 
notes  g'lvon  to  D,  and  creditinpr  the  es- 
tate with  $2,0;)4,  for  the  avails  of  the 
partnership  property  belonf,nnf,'  to  it, 
thus  showiufj  a  loss  resultiniif  lo  it  from 
the  partnership  concern  of  $908.  After 
the  death  of  C,  new  partnership  debts 
were  contracted,  which  are  still  unsatis- 
fied. Some  of  these  creditors  brought 
suits  on  their  respective  claims  against 
A  alone,  attaching'  his  interest  in  the 
partnership  property-,  which  suits  are 
still  pending.  In  April,  1S44,  A  exe- 
cuted a  mortgage  of  all  his  interest  in 
the  partnership  property  to  certain 
other  creditors,  to  secure  debts  against 
him'  individually.  A  is  entirely  insol- 
vent, and  B  has  no  estate,  except  his 
interest  in  the  partnership  propertj'.  On 
a  bill  in  chanceiy  brought  by  the  hehs 
of  C  against  A  and  B  and  the  attaching 
creditors  and  mortgagees  of  A,  it  was 
held, 

1.  That  the  notes  given  by  A,  B  and 
C  to  D,  notwithstanding  their  form,  con- 
stituted a  partnership  debt. 

2.  That  although  the  notes  given  to 
D  were,  in  form,  several  as  well  as  joint, 
so  that  D  could  sustain  an  action  at  law 
thereon  aga.nst  C's  administrator,  with- 
out resorting  to  A  and  B  as  surviving 
partners,  yet  this  did  notvaiythe  equi- 
table rights  of  those  interested  in  C's  es- 
tate, nor  prevent  the  interposition  of  a 
court  of  chancery,  to  apply  the  partner- 
ship effects  in  payment  of  the  debt; 

3.  That  the  rights  of  those  interested 
in  C's  estate  were  not  impaired  by  delay 
in  closing  the  partnership  concerns; 

4.  That  they  were  not  impaired  in 
consequence  of  the  sale  to  A  through 
the  agency  of  E;  for  whether  A  could, 
under  the  circustances,  be  both  seller 
and  purchaser  or  not,  yet  he  received 
the  property  subject  to  the  incumbrance 
of  the  notes  to  D,  and  it  was  still  liable 
for  the  payment  of  those  notes; 

5.  Tiiat  the  creditors  of  the  partner- 


ship whose  debts  were  contracted  after 
the  death  of  C,  were  entitled  to  share 
in  the  partnership  effects; 

6.  That  those  creditors  who  hvA 
brought  suits  against  A  alone  and  at- 
taehed  his  intfrest  in  the  iiartm  rship 
property,  which  suits  were  still  pending, 
were  also  entitled  to  share  iii  the  part- 
nership effects; 

7.  That  the  mortgagees  and  other 
creditors  of  A  individually  could  take 
nothing,  except  his  share  in  the  part- 
nership property  remaining  after  pay- 
ment of  the  partnership  debts.  Filley 
V.  Phelps,  18  Conn.  294. 

A  person  who  has  advanced  money  to 
one  of  several  partners,  upon  his  indorse- 
ment of  a  note  made  by  another  part- 
ner, cannot  come  into  a  court  of  chan- 
ceiy  for  payment  of  the  note  out  of  the 
partnership  etlects,  though  the  proceeds 
of  the  note  were  applied  to  partnership 
purposes.  Coster  v.  Clarke,  3  Edw.  Ch. 
411. 

The  excess  of  one  partner's  advance 
over  those  of  another,  constitutes  a  pre- 
ferred claim  upon  the  partnership  prop- 
erty or  its  proceeds,  against  the  individ- 
ual creditors  of  the  biuilcrupt  partner. 
Conkling  r.  Washington  Univei-sity,  2 
Md.  Ch.  497.  See,  also,  Buchan  v.  Sum- 
ner, 2  Barb.  Ch.  165. 

A  judgment  confessed  by  one  partner 
in  favor  of  his  co-partner,  to  secure  him 
for  capital  advanced  to  the  concern,  is 
valid  against  the  judgment  of  a  private 
creditor  of  the  partner  who  confessed 
the  judgment.  Purdy  v.  Lacock,  6  Pa. 
St.  490. 

A  and  B  were  pai-tners.  A  owed  the 
firm  ^17.600.  He  died.  The  surviving 
partner  assigned  the  firm  assets  to  an 
assignee  for  the  benefit  of  creditors. 
The  assignee  claimed  of  A's  adminis- 
trator that  out  of  A's  individual  assets 
he  should  pay  to  the  assignee  the  $17.- 
600  which  A  owed  the  firm.  The  indi- 
vidual creditors  of  A  resisted  this  clau', 
on  the  ground  that  it  was  snl'st;uit;a.iy 

1.)  T  - 


^1054 


DEATH    AND    ITS   CONSEQUENCES 


[book  IV. 


a  claim  by  the  firm  creditors  to  come  in 
upon  A's  separate  estate,  notwithstand- 
ing' the  existence  of  a  fund  of  their 
own;  an  objection  which  the  trial  court 
thought  vaHd,  and  disallowed  the  claim. 
The  appellate  court  reversed  the  decis- 
ion and  allowed  the  claim,  holding  that 
"the  debt  of  a  partner  to  his  firm  for 
partnership  effects  withdrawn  and  ap- 
]}ropriated  to  his  separate  use, ' '  was  not 
' '  a  partnership  debt, "  but  an  individual 
debt,  and  that  he  was  "just  as  much  a 
debtor  severally  for  what  the  firm  has 
advanced  to  him  as  he  would  be  to  an- 
other creditor,"  and  this,  notwithstand- 
ing "when  his  debt  is  paid,  it  will  go 
into  the  firm  and  form  a  part  of  its  as- 
sets, and  the  fiiin  creditors  will  then 
come  in  upon  it  as  part  of  then-  fund." 
A  partnership  debt  is  a  debt  which  a 
partnership  owes  to  its  creditors,  not 
that  which  another  owes  to  it,  whether 
its  debtor  is  one  of  the  partners 
themselves  or  some  one  else.  McCor- 
mick's  Appeal,  55  Pa.  St.  252.  See,  also, 
Busby  V.  Chenault,  13  B.  Mon.  554; 
Payne  v.  Matthews,  6  Paige,  19. 

A,  B  and  C  were  partners.  B  sold 
the  partnership  property,  took  notes, 
and  received  some  money  thereon  from 
the  purchasers.  He  gave  A  and  C  his 
own  notes  for  their  shares,  with  the  un- 
derstanding that  a  settlement  should 
take  place  when  all  the  other  notes  were 
collected,  each  partner  bearing  his  pro- 
portion of  the  loss  from  bad  debts,  if 
any.  On  a  bill  by  A  against  B's  execu- 
tor, held,  that  A  was  entitled  to  his 
share  of  the  money  received  or  to  be  col- 
lected on  the  notes  given  for  the  partner- 
ship property  by  the  pui-chasers,  in 
preference  to  the  private  creditors  of  B, 
Kidgely  v.  Carey,  4  Har.  &  M.  167.  See, 
also.  Christian  v.  Ellis,  1  Gratt.  396. 

A  held  a  contract,  upon  which  certain 
money  was  to  be  i-eceived  for  the  benefit 
of  B  and  C,  who  were  partners.  B  and 
C  ordered  the  money,  when  received,  to 
be  paid  over  to  D,  to  whom  the  partner- 

1386 


ship  was  indebted;  and  B,  survivin^j 
partner,  after  the  death  of  C,  made  a 
formal  assignment  of  the  money  to  D,  to 
be  appropriated  to  the  payment  of  h"s 
demand  against  the  partnership.  After 
this,  A  received  the  money,  at  different 
times,  and  paid  it  over  to  D.  Mean- 
while, E  summoned  A  and  D.  as  trustees 
of  B  and  C:  Held,  that  D  was  entitled 
to  so  much  of  the  money  as  would  satis- 
fy his  demands  against  the  partnership, 
but  that  he  was  not  entitled  to  retain 
for  the  private  debt  of  B,  the  surviving 
partner,  nor  for  the  debts  of  other  credit- 
ors of  B  and  C,  to  whom,  without  any 
authority,  he  had  said  that,  if  there  was 
any  balance  in  his  hands,  he  would  pay 
the  debts.  French  r.  Lovejoy,  12  N.  H. 
458. 

Where  an  individual  member  of  a 
firm  deposits  with  a  creditor  of  the  firm 
a  promissoi-y  note  belonging  to  such 
partner,  as  collateral  security  for  a  par- 
ticular debt  owing  by  the  finn  to  such 
creditor  and  afterwards  pays  the  debt, 
the  party  so  depositing  the  collateral 
can  recover  the  proceeds  collected  by  the 
creditor,  notwithstanding  there  may  re- 
main other  unadjusted  claims  due  from 
the  firm  to  such  creditor,  the  firm  being 
solvent  at  the  time,  on  the  ground  of 
the  separate  property  of  one  partner  not 
being  liable  to  be  taken  m  the  first  in- 
stance, to  satisfy  partnership  debts. 
Adams  v.  Sturges,  55  111.  468. 

A  firm  to  secure  creditors  agreed  to 
transfer  certain  coal  barges,  mules,  etc., 
to  them  and  execute  a  bill  of  sale,  the 
creditors  agreeing  at  the  same  time  to 
take  the  real  estate  of  one  of  the  firm 
and  pay  the  liens  thereon,  which  were 
for  his  individual  debts;  deeds  for  the 
property  were  made,  but  the  cred  tors 
did  not  pay  the  liens,  and  in  an  action 
in  the  name  of  tho  individual  partner 
against  the  creditors  on  their  agi-eement 
to  take  his  property  and  pay  the  liens, 
the  defendants  claimed  that  it  and  the 
bill  of  sale  were  one  transaction,  and 


CHAP.  I.] 


AS    REGARDS   JOINT    CREDITORS. 


*l()oi 


that  they  were  entitled  to  default  against 
the  amount  to  be  recovered  against 
them,  damages  for  breach  of  the  part- 
nership contract  in  not  turning  over  to 
them  the  property  sold,  to  which  they 
covenanted  that  they  had  a  good  title : 
Held,  defense  not  valid,  its  effect  being 
to  divert  to  the  creditors  of  the  partner- 
ship a  fund  arising  from  private  prop- 
erty specifically  appropriated  to  private 
debts.  Jackson  v.  Clymer,  43  Pa.  St. 
79. 

The  ratification  by  the  firm  of  the 
unauthorized  act  of  one  partner  in  sign- 
ing the  firm  name  to  a  contract  of  sure- 
tyship is  ineffectual  as  against  existing 
partnership  creditors,  being  in  substance 
an  adoption  by  the  firm  of  the  private 
debt  of  one  partner.  Kidder  v.  Page, 
48  N.  H.  380. 

Where  one  partner  retires  from  a  firm 
and  releases  all  his  interest  in  the  as- 
sets to  the  other  partner,  who  agrees  to 
pay  all  the  company  debts,  the  right  of 
priority  still  continues  in  the  partner- 
ship creditors  in  respect  to  such  assets. 
Caldwell  V.  Scott,  54  N.  H.  414.  Suc- 
cession of  Beer,  12  La.  Ann.  698;  Wil- 
son V.  Soper,  13  B.  Mon.  411. 

Upon  the  dissolution  of  a  partnership 
between  A  and  B,  A  assumed  the  pay- 
ment of  the  partnership  debts:  Held, 
that  a  partnership  creditor  could  not 
jiroceed  for  the  appointment  of  a  re- 
ceiver of  B's  property  only,  without 
showing  some  sufficient  reason  for  not 
proceeding  against  the  property  of  the 
partnership,  and  of  A.  Henry  v.  Henry, 
10  Paige,  314. 

The  property  of  the  partnership  re- 
mains subject  to  the  preference  of  the 
partnership  creditors,  notwithstanding 
the  survivor  may  have  managed  and 
treated  it  as  his  own,  with  the  assent  of 
the  administrator  of  the  deceased  part- 
ner, and  may  have  contracted  debts  upon 
the  credit  of  the  property.  Benson  v. 
Ela,  35  N.  H.  402.  See,  however,  Top- 
liff  V.  Vail,  Han-.  Ch.  340. 


Where  land  wa.s  purchased  by  a  part- 
nership, but  not  used  by  them  in  their 
business,  and  it  afterwards  was  sold  un- 
der execution  against  one  of  the  part- 
ners, and  it  did  not  appear  that  the  pur- 
chaser had  notice  that  it  was  partner- 
ship property:  Held,  that  the  land  so 
purchased  was  not  to  be  made  liable  in 
his  hands  for  partnership  debts.  Buck 
V.  Winn,  11  B.  Mon.  320. 

If  two  persons  who  are  not  in  fact 
partners,  hold  themselves  out  to  certain 
creditors  as  partners  of  a  stock  in  trade, 
so  as  to  become  liable  to  them  as  such, 
although  the  stock  belongs  exclusively 
to  one,  the  rights  of  these  creditors 
would  rest  upon  estoppel,  which  would 
be  personal  to  the  parties  bound,  or  their 
privies,  not  upon  a  hen  on  or  equity  in 
the  stock,  to  be  worked  out  through  the 
parties;  and  therefore,  in  a  controversy 
between  such  creditors  and  a  purchaser 
of  the  stock  at  execution  sale  imder  a 
judgment  against  the  actual  owner  of 
the  goods  as  the  sole  proprietor,  the 
purchaser  would  have  the  better  right. 
Hillman  r.  Moore,  3  Tenn.  Ch.  454.  See, 
also,  Allen  v.  Dunn,  15  Me.  292. 

A,  with  the  consent  of  B,  did  business 
in  his  name  and  bought  goods  of  C  and 
also  of  D,  who  both  gave  crecUt  to  B.  C 
brought  an  action  against  B  and  attach- 
ed goods  as  his  property.  Subsequently 
D  brought  an  action  against  A,  doing 
business  under  the  name  of  B,  and  at- 
tached the  same  goods.  C  was  then  allow- 
ed, without  notice  to  D,  to  amend  his  writ 
by  adiling  the  name  of  A  as  a  defendant 
and  declaring  against  A  and  B  as  co- 
partners doing  business  under  the  name 
of  B.  Both  C  and  D  recovered  judg- 
ments. As  between  A  and  B  the  latter 
had  no  interest  in  the  attached  goods: 
Held,  that  the  goods  attached  wtMV  first 
to  be  applied  in  satisfaction  of  the  exe- 
cution obtained  by  C  on  his  judgment; 
and  that  the  amendment  was  immate- 
rial.   Wright  r.  Herrick,  125  Mass.  154. 

The  creditors  of  a  partnership  consist- 

1387 


>1054 


DEATH    AND    ITS    CONSEQUENCES 


[book  IV. 


ing  of  A  and  B,  who  were  mostly  igTio- 
rant  of  the  partnership  and  dealt  with 
A  alone,  after  the  partnership  goods 
had  been  attached  by  C  to  secure  a 
debt  in  his  favor  against  A  individually, 
with  a  view  to  save  expenses,  consoli- 
dated their  debts  and  took  a  note  to  D 
for  the  amount,  it  being  agreed,  be- 
tween them  and  B,  that  he  should  not 
be  called  upon  beyond  the  value  of  the 
partnership  goods.  D,  in  a  suit  on  such 
note,  afterwards  attached  the  same 
goods.  A  and  the  partnership  were 
insolvent  and  had  no  other  property 
than  the  goods  attached,  which  were  of 
less  value  than  the  amount  of  the  note 
to  D.  On  a  bill  in  chancery,  brought  by 
D  against  C,  claiming  priority  of  lien, 
it  was  held,  1,  that  the  agreement  be- 
tween the  partnership  creditors  and  B 
was  a  fair  and  proper  one  as  between 
them,  and  that  neither  C  nor  A  could 
complain  of  it;  2,  that  D  was  entitled 
to  the  priority  claimed ;  3,  tha  t  the  only 
adequate  remedy  was  in  chancery,  where 
all  the  parties  interested  might  be 
brought  together  and  their  several 
rights  determined.  Witter  v.  Richards, 
10  Conn.  37. 

Where  a  debtor  partner,  by  his  will, 
has  subjected  his  real  estate  to  the  pay- 
ment of  his  debts,  his  partnership  cred- 
itors are  entitled  to  share  with  the  sep- 
arate creditors  in  that  fund.  Monis  v. 
MoiTis,  4  Gratt.  293. 

Partnership  property  is  first  to  be  ap- 
plied to  the  payment  of  partnership 
debts,  but  a  partnership  creditor  may, 
with  the  assent  of  the  finn,  waive  this 
privilege  and  agree  to  share  pro  rata 
with  the  creditor  of  the  individual  part- 
ner.   Linford  v.  Linford,  29  N.  J.  L.113. 

The  rule  that  the  creditors  of  a  part- 
nership will  not  be  permitted  to  reach 
the  individual  estate  of  a  deceased  part- 
ner until  all  the  separate  creditors  are 
satisfied,  applies  only  to  cases  founded 
on  the  relation  of  debtor  and  creditor, 
and  cannot  interfere  with  the  remedy 

1388 


against  an  individual  as  a  wrong-doer, 
or  his  estate.  Morgan  v.  Skidmore,  55 
Barb.  263. 

The  rule  that  partnership  property 
must  be  first  applied  to  the  payment  of 
partnership  debts,  does  not  apply  in  the 
case  of  a  silent  partner:  in  such  case,  the 
partnership  property  may  be  taken  for 
the  private  debts  of  the  ostensible  part- 
ner, although  there  be  partnership  debts 
unpaid.  Cammack  v.  Johnson,  2  N.  J. 
Eq.  163.  See,  also,  French  v.  Chase,  6 
Me.  166. 

In  the  case  of  a  doi-mant  partnership, 
an  attachment  of  the  stock  in  trade  in 
the  hands  of  the  ostensible  partner,  in  a 
suit  against  him  alone,  has  preference 
to  a  subsequent  attachment  of  the  same 
goods  by  another  person  in  an  action 
against  the  partners.  Lord  v.  Baldwin, 
6  Pick.  348. 

Where  a  surviving  dormant  partner 
was  a  creditor  of  the  firm  for  advances 
and  profits,  and  where  the  deceased 
partner  had  promised  to  pay  the  same : 
Held,  that  he  might  have  a  remedy  by 
filing  his  claim  with  the  commissioners 
of  insolvency  upon  the  estate  of  the  de- 
ceased, and  that  they  might  allow  it, 
postponing  payment,  until  the  creditors 
had  been  paid  in  full.  Johnson  v.  Ames. 
11  Pick.  173. 

The  doctrine,  that  a  separate  debt  of 
one  partner  shall  not  be  paid  out  of  the 
partnership  property  till  all  the  partner- 
ship debts  are  paid,  is,  it  is  said,  appli- 
cable only  where  the  principles  of  equity 
are  brought  to  interfere  in  the  distribu- 
tion of  the  partnership  property  among 
the  creditors.  Mittnight  v.  Smith,  17 
N.  J.  Eq.  259.  See,  also,  Gillaspy  v. 
Peck,  46  Iowa,  461. 

The  quasi  lien  of  the  creditors  of  a 
partnership,  on  its  property,  as  against 
creditors  of  individual  members  of  the 
partnership,  gives  equity  jurisdiction  for 
the  purpose  of  protecting  the  members 
of  the  partnership.  Blackwell  v.  Ran- 
kin, 7  N.  J.  Eq.  152. 


CHAP.  I.] 


AS    REGARDS   JOINT    CREDITORS. 


*1U54 


The  preference  which  the  law  gives 
th?  creditors  of  a  partnership  to  be  firat 
satisfied  out  of  the  firm  property,  will, 
however,  be  protected  in  proceedings  of 
g;\mishment  by  firms  and  individual 
troditors.  Switzer  v.  Smith,  35  Iowa, 
269. 

Where  one  partner,  without  the 
knowledge  or  consent  of  his  co-partner, 
pays  his  own  note  to  a  private  creditor 
out  of  the  funds  of  the  insolvent  firm, 
such  creditor  knowing  that  the  money 
belonged  to  the  firm,  the  funds  so  re- 
ceived will  be  regarded  as  held  by  the 
private  creditor  in  trust  for  the  benefit 
of  the  firm,  and  may  be  attached  in  his 
hands  upon  a  trustee  process  instituted 
•against  the  firm  by  one  of  its  creditors. 
Johnson  r.  Herscy,  70  Me.  74;  S.  C.  8 
Am.  Law  Record,  720. 

The  rule  applies  where  a  court  of  equi- 
ty is  asked  to  set  aside  a  fraudulent  con- 
veyance of  real  estate.  Hardy  r.  Mitch- 
ell, 67  Ind.  485.  See  Loving  v.  Paird, 
10  Iowa,  282. 

The  fact  that  an  individual  ci-editor 
foregoes  his  right  to  have  a  fraudulent 
conveyance  of  the  real  estate  of  such 
partner  set  aside,  gives  a  partnership 
creditor  no  right  to  attack  such  convey- 
ance. Hardy  v.  Mitchell,  67  Ind.  4S5. 
The  only  interest  of  the  partnership 
creditor  in  such  case  is  in  the  residue  of 
the  individual  property  over  individual 
debts.     Hardy  v.  Mitchell,  supra. 

In  a  complaint  by  a  partnership  cred- 
itor, attacking  an  alleged  fraudulent 
conveyance  of  the  individual  real  estate 
of  the  partner,  it  would  be  proper  to 
aver  that  there  were  no  individual  debts. 
Hardy  v.  Mitchell,  supra. 

An  action  attacking  such  conveyance 
might  be  brought  jointly  by  partnership 
and  individual  creditora.  Hardy  v. 
Mitchell,  supra. 

The  administrator  of  a  surviving  part- 
ner represents  the  partnership  assets,  as 
well  as  the  individual  estate  of  his  in- 


testate. Accordingly,  it  is  held  that  a 
partnership  creditor  being  in  time  to  Vti- 
cover  against  the  estate  of  the  surviving 
partner,  in  which  event  that  estate 
would  be  entitled  to  proper  reimburse- 
ment from  the  partnership  fund,  it  is 
therefore  proper  to  reach  the  same  re- 
sult without  circuity,  by  allowing  the 
creditor  to  resort  to  the  partnership  fund 
directly.  Brooks  v.  Brooks,  12  Heisk.  12. 

Where  the  partnership  property  is 
not  sufficient  to  pay  the  debts  of  the 
firm,  the  priority  of  the  United  States 
docs  not  reach  the  undivided  interest  of 
one  of  the  paitners  in  the  partnership 
effects,  if  he  is  indebted  to  the  United 
States,  but  when  it  has  become  his  sep- 
arate, individual  property,  the  i-ule  is 
difTerent.  The  true  test  is,  whether  the 
property  belongs  to  the  partnership  or 
to  the  individual.  United  States  r. 
Duncan,  12  111.  523. 

The  creditors  of  a  partnership  applied 
to  a  State  court  by  bill,  to  declare  the 
partnership,  and  decree  the  payment  of 
the  partnership  debts  out  of  assets  in 
the  hands  of  the  administrators  of  one 
of  the  partners  who  had  died  insolvent, 
indebted  to  the  United  States.  The  ad- 
ministrator denied  the  partnei-ship,  and 
took  an  objection  based  on  the  debts 
being  due  the  United  States  and  its 
priority.  The  Unibxl  States  were  not 
parties,  and  did  not  appear  in  the  State 
court.  The  State  court  decreed  in  ac- 
cordance with  the  prayer  of  the  bill: 
Held,  that  the  proceedings  in  the  State 
court  did  not  impair  the  rights  of  the 
United  States,  and  that  it  was  not 
bound  by  them ;  but  that,  notwithstand- 
ing the  decree  in  the  State  court,  the 
priority  of  the  government  attached, 
and  that  whenever  the  proceeds  of  any 
real  estate  or  personal  estate  came  into 
the  hands  of  the  administrator,  he  be- 
came a  trustee  for  the  United  States, 
which  must  fii^t  be  paid.  United  States 
V.  Duncan,  12  111.  523. 

1389 


n055 


DEATH    AND    ITS    CON:  EQUK^TES 


[book  IV. 


surviving  partners  may  be  bankrupt,  (c)  If,  indeed,  there  is 

*1055     not,  *and  never  was,  since  the  death  of  the  deceased  any 

joint  estate  whatever,  and  no   solvent  partner,  it  seems  that 

the  joint  creditors  may  rank  pari  passu  with  the  separate  creditors 

of  the  deceased,  against  his  separate  estate,  (c/)' 

Again,  the  rule  which  in  bankruptcy  precludes  one  partner  from 
proving  against  the  separate  estate  of  his  co-partner,  whilst  the 
joint  debts  are  unpaid,  also  applies  in  administering  the  estate  of  a 
deceased  partner,  {e) 

The  separate  estate  thus  primarily  liable  to  the  separate  credit- 
shareinfirm  ors  of  the  deceased,  docs  not  include  his  share  iu  the 
forsei)arat'i^  partnership  assets;  for  he  has  no  share  in  those  assets, 
j^jTiUCTeditors  Gxccpt  subject  to  the  payment  of  the  debts  of  the  firm, 
are  paid.  Whilst,  therefore,   the    separate   creditors  of  the  de- 

ceased are  entitled  to  be  first  paid  out  of  his  separate  estate,  the 
creditors  of  the  firm  are  entitled  to  be  first  paid  out  of  its  assets, 
and,  consequently,  to  be  paid  in  full  before  the  share  of  the  de- 
ceased in  those  assets  becomes  available  for  the  payment  of  his  sep- 
arate creditors.  (/")" 


(c)  Lodge  V.  Prichard,  and  Wliitting- 
stall  V.  Grover,  iihi  sup.  See,  as  to 
winding  up  the  estate  of  a  deceased  part- 
ner in  bankruptcy,  where  the  surviving 
l^artners  are  bankrupt.  Ex  parte  Gor- 
don, 8  Ch.  555;  Morley  v.  White,  ib. 
214. 

{d)  See  Cowell  v.  Sikes,  2  Russ.  191; 
and  Lodge  v.  Prichard,  uhi  sup. 

'  If  tliere  is  no  ioint  fund  nor  any 
solvent  partner,  joint  creditors  may 
participate  equally  with  a  private  cred- 
itor in  the  estate  of  a  deceased  partner. 
Pahlman  v.  Graves  26  111.  405;  Brock  v. 
Bateman,  25  Ohio  St.  609;  Rogers  v. 
Meranda,  7  id.  179. 

{e)  Lacey  v.  Hill,  8  Ch.  441.  Com- 
pare Ex  parte  Topping,  4  DeG.  J.  <fe 
Sm.  551. 

(/)  See  Ridgway  v.  Clare.  19  Beav. 
Ill;  Hills  V.  McRae,  9  Ha.  297. 

^  All  the  debts  due  from  the  joint  fimd 
mast  first  be  disehargjd,  before  any 
partner  can  appropriate  any  part  of  it 
to  his  own  use,  or  pay  any  of  his  private 

131)0 


debts;  and  a  creditor  of  one  of  the 
partners  cannot  claim  any  interest  but 
what  belongs  to  his  debtor,  whether  his 
claim  be  founded  on  any  contract  made 
with  his  debtor  or  on  a  seizure  of  the 
goods  on  execution  or  attachment. 
Pierce  v.  Jackson,  6  Mass.  242;  Fish  v. 
Herrick,  id.  271;  Phillips  v.  Bridge,  11 
id.  2t2;  Goodwin  v.  Richardson,  id. 
469;  Rice  v.  Austin,  17  id.  197;  Adams 
r.  Paige,  7  Pick.  542;  Wilson  v.  Conine, 
2  John.  230;  Smith  v.  Baker,  10  Me. 
458;  Menagh  v.  Whitwell,  52  N.  Y.  147; 
Cox  r.  Russell,  44  Iowa.  556;  Williams 
?'.  Gage  49  Miss.  777;  Faler  t'.  Jordan, 
44  id.  283;  Irby  r.  Graham,  46  id.  425. 
See  Fenton  v.  Folger,  21  Wend.  676; 
Stevens  v.  Bank  of  Central  N.  Y.  31 
Barb.  l90;  Reed  v.  Shephardson,  2  Vt. 
120;  Gillaspy  v.  Peck,  46  Iowa,  461. 

The  mere  insolvency  of  a  co-partner- 
ship is  sufficient  to  defeat  an  attachment 
made  by  a  creditor  of  one  of  the  firm, 
although  the  partnership  creditors  have 
commenced  no  action  for  the  recovery 


CHAP.  I.] 


AS    REGARDS    JOINT    CREDITORS. 


*10 


00 


Actions  by  creditors  of  the  firm  to  obtain  payment  out  of  tlie 
assets  of  a  deceased  partner,  are  well  illustrated  by   Anion  by  joint 
Brett  V.  Beckwith.  {g)     In  that  case  tliere  liad  been  two  Brett'TiJcck- 
partners,  Young  and  Beckwith.     Beckwith  was  dead,  ^^■'"^• 
and  Young  was  bankrupt.     A   bill  was  filed  by  a  creditor  of  the 


of  their  debts.  Therefore,  where  an 
officer  had  attached  the  partnership 
effects  in  a  suit  against  one  of  the  part- 
ners, and  afterwards  with  the  consent 
of  the  firm,  which  was  insolvent,  suf- 
fered the  effects  to  be  applied  to  pay  a 
partnership  debt  due  to  a  strangrer,  it 
was  held  that  he  was  not  responsible  to 
the  first  attaching  creditor  in  an  action 
for  not  having  seized  the  goods  in  exe- 
cution.    Bank  v.  Wilkins,  9  Me.  28. 

The  joint  sale  of  partnership  property, 
on  separate  executions  against  the  indi- 
vidual partners,  leaves  their  interest  as 
they  were.  Where  one  was  more  in 
advance  of  the  other  than  the  whole 
proceeds,  partnership  executions  are  to 
be  first  satisfied,  and  then  the  separate 
execution  creditors  of  such  partner,  in 
exclusion  of  the  other  partner  and  his 
separate  execution  creditors.  Cooper's 
Appeal,  26  Pa.  St.  262.  See,  also.  Van- 
dike's  Appeal,  57Penn.  St.  9. 

An  individual  creditor  attached  firm 
property;  a  firm  creditor  thereupon  at- 
tached the  same  property :  Held,  that, 
in  order  to  obtain  the  precedence  to 
which  the  firm  creditor  had  a  right,  and 
to  oust  the  first  attachment,  it  must  ap- 
pear by  a  bill  in  equity,  or  in  some  way, 
that  all  the  firm  property  was  needed  to 
pay  the  firm  debts.  Scudder  v.  De- 
lashmut,  7  Iowa,  39. 

The  court  will  not,  by  injunction,  re- 
strain the  sale  of  the  interest  of  one 
partner  in  co-partnership  property  under 
a  judgment  and  execution  against  such 
partner  for  a  debt  due  from  him  indi- 
vidually, where  there  are  no  averments 
in  the  complaint  to  show  that  the  debtor 
in  the  execution  has  not  some  interest 


in  the  property  levied  on,  after  the  satis- 
faction of  the  partnership  debts,  and 
after  deducting  the  interest  of  the  solv- 
ent partners  from  the  partnership  estate. 
Mowbray  r.  Lawrence,  13  Abb.  Pr. 
317;  22  How.  Pr.  107.  See,  also. 
Moody  V.  Payne,  2  John.  Ch.  64S. 

One  partner,  who  has  sold  out  his  in- 
terest to  his  co-partner,  retaining  V>y 
agreement  a  lien  upon  the  property  for 
his  indemnity,  may  obtain  an  injunction 
to  pi  event  a  private  creditor  of  the 
vendee-partner  from  selling  on  execu- 
tion before  an  account  had  been  taken, 
and  the  interest  of  the  vendee-partner 
in  the  property  thereby  ascertained. 
White  V.  Parish,  20 Tex.  688;  Rogers  r. 
Nichols,  Id.  719. 

Certain  creditors  obtained  judgments 
aga'nst  an  insolvent  limited  partner- 
ship, upon  failure  to  answer,  and  levied 
execution  on  the  partnership  effects; 
after  which  the  partners  made  a  general 
assignment  for  benefit  of  creditors, 
without  preferences:  Held,  that,  at 
suit  of  a  creditor  at  large,  those  pro- 
ceedings would  be  enjoined  and  a  re- 
ceiver appointed  to  take  charge  of  all 
the  assets  of  the  firm,  as  they  existed  at 
the  time  of  its  insolvency,  discharged  of 
the  liens  of  the  executions,  and  to  dis- 
tribute the  same  equally  among  all  the 
creditors.  Jackson  v.  Sheldon,  9  Abb. 
Pr.  127. 

Where  there  is  a./?,  fa.  against  a  firm, 
and  an  older/. /a.  against  one  of  the 
partners,  the  proceeds  of  a  sale  of  part- 
nership property  must  be  apphed  first  to 
the  ,fi.  fa.  against  the  firm.  Crawfonl 
r.  Baura,  12  Rich.  7o.  Coover's  Appeal. 
29  Pa.  St.  1.     See,  Miller  v.  Miller,  3 


(g)  3  Jur.  K.  S.  31. 


1391 


4055 


DEATH    AND    ITS   CONSEQUENCES 


[book  IV. 


late  firm  against  the  executors  of  Beckwitli  and  the  assignees  of 
Young,  praying  for  a  declaration  that  Beckwith's  real  and  personal 
estate  was  liable  in  equity,  after  satisfying  his  separate  debts,  to  the 


Pittsb.  540;  Cope's  Appeal,  39  Pa.  St. 
284. 

An  action  for  a  false  return  will  not 
lie  against  a  sheriff  for  returning  an 
execution  nulla  bona,  where  the  proper- 
ty of  a  firm  is  levied  on  under  an  execu- 
tion against  one  of  its  meinbers,  and 
previous  to  a  sale,  an  execution  against 
the  firm  comes  to  the  hands  of  the 
sheriff,  under  which  the  property  levied 
on  by  the  first  execution  is  exhausted. 
Dunham  v.  Murdock,  2  Wend.  553; 
Tappan  v.  Blaisdell,  5  N.  H.  189. 

Where  more  is  levied  on  partnership 
property  than  is  sufficient  to  pay  part- 
nership executions,  the  balance  may  be 
applied  to  pay  private  executions  in  the 
hands  of  the  officer.  Roop  v.  Rogers,  3 
Watts,  193. 

B.  &  L.,  as  a  fii-m,  were  members  of 
two  other  partnerships,  and  all  three 
finns  failed.  The  creditors  of  the  two 
other  firms  put  attachments  on  property 
belonging  to  B.  &  L.  before  the  creditors 
of  that  firm  attached  it:  Held,  that  the 
creditors  of  B.  &  L.  were  entitled  to  the 
proceeds  of  a  sheriff's  sale  of  the  prop- 
erty,    Bullock  V.  Hubbard,  23  Cal.  495. 

Where  the  sheriff  has  in  his  hands  at 
the  time  of  the  sale  an  execution  against 
one  partner,  and  also  executions  against 
the  firm,  and  sells  the  goods  absolutely 
and  not  in  the  interest  of  one  partner 
therein,  the  presumption  is  that  he  sold 
under  the  executions  against  the  firm. 
Rider  v.  Gilbert,  16  Hun,  163. 

A  judgment  recovered  against  all  the 
partners  of  a  firm,  upon  process  served 
upon  all,  imports  in  itself  the  existence 
of  a  partnership  debt.  Jaques  v.  Green- 
wood, 12  Abb.  Pr.  232. 

Where  there  is  a  judgment  against  a 
firm,  and  the  creditor  has  a  priority  un- 
der an  execution  on  the  property  of  such 
a  firm,  he  retains  it,  though  he  does  not 

1392 


show  that  his  claim  was  on  a  partner- 
ship transaction,  the  presumption  being 
that  it  was.  McDuffie  v.  Bartlett,  3  Pa. 
St.  317. 

In  order  however,  to  entitle  a  judg- 
ment creditor,  on  a  bond,  given  in  the 
partnership  name  to  be  satisfied  out  of 
the  proceeds  of  a  sale  of  partnership 
property,  in  preference  to  a  prior  execu- 
tion against  one  partner,  levied  on  the 
same  property,  it  is:  held,  that  it  must 
appear  affirmatively  that  the  bond  was 
given  to  secure  the  paym3nt  of  a  part- 
nership debt.  Snodgrass'  Appeal,  13 
Pa.  St.  471. 

Finn  property  is  not  holden  by  an  at- 
tachment in  a  suit  based  on  the  joint  and 
several  notes  of  the  partners,  and  not 
being  a  partnership  debt.  Buffum  v. 
Seav.:r,  16  N.  H.  160. 

A  and  B  partners,  executed  a  bond 
as  follows,  to  wit:  "  We,  A  and  B  now 
trading  under  the  firm  of  A  &  Co.,  are 
held  and  bound,  &c.;  for  payment 
whereof  we  bind  ourselves,  and  each  and 
every  of  our  heirs,  executors,  and  ad- 
ministrators, jointly  and  severally": 
Held,  that,  whether  the  bond  was  bind- 
ing on  the  partnership  or  not,  it  was  the 
separate  debt  of  each  of  the  partners, 
and  that  the  obligee  was  not  bound  to 
resort  to  the  partnership  in  the  first  in- 
stance. Perman  v.  Tunno,  Riley,  Eq. 
181. 

In  this  action,  commenced  by  one 
partner  against  his  co-partner  to  adjust 
the  affairs  of  the  partnership,  which  was 
insolvent,  and  to  distribute  its  assets 
equally  among  its  creditors,  a  receiver 
was  by  stipulation  appointed.  After 
the  commencement  of  this  action  and 
the  appointment  of  a  receiver,  and  dur- 
ing the  pendency  of  this  action,  other 
actions  were  brought  against  the  firm 
by  certain  of  their  creditors  and  judg- 


c:iAi'.  I.] 


AS    REGARDS    JOINT    CREDITORS. 


4056 


joint  del)ts  of  tlic  firm;  for  an  account  of  sucli  debts  at  Beckwith's 
deatli;  for  an  acccnint  of  the  joint  assets  received  by  liis  executors 
and  Young's  assignees;  for  an  accountof  Beckwitli's  separate  debts; 
that  his  real  and  personal  estate  might  be  applied,  first  in  payment 
of  his  separate  debts,  and  then  in  pa3Mnent  of  the  joint  debts;  and 
that  a  receiver  might  be  appointed  to  get  in  the  outstanding  joint 
assets.  The  Court  held  that  the  plaintiff  was  clearl}'  enti- 
tled, as  a  creditor  of  Beckwith,  to  have  his  *estate  fully  ad-  "*105G 
ministered;  and  for  that  purpose  to  have  an  account  taken 
of  his  separate  estate;  and  to  have  the  accounts  between  Beckwith's 
executors  and  Young's  assignees  also  taken,  in  order  to  ascertain 
of  what  the  joint  estate  consisted;  and  a  decree  was  accordingly 
made  for  taking  such  iiccounts. 

AVhen  a  creditor  of  the  firm  proceeds  against  the  as-   .  , 

I  "  JiKlpmont  in 

sets  of  a  deceased  i)artner,  the  form  of  the  iud^-ment   ?;••'•"»';>•  cred- 
which  is  given  is  in  substance  as  follows  (A)  :  ecutorVf^a  de-" 

1.   It  is  declared  that  all  |)ersons  who  are  creditors  of    ''''''^*"^  partner. 
the  deceased,  are  entitled  to  the  benefit  of  the  judgment. 


inents  were  recovered  therein,  upon 
which  supplementary  proceedings  wore 
instituted,  resulting  in  the  sanu  person 
being  appointed  receiver  therein  as  in 
the  first  mentioned  action.  Subse- 
quently the  plaintiifs  in  the  creditor's 
actions  applied  to  have  the  receiver 
directed  to  pay  their  debts  out  of  the 
assets  in  his  hands:  Held,  that  the 
judgments  recovered  by  the  plaintiffs 
gave  them  no  priority  over  the  other 
finn  creditors,  and  that  the  order  was 
properly  denied.  Holmes  i'.  McDowell, 
15  Hun,  586. 

When  there  has  been  no  transfer  by 
the  finn,  and  the  prop"rty  remains  in 
.specie  and  capable  of  being  levied  upon, 
it  may  be  followed  in  the  hands  of  those 
claiming  by  vii-tue  of  such  transfers  or 
proceedings,  and  may  be  levied  upon  by 
a  judgment  creditor  of  the  firm.  Me- 
nagh  V.  Whitwell,  52  N.  Y.  147. 

Accordingly,  where  two  membei-s  of  a 
firm  of  three  mortgaged  their  interests 
to  secure  individual  dobts.  and  the  third 
ti'ansfcrred  his  iuten^st  to  a  stranger,  a 
levy  under  executiou  for  a  partnership 


debt  upon  the  firm  property,  in  the 
hands  of  a  purchaser  under  the  mort- 
gage is  valid.  Menagh  v.  Whitwell. 
52  N.  y.  147. 

Certain  real  estate  being  owned  by  a 
firm  composed  of  two  partners  and  used 
in  the  business  of  the  partnership,  one 
of  them  alone  executed  a  mortgage  on 
an  undivided  half  of  it,  to  secure  the 
payment  of  his  individual  debt.  After- 
wards said  real  estate  was  sold  at  sher- 
iff's  sale  under  a  judgment  rendered  af- 
ter the  execution  of  said  mortgage 
against  the  partners,  for  a  debt  of  the 
firm  contracted  before  the  execution  of 
the  mortgage:  Ilihl,  that  the  mort- 
gagee was  not  entitled  to  foreclose  his 
mortgage  as  against  the  purcha.ser  at 
the  sheriff's  sale,  without  first  redeeming 
or  offering  to  redeem  from  the  sheriff's 
sale  that  part  of  the  real  estate  covered 
by  said  mortgage.  Kestner  v.  Sindlin- 
ger,  3o  Ind.  114. 

{h)  See  Hills  v.  McRae,  9  Ha.  297; 
Harris  r.  Farwell,  13  Beav  407;  Rice  r. 
Gordon,  11  Beav.  271. 

-1  o'j.- 


*1057  DEATH    AND    ITS    CONSEQUENCES  [bOOK  IV. 

2.  It  is  declared  that  the  surplus  of  the  estate  of  the  deceased, 
after  satisfying  his  funeral  and  testainentarj'  expenses  and  separate 
debts,  was  liable  at  the  time  of  his  death  to  the  joint  debts  of  the 
firm,  but  without  prejudice  to  the  liability  of  the  surviving  partner, 
as  between  himself  and  the  estate  of  the  deceased. 

3.  An  account  is  directed  to  be  taken  of  the  funeral  and  testamen- 
tary expenses  and  separate  debts  of  the  deceased,  and  of  the  debts 
of  the  firm.  If  the  surviving  partner  is  not  a  party  to  the  action, 
liberty  is  given  him  to  attend  in  the  prosecution  of  this  last  inquiry. 

4.  An  account  is  directed  to  be  taken  of  the  personal  estate  of  the 
deceased. 

5.  It  is  ordered  that  his  personal  estate  be  applied,  in  the  first  in- 
stance in  the  payment  of  his  separate  debts  and  funeral  expenses,  in 
a  due  course  of  administration,  and  then  in  payment  of  the  debts  of 
the  firm. 

6.  And  if  the  personal  estate  of  the  deceased  is  insufficient  for 
the  purposes  of  the  action,  inquiries  are  ordered  to  be  made  for  the 
purpose  of  ascertaining  the  real  estate  to  which  the  deceased  was 
entitled. 

The  judiTjment  will,  if  necessary,  direct  inquiries  whether  the  cred- 
itors of  the  firm  continued  to  deal  with  the  surviving  partners,  and 
what  sums  have  been  paid  by  them  to  such  creditors,  and  whether 
the  creditors  have,  by  their  dealings  with  the  surviving  partners, 
released  the  estate  of  the  deceased  from  the  payment  of  their  res- 
pective debts,  (i) 
*1057  *No  directions  are  usually  given  for  the  purpose  of  keep- 
ing distinct  the  joint  and  the  separate  ei^tates;  but,  if  neces- 
sary, it  is  conceived  that  such  directions  would  be  given  in  order 
that  the  principles  upon  which  the  judgment  is  framed  might  be 
properly  carried  out.  [k) 

In  Ridgway  v.  Clare  (l)  two  partners,  A.  and  B.,  had  died.  A 
Rid  va  V  ^"^^  ^^''^^  instituted  by  a  separate  creditor  of  A.  fur  tlie 
Clare.  administration  of  his  estate;  a  suit  was  also  instituted 

by  a  separate  creditor  of  B.  for  the  administration  of  liis  estate;   a 
third  suit  was  instituted  by  a  joint  creditor  of  A.  and  B.  for  pay- 

(i)  See  the  decree    in    Devaynes    v.  Ridgway  r.  Clare.  19  Beav.  Ill;  Wool- 
Noble,  1  Mer.  530,  and  in  Fisher  r.  Far-  ley  V.  Gordon,  Taml.    11;    Paynter  i\ 
rington,  Seton  on  Decrees,  280,  ed.  2.  Houston,  3  Mer.  297. 
See  ib.  ed.  3.  p.  550.  (?)  Ridgway  v.  Clare,  19  Beav.  111. 

{k)  See  Rice  v.  Gordon,  11  Beav.  271; 

1394 


CHAP.  I.]  AS    REGARDS    JOINT    CREniTORS.  *1058 

inent  of  a  debt  due  from  both  out  of  both  tlicir  estates;  and  a 
fourth  suit  was  instituted  by  tlie  representatives  of  A.  against 
the  reresentatives  of  B.  for  taking  the  accounts  of  the  partnership. 
The  plaintiff  in  tlie  third  suit  was  found  to  be  a  creditor  of  both  A. 
and  B.,  but  he  was  held  by  the  Master  not  to  be  entitled  to  rank  as 
a  separate  creditor  of  A.  On  an  appeal  from  the  decision  of  the 
Master,  the  Court  thoui^ht  it  desirable  that  the  separate  creditors 
should  be  ascertained,  but  reserved  the  question  whether  the  joint 
creditor  was  or  was  not  entitled  to  rank  as  one  of  A. 's  separate 
creditors.  The  judgment,  however,  is  instructive,  as  it  states  the 
manner  in  which  the  Court  administers  the  assets  of  a  deceased 
partner,  and  pays  each  class  of  creditors.  It  appears  that  when 
there  are  assets  sufficient  to  pay  all  the  creditors,  the  estate  of  the 
deceased  forms  one  fund,  out  of  which  the  joint  and  separate  credit- 
ors are  ^a'ld  pari  jyf^ssu/  but  that  they,  and  the  funds  for  their  pay- 
ment, are  distinguished  when  the  assets  are  in  any  way  deficient. 

It  will  be  seen  hereafter  that  in  bankruptcy  a  creditor  who  holds 
a  security  cannot  retain  his  security  and  prove  for  his  Secured 
whole  debt,  nor  realize  his  security  and  prove  for  more  creditors, 
than  the  balance  then  remaining  due  to  him:    but  in  administer- 
ing estates  in  Chancery,  a  creditor  was  etititled  to  prove  for  and 
receive  dividends  upon  the  full  amount  of  his  debt,  and  at 
the  *same  time  realize  his  securit}",  so  that  until  his  debt     *1058 
was  satisfied  his  right  of  proof  remained,  (w)'     This,  liow- 
ever,  has  been  altered  by  the  Judicature  Act,  1875.  (/i)     A  creditor 
is  only  entitled  to  be  satisfied  his  debt,  but  until  he  is  satisfied  he 

(»i)  Bonser  v.  Cox,  6  Beav.  84;  Mason  for  the  payment  of  a  debt  of  a  partner- 

V.  Bogg,  2  M.  &  Cr.  443;  Kellock's  case,  ship  of  which  he  was  a  member,    and 

3  Ch.  769.  for  which  debt  the  creditor  also  held  a 

'Where  partnership    creditors    have  mortgage  on  lands   belonging   to    tho 

secured  themselves  by  mortgage,   they  firai  situated  in  Wisconsin, — held,  that 

must  abide  by  their  contract,   and  are  W.  was  not  m  the  situation  of  a  surety 

not  preferred  to   individual    creditors.  for  his  partner,  so  that  he  could  compel 

January  v.  Poj'ntz,  2  B.  Mon.  404.  a  resort  to  tlie  Wisconsin  mortgage  be- 

A  creditor  of  a  partnership  who  has  a  fore  the  creditor  could  come  upon  him, 

mortgage  on  the  separate  property  of  because  the  mortgage  was  given  to  se- 

one  of  the  partners  to  secure  him,  is  not  cure  the  note  of  the  firm  of  which  W 

required  to  resort  to  such  property  for  was  a  memVjer,   and  therefore  he  was 

payment.     Roberts  v.   Oldham,  63  N.  personally    liable  therefor.     Tiffany  r. 

C.  297.  Crawford,  14  N.  J.  Eq.  278. 

In    a    suit  to  foreclose   a   mortgage  (h)  §  10;  the  act  only  applies  to  the 

given  by  W.  on  his  individual  property  estiites  of  persons  dying  after  its  com- 

in  this  state,  as   "  additional  security  "  mencement. 

139.- 


*1050  DEATH    AND    ITS    CONSEQUENCES  [bOOK  IV. 

has  a  riglit  in  equity'  to  prove  for  his  whole  demand  against  the 
estates  of  all  his  debtors. 

The  crxlitors  of  a  partnership  having,  on  the  death  of  one  of  the 
Creditors'  right  partners,  a  right  .to  obtain  payment  from  the  surviving 
against  the        partners,  and  out  of  the  assets  of  the  deceased  partner, 

survivors  and  .  .  i        i  ,i  t^  i- 

against  the        the  uucstion  arises  whether  the  creditors  can  enrorce 

CStiltG  of  tilG 

deceased.  botli  these  rights,  or  whether  they  can  only  avail  them- 

selves of  one  of  them. 

Before  the  Judicature  Act,  if  the  creditors  proceeded  at  law 
against,the  surviving  partners,  but  did  not  obtain  satisfaction,  they 
could  afterwards  proceed  in  equity  against  the  estate  of  the  de- 
ceased partner,  (o)"  So  if  the  surviving  partners  became  bankrupt, 
and  the  creditors  of  the  firm  proved  against  their  estate  and  re- 
ceived a  dividend,  tliey  might  nevertheless  afterwards  proceed 
against  the  estate  of  the  deceased,  {p)  Again,  as  the  creditors  of 
the  firm  could  not  in  equity  obtain  any  decree  for  payment  by  the 
surviving  partners,  but  only  a  decree  for  payment  out  of  the  assets 
of  the  deceased  partner,  there  was  no  reason  why,  even  after  a 
decree  for  the  administration  of  the  estate  of  the  deceased,  the  cred- 
itors in  question  should  not  also  proceed  at  law  against  the  surviving 
partners.  If,  however,  it  could  be  shown  that  injustice  would  be 
produced  by  allowing  the  creditor  to  pursue  both  his  remedies  at 
once,  the  Court  would  perhaps  have  compelled  him  to  elect  between 

them,  or  have  restrained  him  from  proceeding  at  law.  {q) 
^1059  *The  Judicature  Acts  have  so  far  altered  the  practice  as 
to  allow  one  action  to  be  brought  against  the  surviving 
partners  and  the  legal  personal  representatives  of  the  deceased;  and 
the  creditor  will  practically  obtain  payment  from  the  survivors  or 
the  estate  as  may  be  most  convenient;  but  if  the  estate  of  the  de- 
ceased is  not  sufficient  to  pay  his  seperate  creditors  the  creditors  of 
the  firm  will  not  be  able  to  compete  with  them,  but  will  have  to 
look  to  the  surviving  partners,  (r) 

(o)  Jacomb  v.  Harwood,    2  Ves.  S.  comes  bankrupt,  and  a  creditor  of  the 

265;  and  the  cases  in  the  last  note.  firm  proves  against  his    «tate,  he  cannot 

2  See  ante,  1053,  note.  afterwards  sue  the  bankrupt  and  his  co- 

ip)  Heath  v.  Percival,  1  P.  W.  682;  partners  jointly.     See  Bradley  v.  Millar, 

Devaynes  v.  Noble   (Sleech's   case),    1  1  Rose,  273.     The  subject  of  election  in 

Mer.  539.  bankruptcy  will  be  examined  hereafter. 

((7)  See,  as  to  the  considerations  which  (r)  See  aH^e,  p.  1054,   and  Jud.  Act, 

guided  the  Court,  Ex  2)arfe  Kendall,  17  1875,  §  10. 
Ves.  525  and  526.     If  one  partner  be- 

1396 


CHAP.  I.]  AS   KEGAIIDS   JOLNT    CUEDITORS.  *1060 

If  more  than  one  partner  is  dead,  a  creditor  of  the  one  action 

^  ,  .        a^'Hinst  the  ex- 

firm  may,  in  one  action,  obtain  a  jndt^nient  against  the  ''^'-^^^l"^^^\J^l- 
estates  of  all  of  tlie  deceased  partners.  panuera. 

In  a  case  before  the  late  Vice-Chancellor  Shadwcll  there  was  a 
partnership  of  seven  persons.  A.,  B.,  C,  &c.,  and  Brown  v. 
another  partnership,  A.  and  B.,  composed  of  two  of  ^'""gi'^- 
the  members  of  the  first.  A.  and  C.  were  dead.  The  surviving 
partners  were  bankrupt.  Tlie  plaintift',  who  was  a  creditor  of  both 
firms,  filed  a  bill  on  behalf  of  himself  and  all  other  the  creditors  of 
A.,  and  on  behalf  of  himself  and  all  other  the  creditors  of  C.  against 
the  real  and  personal  representatives  of  A.,  the  personal  representa- 
tives of  C,  and  the  assignees  of  the  bankrupts.  The  bill  prayed 
that  an  account  might  be  taken  of  what  was  due  from  A.  and  C.  re- 
spectively to  the  plaintiff,  and  their  other  joint  and  separate  cred- 
itors, and  of  the  personal  estates  of  A.  and  C.  and  of  the  real  estate 
of  A.,  and  that  the  per.-onal  estates  of  A.  and  C.  and  the  real  estate 
of  A.  might  be  applied  in  payment  of  their  respective  debts,  as  well 
joint  as  6ei)arate.  This  bill  was  demurred  to  on  the  ground  of 
multifariousness,  but  tlie  Yice-Chancellor  overruled  the  demurrer, 
and  held  the  frame  of  the  suit  to  be  proper  in  point  of  form,  {s) 


h.  With  reference  to  tvhat  has  occurred  since  death. 

Having  now  examined  the  position  of  the  executors  of  a  deceased 
partner,  with  reference  to  the  creditors  of  the  firm,  and  in 
respect  of  debts  existing  at  the  time  of  the  death  of  *the     *10G0 
deceased,  it  is  proposed    to  consider  the  liability  of  the 
assets  of  the  deceased,  and  of  his  executors,  in  respect  of  what  may 
liave  taken  place  since  his  death. 

With  respect  to  the  executors  themselves,  it  is  clear  that  if  the 

executor  of  a  deceased  partner  carries  on  the  ivirtner-   rersonai  lia- 

111-11     i>i''ty  ^'' 
ship  business,  the  executor  becomes  personally'  lial)le  executors. 

to  third  parties  as  if  he  were  a  partner  in  his  uwn  right  {t)\'  and  if 

(s)  See  BrowTi  v.   DonrrUus.    11   Sim.  Moo.  P.  C.  198;  Ex  parte  Garland  10 

283:  Brown  r.  Weatherby,  12  Sim,  6.  Yes.  119;  Ex  parte  Hoklsworth,  1   M. 

Since  the  Judicature  acts  it  is  a  mere  D.  &  D.  475.     As  to  his  hablity  to  cred- 

question  of  convenience  whether  there  itoi-s  by  merely  sharing  profits  with  the 

shall  be  one  action  or  more.  surviving  partners,  see  Holme  r.  Ham- 

(0    See  Wightman  i\  Townroe,  1  M.  mond,  L.  R.  7  Ex.  21^.  ante,  p.  40. 

&  S.  412;    Labouchere  r.   Tupper,  11  » To  make  the  executors  of  a  deceased 

1397 


1000 


DEATH    AND    ITS    CONSEQUENCES 


[book  IV. 


tlie  executor  accepts  or  indorses  bills  of  exchange  or  promissory 
notes  either  in  Lis  own  name  as  executor  (u),  or  in  the  name  iu 
which  the  deceased  carried  on  business  («),  the  executor  will  be  per- 
sonally liable  to  be  sued  on  such  bills  or  notes.  Whether  in  such 
cases  the  executor  is  entitled  to  be  indemnified  out  of  the  assets  of 
the  deceased  is  altogether  another  question;  and  depends  upon 
whether  the  executor  has  carried  on  the  business  pursuant  to  the 


partner  liable  personally  as  partners 
with  the  surviving^  partner  for  the  firm 
debts,  it  must  appear  that  they  volunta- 
rily entered  into  such  partnership  and 
•employed  the  testator's  assets  in  the 
businefs  of  the  same.  It  is  not  suffi- 
cient to  so  charge  them  that  the  busi- 
ness is  carried  on  by  sundving  partner 
with  the  assent  of  the  executors,  and 
that  they  allow  the  testator's  share  of 
the  capital  to  remain  in  the  business  for 
the  benefit  of  the  cestui s  que  trust,  when 
it  is  done  in  accordance  with  the  m- 
^^tructions  of  testator's  will,  or  with  the 
partnei-ship  agreement.  Richter  v. 
Toppenhusen,  39  How.  Pr.  82. 

A  partnership  was  formed  between  J. 
andE.,  and  the  business  conducted  for 
some  time,  when,  in  1842,  J.  died,  leav- 
ing- a  will  by  which  he  appointed  his  wife, 
E.,  his  padner,  and  M.  his  executors, 
to  whom  he  devised  his  entire  estate 
in  trust  for  certain  purposes.  He  di- 
rected that  the  business  should  be  con- 
ducted after  his  death  by  E.,  and  that 
the  trustees  und  ^r  the  will  should  not 
withdraw  from  the  business  of  the  firm 
any  part  of  the  capital  which  he  had 
invested  therein,  unless  it  was  neces- 
•sary  for  them  to  do  so  in  payment  of 
liis  debts.  The  business  was  continued 
by  E.  according  to  the  directions  of  the 
testator  until  1857,  when  T.  was  taken 
into  the  firm,  and  an  article  of  agree- 
ment entered  into  between  E.  acting  in 
his  own  right,  and  jointly  with  the 
\vidowof  J.,  and  M.,  trustees  under  the 
will,  and  T.,  by  which  it  was  provided 


that  tlie  business  should  be  carried  on 
under  the  old  name,  and  should  con- 
tinue for  a  specified  time — the  net  prof- 
its were  to  be  divided  into  three  equal 
parts,  one  of  which  was  to  go  to  E.  in 
his  own  right,  one  to  the  trustees  under 
the  will  of  J.,  and  the  remaining  part 
to  T.  It  was  also  provided  that  in  case 
of  the  death  of  E.  his  "  executors  or 
trustees,  or  both,"  should  hold  the  same 
relations  to  the  firm  as  he  did  in  his  life- 
time. This  agreement  was  assented  to 
by  the  heirs-at-law  of  J.  Subsequently 
the  widow  of  J.  died,  and  in  1862,  the 
article  of  agreement  was  continued  for 
seven  years,  by  E.  acting  for  himself 
and  jointly  with  M.  as  surviving  exec- 
utors and  trustees  of  J.,  and  by  T,  This 
contract  was  also  assented  to  by  the 
children  of  J.  E.  died  leaving  a  will 
by  which  he  provided  for  the  continu- 
ance of  his  interest  in  the  business.  He 
appointed  0.  and  D.  his  executors — the 
latter  renounced,  and  the  former  became 
sole  executor.  The  business  was  car- 
ried on  in  the  same  name  and  at  the 
same  place,  untU  1868,  when  the  firm 
failed.  An  action  was  brought  by  a  cred- 
itor of  the  finn  against  M.,  seelring  to 
charge  hun  as  a  partner  for  the  debt.  M. 
never  participated  in  any  way  in  the 
management  of  the  business  of  the  firm, 
nor  exercised  any  control  or  supervision 
over  the  same,  nor  received  any  portion 
of  the  profits  thereof  directly  or  indi- 
rectly; and  never  gave  any  authority 
for  the  continuance  of  the  firm  after  the 
death  of  E.:     Held,  that  M.  was  not  a 


{u)  Liverpool  Borough  Bank  v.  Walk- 
er, 4  DeG.  &  J.  24. 
1398 


{x)  Lucas  V.  Williams,  3  Giff.  150. 


AS    REGARDS   JOINT    CREDITORS. 


•lOGO 


CHAP.  I.] 

will  of  the  deceased,  or  the  directions  of  those  beneficially  interest- 
ed in  his  estate. 

With  respect  to  the  direct  liability  of  the  assets  of  the  deceased 
to  creditors,  it  may  be  taken  as  a  (general  proposition,  Liability  of 

'  •'  ^  111       estiite  ul  «le- 

that   the  estate  of    a   deceased  partner   is  not   liable  t;w>scd  partner 

^  for  wiiiit  ocfurs 

to  third  juirties  for  what  may  be  done  after  liis  decease  after  his  death, 
by  the  surviving  partners;"  and  on  that  ground  it  has  been  held 
that  they  cannot  be  restrained  at  the  suit  of  the  executors  of  the 
deceased  from  continuing  to  carry  on  the  business  of  the  late  firm 
in  the  old  name,  (y) 


partner  in  the  firm,  and  was  not  per- 
sonally lialde,  as  a  partner,  to  a  creditor 
of  the  firm.  Owens  i'.  Mackall,  33  Md. 
38-4. 

The  legal  representatives  and  widow 
of  a  deceased  partner  suffered  his  share 
to  remain  in  the  firm,  which  was  con- 
tinued for  some  years,  when  a  new  firm 
was  formed  between  the  surviving  part- 
ner and  the  widow's  second  husband. 
She  intervened  in  the  contract,  and  con- 
s?nted  that  the  balance  due  her  as 
widow  in  community  should  remain  with 
the  new  firm  as  a  loan,  on  which  she 
was  to  receive  interest:  Held,  that  she 
was  a  creditor  of  tJic  new  firm  and  not 
a  partner.  Brower  v.  Creditors,  11  La. 
Ann.  117. 

If  the  administrators  of  a  deceased 
partjior  igiionintly  take  the  partnership 
books  and  collect  some  of  the  debts, 
they  do  not  thereby  become  responsible 
to  the  surviving  partner  for  all  the  part- 
nership debts.  Alexander  v.  Coulter,  2 
S.  &  R.  494. 

« See  post  1063,  note. 

k  clause  in  the  partnership  articles, 
that  the  partnership  shall  continue  for 
ft.  specified  time  notwithstanding  the 
death  of  one  or  more  of  the  partners, 
has  not  the  effect,  even  in  connection 
with  the  statute  of  Alabama  of  1839,  to 
render  the  administrator  of  the  deceased 
partner  liable  at  law  upon  a  contract 
made  by  the  smwivoi-s.     Edgar  v.  Cook, 


4  Ala.  r.88. 

A  stipulation  in  partnership  articles, 
that,  in  case  of  the  decease  of  either 
partner,  the  business  may  be  carried  on 
for  one  year  by  the  survivor  for  the  mu- 
tual benefit  of  both  ])arties,  does  not,  in 
ca.se  of  the  death  of  one  partner,  justify 
the  allowance  against  his  insolvent  es- 
tate of  a  debt  contracted  by  the  surviv- 
or within  the  year,  with  one  who  had 
notice  of  the  death.  Stan  wood  v.  Owen, 
14  Gray,  195. 

A  company  was  fonned  to  go  to  Cali- 
fornia. Among  other  ailicles  of  agree- 
ment was  one  that  in  case  of  the  death 
of  a  party  his  nearest  relatives  should 
receive  half  his  share  of  the  profits, 
80  long  as  the  concern  lasted:  Held, 
not  to  be  a  partnei-ship,  and  that  the 
court  had  no  equity  power  over  it  as 
such.     Knowlton  r.  Reed,  38  Me.  246. 

Where  the  mode  of  closing  the  busi- 
ness of  a  firm  is  by  the  creation  of  a 
new  one,  in  accordance  with  the  will  of 
a  deceased  partner,  composed  of  the 
surviving  partner  and  the  representa- 
tives of  the  deceased,  the  creditors  of 
the  new  firm  are  clothed  with  the  equi- 
ties of  that  firm  agtiinst  the  estate  of 
the  decedent  arising  out  of  the  payment 
by  the  new  firm  of  the  debtd  of  the  old. 
Laughlin  r.  Lorenz,  48  Pa.  St.  275. 

{;/)  Webster  r.  Webster,  3  Swanst. 
490,  note.  But  see  as  to  selling  good 
will,  aute,  p.  860. 

1309 


■^'1001  DEATH    AND    ITS    CONSEQUENCES  [bOOK  IV. 

In  the  great  case  of  Devayncs  v.  Noble  {z\  some  bills  deposited 
Devaynes^.  ^^''^^^  ^  ^'"'^^  of  bankers  were,  after  the  death  of  une  of 
Noble.  ^|jg    partners,    misapplied    by    the   surviving  partners, 

and  an  attempt  was  made  to  obtain  out  of  theestateof  the  deceased 
the  value  of  the  bills  so  misapplied.  But  the  attempt  was  not  suc- 
cessful; Sir  Wm.  Grant  observing — 

*10G1  *  "  If  there  be  no  remedy  at  law  against  the  executors  of  Mr.  Devayncs, 
I  am  at  a  loss  to  understand  the  equity  on  which  this  Court  is  to  intei-pose 
to  make  good  the  loss  against  Mr.  Devaynes'  estate.  It  has  not  been  incun-ed  by 
anything  that  he  did  or  neglected  to  do.  The  bills  were  safely  kept  as  long  as  he 
had  anything  to  do  with  them.  From  the  act  of  placing  them  in  the  custody  of  a 
partnership,  it  followed  that  upon  the  death  of  one  of  the  partners  they  would  fall 
into  the  possession  of  the  surviving  partners.  Mr.  Houlton  himself  therefore,  has 
virtually  placed  them  there.  Mr.  Devaynes'  executors  could  not  take  them  away; 
Mr.  Devaynes  could  not  direct  his  executors  to  take  them  away;  and  though  Mr. 
Devaynes  had  neither  been  personally  instrumental  in  the  loss,  nor  personally 
benefited  by  it,  nor  could  have  prevented  it,  yet  it  is  contended  that  it  is  upon  liis 
estate  the  less  ought  to  be  thrown,  and  that  by  a  court  of  equity.  I  apprehend, 
however,  that  it  would  be  the  reverse  of  equity  to  throw  the  loss  on  his  estate  in 
such  a  case  as  the  present.  It  might  be  as  well  contended  that  if  they  had  tkrown 
the  bills  into  the  fire,  or  lost  them  by  negligence,  Mr.  Devaynes  would  be  responsi- 
ble for  such  act  or  negligence.  He  had  no  more  to  do  with  the  sale  of  the  bills 
than  he  would  have  had  to  do  with  a  loss  occasioned  by  such  means  as  these." 

Moreover,  although  an  executor  has  power  to  dispose  of  the  as- 
Liabiiityof  ^^^^  ^^  ^^'®  deceased,  and  to  keep  alive  demands  against 
thl^'tfo/the  ^^^^''"  which  would  otherwise  become  barred  by  the 
executor.  statute  of  limitations,  still  the  acts  of  an   executor,  to 

whatever  extent  they  may  render  him  personally  liable,  do  not  im- 
pose liability  on  the  assets  of  the  deceased,  unless  those  acts  have 
been  properly  performed  by  the  executor  in  the  execution  of  the 
trusts  reposed  in  him.  At  the  same  time,  there  are  acts  which, 
if  done  by  an  executor,  impose  liability  on  the  assets  of  the  de- 
ceased («);  and,  therefore,  if  a  partner  appoints  a  co-partner  his 
executor,  and  dies,  and  the  executor  continues  to  carry  on  the  busi- 
ness, it  is  possible  that  his  acts,  attributed  to  him,  not  as  partner 
but  as  executor,  may  render  the  assets  of  the  deceased  liable  for 
what  may  have  occurred  since  his  death,  (J) 

[z)  Houlton's  case,  Johne's  case,  and  (6)  See  Vulliamy  v.  Noble,   3   Mer. 

Brice's  case,  1  Mer.  616,  etc.     See,  too,  614;  but  see  Farhall  v.  Farhall,  7  Ch. 

Vulliamy  v.  Noble,  3  Mer.  614.  123,  and  Owen  v.  Delamere,  15  Eq.  134, 

(«)  See  Williams  on  Executors,  vol.  and  ante,  p.  52. 
ii.  p.  1636,  etc.,  ed.  6,  1771,  ed.  7. 

1400 


CHAP.  I.]  AS    REGAKbS   JOINT    CKEDITOKS.  '^1002 

If  an  executor  of  a  deceased  partner  carries  on   the  partnership 
business  pursuant  to  directions  contained  in  the  will  of    Effc-t  ofcm- 

*  _  pldyrrn'iit  of 

his  testator,  tlie  executor  will,  as  already  uo in  ted  out,  as-cts  in  tiie 
render  himself  personally  liable  for  debts  contracted  in   thoiirm. 
80  doiiif^,  but  lie  will  be  entitled  to  indemnity  in  re=pect  thereof 
out  of  the  esl^ate  of  the  deceased;  and  consequently,  if  a  de- 
ceased partner  *lias  himself  directed  his  assets  or  any  ])art     *]0G2 
thereof  to  be  employed  in  carrying  on  the  partnersldp  busi- 
ness, so  much  of  them  as  are  directed  to  be  employed,  are  liable  to 
'.nake  good  the  debts  contracted  during  their  employment.     For 
these  reasons,  and  to  this  extent,  therefore,  liis  estate  will  be  ap- 
plicable to  the  liquidation  of  the  demands  of  those  who  have  be- 
come creditors  of  the  partnersliip  after  his  decease.     In  such  a  case, 
the  creditors  are  better  off  than  the  creditors  of  ordinary  partners, 
inasmuch  as  these  last  have  nothing  to  look  to  except  the  property 
of  tlie  partners;   whereas,  in  the  case  supposed,  the  creditors  have 
not  onl}'  the  personal  security  of  those  who  carry  on  the  business, 
but  also  a  right  to  be  paid  out  of  the  assets  of  the  deceased  em- 
ployed therein,  (c) 

The  cases  which  liave  occurred  upon  this  subject,  have  for  the 
most  part  arisen  w'here  the  executor,  having  continued   proof  bv  the 
the  business  with   the  surviving  partner,  and  having  ^he'event'of 
become  bankrupt  with  him,  has  endeavored  to  with-  banicrui-tfy. 
draw  from  the  joint  estate  the  assets  of  the  deceased  employed  in 
the  trade.     In  such  cases,  the  executor  has  been  held  entitled  to 
prove  for  the  value  of  the  assets  which  he  embarked  in  the  business 
without  authority,  such  assets  being  in  substance  an  unauthorized 
loan  of  trust  money;  but  he  has  been  held  not  entitled  to  prove  as 
against  joint  creditors  for  tlie  value  of  those  assets  whicli  his  testa- 
tor authorized  to  be  so  continued  in  the  business. 

In  Ex  jparte  Garland  (c?),  a  miller  and  farmer  made  a  will  where- 


by he  directed  his  wife  to  carry  on  liis  business,  and    ^x  pane 
that  for  the  purpose  of  enabling  her  to  carry  it  on,  any  <^a'"i"»J- 


sum  not  exceeding  600Z.  should  be  advanced  to  her  by  liis  trustees. 
He  also  directed  his  wife  to  give  her  notes  of  hand  for  what  might 
be  advanced,  and  for  the  value  of  the  stock,  crops,  and  effects,  in 

'  (c)  See  the  cases  in  the  next  two  of  that  class,  noticed  hereafter  under 
notes.  the  heiul  Bankruptcy;   Hall  r.  Fennell, 

(«f)  10  Ves.  110.     See,  also,  Ex  parte      Ir.  Rep.  9  Eq.  40(5,  and  on  Appeal,  615. 
Butterfield,  DeG.  570,  and  other  cases 

1401 


•5-1063  DEATH    AND    ITS    CONSEQUENCES  [bOOK  IV. 

his  business.  He  appointed  his  wife  and  the  trustees  before  al- 
luded to  his  executors.  After  his  death,  his  widow  carried  on  the 
business,  the  stock,  crops,  and  effects  in  which  were  valued  at 
ISoll.  5s.  Od.  She  also  received  6001.  from  the  trustees  for 
*1063  the  purpose  of  enabling  her  to  carry  on  the  *business,  and 
for  these  two  sums  she  gave  them  her  promissory  notes. 
She  also  became  indebted  to  the  estate  of  the  testator  in  a  further 
sum  of  768Z.  12s.  4:d.  She  then  became  bankrupt,  and  an  attempt 
was  made  to  prove  as  debts  due  from  her  to  the  estate  of  the  de- 
ceased, these  three  sums  of  1351Z.  5s.  Od.,  600?.,  and  76SZ.  12*.  4d. 
But  it  was  held  by  Lord  Eldon,  that  although  the  last  sum  might, 
the  two  first  could  not  be  proved  against  her  estate;  for  they  rep- 
resented property  which  the  deceased  had  authorized  to  be  embarked 
in  trade,  and  which  was  therefore  answerable  to  the  creditors  of  the 
trade. 

The  above  decision  has  been  followed  by  others,  and  its  propri- 
ety has  never  been  questioned,  (e) 

The  liability  of  the  estate  of  a  deceased  partner  to  persons  who 
Creditors  be-  who  become  Creditors  after  his  decease  is  subject  to  its 
preferred  to        liability  to  tliosc  who  wcro  his  creditors  at  his  decease. 

subsequent  _-,  "  r.      ,     i  •  i  i       i ,  i  i       •  i 

creditors.  ihesc  last   luust  tirst   DC  paid;  and  altliough,  m  such 

a  case  as  Ifi'x  jparte  Garhind,  they  might  not  be  able  to  ibllow  the 
assets  of  the  deceased  into  the  hands  of  the  trustee  in  bankruptcy, 
yet,  in  administering  the  estate  of  a  person  whose  assets  have  been 
employed  in  trade  in  pursuance  of  directions  contained  in  his  will, 
the  creditors  who  have  become  such  since  his  decease  cannot  com- 
pete with  his  other  creditors.  {/*) 

It  has  at  various  times  been  contended  that  when  a  testator 
Amount  of         dirccts  a  trade  or  business  to  be  carried  on  after  his 

estate  liable  -,         ^         ^  .  •  771-  i 

where  assets      deceaso,  hc  thereby  sumects  all  his  assets  to  the  pay- 
are  directed  to  1  •  .       . 
be  continued     mcut  of  dcbts  incurred  in  the  course  ot  carrying  it  on; 

in  the  busi-  ./      s  ' 

ness.  and  a  decision  by  Lord  Ivenyon  {g)  has  been  supposed 

to  warrant  such  contention.     It  is  now,  however,  clearly  settled, 

(e)  See,  in  addition  to  the  case  last  owing  mainly  to  lapse  of  time  and  the 

cited,  Ex  parte  Richardson,  Buck.  202,  impossibility  of   taking  the  necessary 

and  3  Mad.  138;  Thompson  ^•.  Andrews,  accounts. 

1  M.  &  K.  116;  Cutbush  v.   Cutbush,  1  (/)  See  Cutbush  v.  Cutbush,  1  Beav. 

Beav.  184;  Scott  v.  Izon,  34  Beav.  4:34.  184. 

In  tliis  last  case  it  was   attempted  to  {(j)  Hankey  v.  Hammock,  Buck.  210, 

make  an  executor  responsible  for  not  and  3  Madd.  148. 
having  proved,  but  the  attempt  faUed, 

1402 


o;iAi'.  I.] 


AS   REGARDS   JOINT    DIKECTOKS. 


nocA 


that  the  extent  of  the  liability  of  the  testator's  estate  does  not  exceed 
the  amount  authorized  by  hira  to  be  employed  in  the  trade  or  busi- 
ness directed  by  him  to  be  carried  uii  (Aj;'  and  it  is  gener- 
ally admitted  that  *the  decision  of  Lord  Kenyon  is  not  in-     *10G4 
consistent  witli  this  doctrine,  (i) 

It  becomes,  therefore,  a  matter  of  considerable  importance,  not 
only  to  executors  but  to  creditors,  to  ascertain  what  a  Effector  gen- 
testator  who  directs  his  trade  or  business  to  be  carried  t^M^rry'^ou'^'' 
on  has  authorized  to  be  employed  in  carryin*^  it  on.  ^^"■'^^■ 
This  must,  of  course,  depend  on  tlie  'terms  of  his  will;  but  it  has 
been  hekl  that  a  general  direction  to  carry  on  a  business  in  which 
the  testator  was  eni^aged  at  the  time  of  his  death  does  not  authorize 


(h)  See  the  cases  in  the  last  three 
notes,'  and  McNeillie  v.  Acton,  4  DeG. 
M.  &  G.  744. 

*  Cook  V.  Rogers,  8  Am.  Law  Record, 
641. 

One  partner  may  by  will,  provide  for 
the  continuance  of  the  partnership  after 
his  death,  by  the  consent  of  the  surviv- 
ing partner  or  partners,  and  may  bmd 
h's  whole  estate  for  debts  to  be  incur- 
red by  the  partnership  after  his  death, 
or  only  that  portion  of  it  invested  in  the 
parthership  at  the  time  of  his  death. 
Cook  V.  Rogers,  supra. 

In  order,  however,  to  bind  the  estate 
of  a  deceased  partner,  either  by  a  part- 
nership agreement  or  by  will,  for  the 
payment  of  debts  contracted  by  the  part- 
nei'ship  after  his  death,  it  is  necessary 
that  the  most  clear  and  unambiguous 
language  should  be  used,  showmg  clear- 
ly the  intention  to  bind  the  general 
estate  of  the  decedent,  and  not  merely 
to  bind  his  "share"  or  "interest"  al- 
ready embarked  in  the  partnership  at 
the  time  of  his  death.  Cook  v.  Rogers, 
supra. 

R.,  by  a  single  clause  in  his  will  di- 
rected his  executor  to  continue,  keep  up, 
and  represent  his  shares  and  interests  in 
three  several  partnerships,  of  each  of 
which  he  was  a  member,  until  such  time 
after  his  death  as  said  executor  should 
think  it  most  advantageous  to  his  estate 


to  sell  out,  or  settle  up  and  close  the  said 
shares  and  interests  respectively,  but  did 
not  use  such  language  as  to  show  that 
he  inteded  to  bind  his  general  estate  for 
the  debts  of  either  of  these  partnerships 
that  might  be  incurred  alter  his  death. 
The  pai'tnerships  were  earned  on  aft vr 
his  death  as  directed.  Two  of  them 
made  large  profits,  which  came  into  the 
hands  of  the  executor.  The  other  be- 
came insolvent:  Held,  that  the  credit- 
ors of  the  insolvent  firm  whose  claims 
accrued  after  testator's  death,  had  no 
right  to  be  paid  out  of  the  profits  of  the 
successful  partners  any  more  than  out 
of  any  other  property  of  testator's  estate 
not  embarked  in  the  insolvent  partner- 
ship.    Cook  V.  Rogers,  supra. 

A  partner  by  his  will,  made  his  brother, 
who  was  his  co-partner,  executor,  and 
devised  to  him  the  residue  of  his  estate 
in  trust  for  certain  purposes,  and  autho- 
rized him  to  use  in  his  business  the 
property  given  him  in  trust,  until  it 
sliould  be  wanted  for  distribution :  Ilild, 
that  the  intent  of  the  will  was  that  the 
residue  only  should  l>e  used  in  business, 
and  that  the  surviving  partner  was 
bound  to  settle  the  affaii-s,  and  pay  the 
debts  of  the  firm,  in  the  usual  way,  not- 
withstanding tliis  clause.  He  Clap,  2 
Lowell,  168. 

(i)  See  the  observations  of  Turner,  L. 
J.,  m  4  DeG.  M.  &  G.  744. 

1403 


*10G5  DEATH    AND    ITS    CONSEQUExXCKS  [bOOK  IY. 

• 

the  emplojinent,  for  the  piirjioscs  of  that  business,  of  more  of  his 
assets  thun  are  embarked  therein  when  he  dies,  {k)  It  has  also 
been  held,  that  a  bequest  by  a  person  of  money  upon  trust  to  allow 
it  to  remain  in  the  concern  of  which  he  is  a  partner,  does  not  neces- 
sarily empower  the  trustees  to  trade  with  that  money;  fur  the  con- 
text may  show  that  all  the  testator  meant  was  that  the  sum  in 
question  should  not  be  called  in,  but  be  allowed  to  remain  outstand- 
ing as  a  loan  to  the  surviving  partners  {I) 


CONSEQUENCES    OF    DEATH   AS    REGARDS   JOINT    CREDITORS.    ] 

{Continued.) 

2.  In  the  case  of  cotnpanies. 

The  position  of  the  executors  of  a  deceased  member  of  a  com- 
Liabiiity  of       pauv  is,  as  reo;ards  the  creditors  of  the  company,  vrima 

executors  of        ^  ^      .  ,       ,         ,  .    .  ..    , 

shareholders       facie  the  samc  as  the  ieo^al  position  oi  the  executors  oi 

to  creditors  of       ''  .   i 

companies.  an  Ordinary  partner  with  respect  to  the  creditors  of 
the  firm.  Whether  the  company  is  incorporated  or  unincorporated, 
its  creditors  hd^vQ,  prima  facie,  no  legal  locus  standi  Sigixm&t^Tidcw- 
tors;  and  unless  the  deceased  was  under  a  several  as  well  as  a  joint 
liability  to  the  creditors  of  the  company,  the  latter  can  only  pro- 
ceed against  the  executors  of  the  former  in  one  of  two  cases:  viz., 

first,  where  the  creditors  are  specially  empowered  to  do  so 
*1065     by  some  statute;  or,  secondly,  where  the  *executors  luive 

themselves  become  shareholders,  and  liable  as  such  to  the 
debts  of  the  company.  Several  cases  have  been  decided  in  which 
executors,  not  being  themselves  shareholders,  have  been  held  not 
liable  to  creditors  of  companies. 

With  respect  to  the  right  of  a  creditor  of  a  company  to  proceed 
Equitable  agaiust  the  cxccutors  of  a  deceased  shareholder,  a  dis- 

liabilityof  P       ,  ' 

estate  of  de-       tiuctiou  must  be  taken  between   unincorporated   and 

ceased  share-        ,  •  <»  i 

holder.  incorporated  companies;  for  whilst  the  assets  of  a  de- 

ceased shareholder  in  an  unincorporated  company  are  prima  facie 
liable  to  the  debts  of  the  company  contracted  before  his  decease, 
the  assets  of  a  deceased   member  of  a  body  corporate  are,  prima 

(k)  See  McNeillie  v.  Acton,  4  DeG.      required. 
M.  &  G.  744,  where  further  capital  was  {I)  See  Travis  v.  Milne,  9  Ha.  141. 

1404 


CHAP.  I.]  AS    REGARDS    JOINT    CREDITORS.  *10GG 

facie,,  not  liable  to  the  payment  of  the  debts  thereof.  But  as  re- 
gards botli  classes  of  companies,  the  position  of  executors  in  fact 
depends  less  on  general  ])rinciple3  than  on  particular  statutes,  the 
provisions  of  which  must  therefore  not  be  overlooked.  Thus, 
although  banking  companies  governed  bj  7  Geo.  4,  c.  46,  are  not 
corporate  bodies,  and  although  creditors  of  sucli  companies  are,  it 
seems,  entitled  to  obtain  payment  of  their  debts  out  of  the  assets 
of  a  deceased  shareholder,  still  the  creditors'  rights  are  so  far  mod- 
ified by  the  acts  in  question,  that,  whether  they  are  creditors  by 
specialty  or  by  simple  contract,  the  lapse  of  three  years  after  the 
death  of  a  sliareholder  bars  their  claims  against  his  executors (m); 
and  even  within  that  period  the  executors  are  only  liable  to  pay 
such  debts  as  the  surviving  shareholders  are  unable  to  discharge,  {n) 
Several  cases  arc  also  to  be  found  in  which  executors,  not  being 
themselves  shareholders,  have  been  held  not  liable  to  creditors.  (t>) 
Similar  observations  appW  to  actions  for  calls. 

The  liabilities  of  executors  as  contributories  under  the  "Wiiiding- 
np  act',  will  be  alluded  to  hereafter;  it  may, 
*however,  be  observed,  that  their  liability  to  *1066  lZ[T^^^L^. 
calls  under  thos?  acts,  is  not  governed  by  the 
principles  ajjplieable  to  ordinary  partnershij^s,  and  is  not  confined 
to  calls  made  for  the  payment  of  debts  incurred  by  the  company 
prior  to  their  testator's  decease,  (j?) 


SECTION  ITT.— CONSEQUENCES  AS  REGARDS  THE  SEPARATE  CREDIT 
ORS,  LEGATEES,  AND  NEXT  OF  KIN  OF  THE  DECEASED. 

In  considering  the  consequences  of  the  death  of  a  partner  or 
shareholdei-,  as  regards  his  separate  creditors,  and  his  legatees,  or 
next  of  kin,  it  will    be  convenient,  first  of  all,  to  examine  their 

(»j)  See  Barker  v.  Buttress,  7  Beav.  where  the  deceased  had  died  before  the. 

134.  creditor  had  obtainod  judprinent  ajraiiTit 

(»)  Heward  v.  Whfatley,  Ex  parte  the  company.  The  doubt  expressed  in 
Wilson,  5  DeG.  &  S.  552.  Compare  Re  Ricketts  v.  Bowhay,  3  C.  B.  889,  is  re- 
Walton,  23  Beav.  480.  moved  by  the  decision  in  Ness  v.  Arm- 

(o)  Ness  V.    Armstrong,    4    Ex.    21,  strong,  4  Ex.  21 ;  and  the  case  of  Ness 

where  the  executors  had  received  divi-  v.  Bertram,  4  Ex.   191,  turned  entirely 

dends;  Powis  v.  Butler,  3  C.  B.  N.  S.  on  a  point  of  pleading. 
645,  and  4  ib.  469,  whore  the  deceased's  (p)    See    Baird's    case,   5    Ch.    725; 

name  was  kept  on  the  register  of  share-  Blakeley's  case,   13  Beav.   133,  and  3 

holders;  Poole  v.  Knott,  7  W.  R.  527,  Mac.  &  G.  726. 

1405 


*1067  EIGHTS    OF    LEGATEES,    ETC.,    OF    THE    DECEASED.       [bOOK  IV. 

rights  under  ordinary  circumstances,  and  then  to  advert  to  the 
complicated  questions  vrhich  arise  when  the  assets  of  the  deceased, 
instead  of  being  realized,  are  allowed  by  his  executors  to  be  employed 
in  the  business  carried  on  by  the  firm  or  company  to  which  he  be- 
longed, and  when  shares  in  companies  are  specifically  bequeathed. 


nights  of  separate  creditors  and  legatees  generally. 

Under  ordinary  circumstances,  the  separate  creditors,   legatees, 
Legatees.  Ac,     and  ucxt  of  kin  of  a  deceased   partner,  must  look  for 

of  deceased  r  ' 

OTJ'ms"^'  payment  of  what  is  due  to  them  out  of  his  assets,  to 
executor.  his  legal  personal  representative,  and  to   him  alone,  {q) 

The  executors  are,  under  ordinary  circumstances,  the  only  persons 
who  have  a  right  to  call  upon  the  surviving  partners  for  an  ac- 
count;' and  of  this  right  they  do  not  divest  tliemselves  by  a  sale 
and  assignment  of  the  share  of  the  deceased;  for  the  effect  of  such 
sale  and  assignment  is  only  to  make  the  executors  trustees  for  the 
purchaser,  (r) 

A  leading  case  illustrating  the  doctrine  that  the  executors  of  a 
deceased  partner  are,  under  ordinary  circum- 
The'ca?ron        *1067     stauccs,  the  *only  pcrsons  entitled  to  require  an 
ompany.  accouut  from  the  surviving  partners,  is  Stainton 

V.  The  Carron  Company,  {s)  There  a  bill  was  filed  by  the  residuary 
legatees  of  a  person  who  had  been  the  agent  of  and  a  shareholder  in  a 
company,  against  liis  executors  and  other  persons  interested  in  the 
will  of  the  deceased,  and  against  tiie  company.  The  bill  charged  that 
one  of  the  executors  was  an  agent  and  manager  of  the  business  of  the 
company,  and  that  he  and  another  executor  were  large  shareholders 
therein,  and  that  a  third  executor  was  also  an  agent  and  manager, 
and  was  entitled  under  the  will  of  the  testator  to  ten  shares  in  the 
company,  and  that  all  three  executors  had  interests  conflicting  with 
their  duties  as  executors  and  trustees;  and  the  bill  prayed  (amongst 
other  things)  that  the  company  might  transfer  the  testator's  shares 
to  his  executors,  and  that  an  account  might  be  taken  of  what  was  due 
from  the  company  to  his  estate,  and  for  paymentto  the  executors  of 

(g)  Alsager  v.  Rowley,   6  Ves.  748;  son,  5  Jur.  N,  S.  1091. 
Saunders  v.   Druce,  3  Drew.    140.      If         •  See  ante,  945,  and  note, 
there  is  no  person  who  in  this  country  (r)  Clegg  v.  Fishwick,  1  Mac.   &  G. 

represents  the  deceased,  a  representative  294. 
will  be  appointed.  See  Maclean  v.  Daw-         (s)  18  Beav.  146. 

1046 


CHAP.  I.]  DKATII    AND    ITS    CONSKQUENCKS.  *1CGS 

the  amount  to  be  fonnd  due.  The  conipauy  and  one  of  tlie  executors 
demurred,  and  their  demurrers  were  uHowed.  In  deliverinj^  judg- 
ment the  Master  of  the  Rolls  thus  sununed  up  tlie  effect  of  tlie 
cases  on  this  subject: — 

"The  persons  interested  in  the  estat"  of  the  testator,  not  being  the  legal  personal 
representatives,  will  not  be  allowed  to  sue  persona  possessed  of  assets  belong-ing  to 
the  testator,  unless  it  is  satisfactorily  made  out  that  there  exist  assets  which  might 
be  recovered,  and  which,  but  for  such  suit,  would  probably  be  lost  to  the  estate."' 
And  again:  "To  support  such  a  bill  as  this  it  is  not  sufficient  to  prove  that  it  may 
be  an  unpleasant  duty  to  the  executors  and  trustees  to  take  the  necessarj'  steps  for 
protecting  property  entrusted  to  them.  It  is  not  sufficient  to  show  that  it  will  be 
for  their  interest  not  to  take  such  steps;  it  is  necessary  to  show  that  they  prefer 
their  interest  to  their  duty,  and  that  they  intend  to  neglect  the  performance  of  the 
obligation  incidental  to  the  office  imposed  upon  them  by  the  testator,  and  which 
they  have  undertaken  to  perfonn." 

The  executors,  it  may  be  observed,  have,  in  ordinary  cases,  a  per- 
sonal interest  in  getting  in  the  assets  of  the  deceased;  ^j,jj.^i ^^f^^j^ 
for,  if  tliey  willfully  neglect  so  to  do,  they  will  be  made 
to  account  for  the  assets,  although  they  may  not  actually  have  re- 
ceived them,  {t) 

*It  must  not,  however,  be  supposed  that  in     *1068  Taking part- 

'  ^  '  nerslnp  ae- 

an   action  against  the  executor  of  a  deceased  ^°"insrexe[^'i'" 

partner  by  a  separate  creditor,  legatee,  or  next  of  kin,  tomionp. 
no  account  of  the  deceased  partner's  share  in  the  partnership  can  be 
decreed  or  taken;  for  it  is  the  common  course  in  such  an  action  tn 
direct  an  inquiry  what  is  due  to  the  estate  of  the  deceased  in  respect 
of  such  share)  {n)  But  before  the  Judicature  acts  in  a  suit  of  this 
description  the  surviving  partners  could  only  be  treated  as  witnessco; 
no  decree  could  be  made,  against  them  for  payment  of  what  was 
due  on  the  account,  and  the  executors  must,  if  necessary,  have  taken 
proceedings  against  them  to  obtain  such  payment.  Now,  however, 
all  this  can  be  done  in  one  action,  (x) 

It  seems  that,  under  an  ordinary  judgment  for  the  administration 
of  the  estate  of  a  deceased  partner,  the  partnership  accounts  will  not 

{/)  See,  as  to  charging  the  executor  of  («)  As  in  McDonald  r.  Richardson.  1 . 

a  partner  with  willful  default,  Grayburn  Giif.  81.     See,  also,  Pointon  r.  Tointon. 

V.   Clarkson,   3  Ch.   605;   Sculthoi-p  r.  12  Eq.  547,   where  the  only  surviving 

Tipper,  13  Eq.  232;  Ward  v.  Ward,  2  paiiner  was  an  executor  and  trustee. 

H.  L.  C.  777,  and  Rowley  r.  Adams,  ib.  fx)  See  Ord.  xvi.  r.  17,  etc.  and  Ur^l. 

726,  and  7  Beav.  395;  Kirkman  v.  Booth,  xvii. 

1  Beav.  273.  ^^^^ 


*1069  EIGHTS    OB"    LKGATEES,    ETC.,    OI'    THE    DECEASED.       [iJOOK  IV. 

be  gone  into,  unless  the  judgment  specially  directs  some  inquiry  to 
be  made  with  reference  to  the  share  of  the  deceased,  (y)  But  it  is 
difficult  to  see  how  any  account  of  his  personal  estate  can  be  taken 
without  such  an  inquiry;  and  it  has  been  decided  more  than  once, 
that  if  the  surviving  partners  seek  to  obtain  payment  of  a  balance 
from  the  estate  of  the  deceased  on  the  partnership  accounts,  these 
accounts  must  be  taken,  although  no  special  direction  as  to  them 
may  be  contained  in  the  judgment.  (2) 

Notwithstanding,  however,  the  general  rule  that  the  separate 
Cases  in  which  ci'editors,  legatees,  or  next  of  kin  of  a  deceased  partner 
&c!/ofaTe^-'  have  no  locus  standi  against  his  surviving  partners, 
havia  rfghuo  ^his  rulc  is  by  no  means  without  its  exceptions.  Indeed 
fmm  the'Iur-  there  are  cases  to  be  met  with,  which  apparently  war- 
viving  partners.  ^^^^^  ^j^^  inference,  that  surviving  partners  may  always 
be  sued  along  with  the  executor  or  administrator  of  the  deceased.  («) 

But  the  authority  of  these  cases  has  recently  been  called  in 
*1069     question,  and  the  better  ^opinion  now  is  that  some  special 

circumstances  are  necessary  to  justify  such  a  coui-se.  {h) 
The  special  circumstances  which  have  been  held  sufficient  are  collu- 
sion between  the  executors  and  the  surviving  partners  (c);  refusal 
by  the  former  to  compel  the  latter  to  come  to  an  account  {d)\  deal- 
ings which  may  have  precluded  the  executors  from  themselves  ob- 
taining any  account  {e)\  the  fact  that  the  executors  are  themselves 
partners  and  liable  therefore  to  account  as  partners  to  themselves  as 
executors  (/);  and  generally,  where  the  relation  between  the  execu- 
tors and  the  surviving  partners  is  sucii  as  to  present  a  substantial 
imi>ediment  to  the  ])rosecution,  by  the  executors,  of  the  rights  of  the 
persons  interested  in  the  estate  of  the  deceased,  against  tlie  surviv- 

iy)  See  the  next  note.  Aslager  v.  Rowley,  6  Ves.  748.     ■ 

[z)  See  Paynter  v.  Houston.  3  Mer.  [d)  Burroup:hs  v.  Elton,  11  Ves.  29; 

297;    Baker    v.    Martin,    5    Sim.    380;  the  prayer  of  tlie  bill  in  tliis  case  may  be 

Woolley  t'.  Gordon,  Taral.  11.  usefully  referred  to.     But  see  Yeatman 

[a)  See  Newland  v.  Champion,  1  Ves.  v.  Yeatman,  7  Ch.  D.  210,  where  mere 

S.  106,  and  2  Coll.  46;  Bowsher  v.  Wat-  refusal  was  held  not  to  be  enough, 

kins,  1  R.  &  M.  277.  (e)  Law  v.  Law,  2  Coll.  41,  and  en 

[h)  See  Davies  v.  Davies,  2  Keen,  534;  appeal,    11    Jur.   463;    Braithwaile    v. 

Law  V.  Law,  2  Coll.  41 ;  Travis  v.  Milne,  Britain,  2  Keen,  206. 

9  Ha.  141;  Stainton  v.  The  Carron  Co.  (/)  Cropper  v.  Knapman,  2  Y.  &  C. 

18  Beav.  146;  Yeatman  v.  Yeatman,  7  Ex.  338;  Travis  v.  Milne,  9  Ha.  141 ;  and 

Ch.  D.  210.  see  as  to  continuing'  the  deceased's  as- 

(c)   Doran   v.   Simpson,   4  Ves.  651;  sets  in  the  business,  ^jo.<?,  p.  1070. 
Gedge  v.  Traill,  1  R.  &  M.  281,  note; 

1408 


CtlAP.  I.]  DEATH    AND    ITS   CONSEQDKXCES.  *1070 

• 

incr  partners,  tliere  it  lias  been  said,  an  action  ina\-  be  instituted  bj 
those  persons  against  the  executors  and  the  surviving  partners,  {g) 
If  the  surviving  partners  and  the  executors  are  different  persons, 
and  tliej  have  bond  fide   come  to  an  account  respect-  Accounts set- 

.-,  ,  1  •         /!•  •  11  ,11  1  tied  between 

ing  the  partnership  anairs,  and  liave  settled  such   ac-  surviving  pan- 

,  ry       ^  1  1  11.       '"-■'^  nndtlie 

count  as  a  rinal  account,  the   account   thus   settled  is  executors  of  a 

,  .     J .  ,  ,  .    .  ,  deceased  part- 

oinding,  as  between  the  surviving  partners  and  the  ner. 
])ersons  interested  in  the  estate  of  the  deceased  partner,  and  cannot 
be  impeaclied,  save  on  tlie  ground  of  fraud.  (//)  And  the  power  of 
the  executors  of  a  deceased  partner  to  make  binding  arrangements 
with  the  surviving  partners  is  considerably  enlarged  by  23  &  24r 
Vict.  0.  145,  §  30,  which  enacts  that,— 

"  It  shall  be  lawful  for  any  executors  to  pay  any  debts  or  claims  upon  any  evidence 
they  may  think  sufficient,  and  to  accept  any  composition  03  &  94  vic  c 

*or  any  security,  real  or  personal,  for  any  deljts  due  to  the      *1070    14.3,  ?30. 
deceased,  and  to  allow  any  time  for  payment  for  any  such 

debts  as  they  shall  think  fit,  and  also  to  compromise,  compound,  or  submit  to  arbi- 
tration, all  debts,  accounts,  claims  and  things  whatsoever,  relating  to  the  estate  of 
the  deceased,  and  for  any  of  the  purposes  aforesaid  to  enter  into,  give,  and  execute 
such  agreements,  instruments  of  composition,  releases  and  other  things,  as  they 
shall  think  expedient,  without  being  responsible  for  any  loss  to  be  occasioned 
thereby." 

But  arrangements  made  between  executors  and  surviving  part- 
ners for  the  beiK.'fit  of  the  executors  individnalh' are  where  exeeut- 

1  Til.  •    •  1    . ,.   ,  1  or**  are  person- 

always  liable  to  suspicion;  and  it  the  executors  are  aiiy  interested, 
themselves  the  surviving  partners,  or  some  of  them,  it  becomes  ex- 
ceedingly difficult  to  make  any  arrangement  which  will  be  bindino- 
on  the  persons  interested  in  the  estate  of  the  deceased;  for  even  if 
any  arrangement  is  assented  to  by  such  persons,  it  will  lie  liable  to 
be  successfully  disputed,  on  any  of  those  numerous  grounds  which 
are  held  to  invalidate  arrangements  between  trustees  and  their 
cestuis  que  trustent^  and  by  which  trustees  do,  or  may,  obtain  a 
benefit  at  the  expense  of  the  trust  estate.  A  remarkable  instance 
of  this  is  afforded  by  the  case  of  Wedderburn  v.  AYedderburn  (/), 
where  an  account  of  a  deceased  partner's  estate  was  directed,  at  the 
suit  of  the  persons  beneficially  interested  therein,  although  thirtv 

ig)  Travis  v.  Milne,  9  Ha.  150.    As  to  Smith  v.  Everitt,  27  Beav.  446;  Yeat- 

discovery  by  the  surviving  partners,  see  man  r.  Yeatman,  7  Ch.  D.  210. 

Leigh  V.  Birch,  32  Beav.  399,  and  Ord.  (/)  2  Keen,  722,  and  4  M.  &  Cr.  1 

x.xxi.  r.  8.  noticed  ante,  p.  987. 


[h)   Pavios  r.  Davies,  2  Keen.   534: 


Uo9 


■^1071  EIGHTS    OF    LEGATEES,    ETC.,    OF    THE    DECEASED.        [bOOK  IV. 

years  had  elapsed  since  his  death,  and  several  chani^^es  had  taken 
place  in  the  firm,  and  releases  had  been  given  to  the  executors  by 
their  cestuls  que  trusient.  (^) 


Rights  of  separate  creditors  and  legatees  when  the  share  of  the 
deceased'  is  not  got  in. 

Executors,  unless  authorized  by  their  testator  so  to  do,  ought  not 
Eights  of  lega-  to  leave  his  assets  outstanding  in  the  trade  or  business 
th^TasseVs^ofthe  iu  whicli  he  was  engaofed  when  he  died.  It  has  been 
neiMirIf con"'^ '  laid  dowu  as  a  rule  without  exception,  that  to  authorize 
business.  '  executors  to  carry  on  a  trade,  or  to  permit  it  be  carried 
OTiAvith   the  property  of  a  testator   held   by  them  in  trust,  there 

ought  to  be  the  most  distinct  and  positive  authority  and 
*1071     ^direction  given  by  tlie  testator  for  tha^  purpose.  {If     A 

bequest  of  his  share  and  interest  in  the  partnership  to  one 
person  for  life,  and  then  to  anothei",  does  not,  without  more,  vrar- 
i-ant  the  trustees  of  his  will  in  keeping  such  share  and  interest  un- 
converted into  money;  and  it  is  therefore  their  duty  to  realize  it, 
and  invest  what  they  receive  for  the  benefit  of  the  legatees,  {m) 

If  a  testators  capital  is  left  in  the  business  as  a  loan  to  the  sur- 
OpUonbe-  viviug  partners,  they  are  only  liable  to  pay  interest  on  it, 
and  profits. ""  eveu  although  they  do  not  pay  it  off  when  they  ought  {n^ ; 
but  where  an  executor  improperly  employs  the  assets  of  the  testator 
in  a  business  carried  on  by  himself,  he  is  chargeable,  at  the  option 
of  the  persons  beneficially  intei'ested  in  the  estate  of  the  deceased, 
either  with  the  sum  employed  and  interest  thereon  at  hi.  per  cent., 
or  with  the  sum  employed  and  the  profits  made  bv  its  employ- 
ment, (o)  And  such  persons  are  not  deprived  of  this  option  by 
the  circumstance  that  it  will  be  difficult  and  ex])ensive  to  ascertain 
what  part  of  the  profits   has   arisen  fro])i  the  employment  of  the 

[Ic)  See  the  other  cases  as  to  profits  (»/)  Kirknian  v.  Booth,  11  Beav.  273. 

accruing  since  death,  ante,  p.  982  et  seq.  See  Skirving  v.  Williams,  24  ib.  275. 

{T)  Kirkman  v.  Booth,  11  Beav.  273.  (;()  See  Vyse  v.  Foster,  L.  R.  7  H.  L. 

A  power  to  executors  named  in  a  will  to  318,  and  8  Ch.  300,  noticed  ante,  p.  9S9, 

carry  on  a  business  do?s  not  justify  an  and  see  infra. 

administrator, in  so  doing  if  all  the  ex-  (o)  See  Docker  v.  Somes,  2  M.  &  K. 

ecutors  renounce.     Lambert  v.  Rendle,  655;  Palmer  v.  Mitchell,  ib.  672,  note; 

3  New  R.  247.  Heathcote  v.  Hulme,  1  J.  &  W.  122. 

'  See,  ante,  1063,  note, 

1410 


CHAP.  I.]  DEATFF    AND    ITS    CONSEQUENCES.  *1<»72 

assets  of  tl.2  deceased;  for  whatever  difficult)'  may  exist  is  attrib- 
utable to  the  conduct  of  tlie  executor  himself,  and  cannot  therefons 
be  effectually  urged  by  him  as  a  reason  why  no  account  of  profitr- 
should  be  taken,  {p)  The  cestuis  que  trust ent  are  moreover  enti- 
tled to  compound  interest  if  the  duty  of  the  executors  is  to  call  in 
their  testator's  capital,  and  invest  it  and  accumulate  the  income  (q)\ 
but  they  are  not  entitled  to  profits  for  part  of  the  time  and  to  inter- 
est for  the  rest  unless  there  has  been  some  intervening  settlement 
of  account  (r),  or  rather  sjiecial  circumstance.  (.§) 

*It  follows  from  the  doctrine  above  stated,  and  from  the  *1072 
princi]~)les  which  were  explained  when  treating  of  judij-  p^ofitj,  ^^^g 
ments  for  an  account  (i"),  tliat  if  one  of  two  partners  since  death, 
makes  the  other  his  executor,  and  dies,  the  surviving  partner  must, 
under  ordinary  circumstances,  not  only  account  to  the  estate  of  the 
deceased  for  what  may  be  due,  in  rcsjiect  of  tlie  testator's  share  in 
the  ]-)artnership  at  his  death  (w),  but  also  for  the  profits  made  by 
him  since  his  death,  by  the  employment  of  his  capital  in  the  busi- 
ness carried  on  by  the  late  firm,  {x)  Moreover,  it  is  immaterial 
whether  such  business  has  been  continued  by  the  surviving  partner 
alone,  or  by  him  and  others  in  partnership  with  him,  for  the  obli- 
gation of  the  executor  thus  to  account,  is  founded  on  a  breach  of 
trust  committed  by  him,  for  which  he  is  liable,  at  all  events,  to  the 
extent  to  vv-liich  he  has  benefited  by  it,  whether  other  persons  are 
also  liable  or  not;  and  being  founded  on  a  l)reach  of  trust,  an  action 
in  respect  of  it  may  be  sustained  against  the  executor  alone,  thougli 
lie  may  only  be  one  of  several,  by  whom  the  profits  have  by  whom 
the  profits  have  been  made,  {y) 

The  cases  illustrating  the  right  of  legatees  to  an  account  of  profits 
made  since  their  testator's  death  where  the  executors  have  con- 
tinued his  assets  in  the  business  in  which  he  was  a  ]>artner  have 
been  alread}'  adverted  to  at  considerable  length,  {s)  The  following 
classified  list  of  them  is  inserted  here  for  reference: 

(/))  Doi'kor  r.  Somes.  2  M.  k  K.  655;  122. 

Tovvnend  r.  Towncnd,  1  Gift".  201 ;  Floik-  {s)  As  in  Townoncl  r.  Townend,  1  GiflF. 

ton  I'.  Banning,  8  CIi.  '52;',  note,  ante,  p.  201,  noticed  ante,  983. 

985.  (0  Ante,^.  ^U  ct  seq. 

(q)  See  Jones  v.  Foxall,  15  Bcav.  .388;  (»)   See  the  cases  citotl,    infra,  pp. 

Williams  v.  Powell,  ib.  461.    Possibly,  1072,  1073. 

also,  in  some  other  cases.  Seet  eobserva-  (x)  Phillips  r.  Phillips,  Finch  410. 

tions  in  Vyse  r.  Foster,  L.  R.  7  H.  L.  346.  (//)  See  ante,  p.  978. 

{>•)  Heathcote  t:   Hulm.',  1  J.  c'tL'  W.  {:)  Ante,  p.  976,  et  scq. 

1411 


*1073     EIGHTS  OF  LEGATEES,  ETC.,  OF  THE  DECEASED.   [bOOK  FV. 

1.     Account  of  subsequent  profits  decreed, 

A.  Executors  against  surviving  partners. 

Brown  v.  De  Tastet,  Jac.  284  [ante,  p.  982). 
Booth  V.  Parks,  1  Moll.  465,  and  Beatty,  444. 
Featherstonhaugh  v.  Turner,  25  Beav.  382. 
Smith  V.  Everitt,  27  Beav.  446. 

B.  Legatees  against  executors  who  were  not  partners,  but  wlio 
continued  his  assets  in  his  business. 

Heathcote  v.  Hulme,  1  J.  &  W.  122. 
Docker  v.  Somes,  2  M.  &  K.  654. 
Palmer  v.  Mitchell,  2  M.  &  K.  672,  note. 

*1073         C.  Legatees  against  executors  who  were  surviving  part- 
ners or  who  became  partners. 

Cook  V.  Collingridge,  Jac.  607  {ante,  p.  983). 

Stocken  v.  Dawson,  9  Beav.  239,  and  on  appeal,  27  L.  J.  Ch.  282. 

Wedderburn  v.  Wedderbum,  2  Keen,  722,  and  4  M.  &  Cr.  21  {ante,  p. 

987). 
Townend  v.  Townend,  1  Giff.  201  {ante,  p.  983). 
Macdonald  v.  Richardson,  1  Giff.  995  {ante,  p.  985). 
Willett  V.  Blanford,  1  Ha.  253  {ante,  p.  980).     In  this  case  accounts  of 

subsequent  profits  were  directed  without  prejudice  to  any  question. 
Flockton  v.  Bunning,  8  Ch.  823,  note,  and  ante,  p.  985. 

2.     Account  of  siibsequent  profits  refused. 

A.  Executor  against  surviving  partner. 

Knox  V.  Gye,  L.  R.  5  H.  L.  656,  the  statute  of  limitations  being  a  bar. 

B.  Legatee  against  executors,  one  of  whom  was  a  surviving 
partner,  and  the  other  of  whom  had  become  a  partner. 

Simpson  v.  Chapman,  4  De  G.  M.  &  G.  154  {ante,  p.  986). 
Vyse  V.  Foster,  L.  R.  7  H.  L.  318,  and  8  Ch.  300  {ante,  p.  989). 
See,  also,  Wedderbum  v.  Wedderburn,  22  Beav.  84,  and  Willett  v.  Blan- 
ford, 1  Ha.  253  {ante,  pp.  987  and  980. 

Upon  the  principle  that  every  one  concerned  in  a  breach  of 
Liability  of  sur-  trust  with  Hoticc  of  the  trust  is  answerable  for  such 
forSsfm-''.'^  breach,  it  follows  that  if  a  partner  dies,  and  his  suiviv- 
ue?Mn\he*buS-'  ing  partners  allow  his  assets  to  remain  in  their  busi- 
"""''■  ness,  with  the  knowledge  that  to  suffer  thera  so  to  re- 

1412 


CHAP,  I.]  DEATU    AND    ITS   CONSEQUENCES.  '^1074 

main  is  a  breach  of  trust  on  the  part  of  tlie  executors,  tne  surviv- 
ing partners  will  be  themselves  responsible  to  the  separate  credit- 
tors,  legatees,  or  next  of  kin  of  the  deceased,  for  any  loss  which 
may  be  thereby  sustained  («).  And  further,  inasmuch  as  it  is, 
prima  facie,  a  breach  of  trust  for  executors  to  allow  the  assets  of 
the  deceased  to  remain  in  the  business  carried  on  by  him  at  his 
death,  surviving  partners  wlio  knowingly  carry  on  the  business  with 
assets  of  the  deceased  thus  left  in  their  hands  will  be  answerable 
for  such  assets,  unless  the}'-  can  show  that  no  breach  of  trust 
was  in  fact  *committed.  {h).  Their  liability  to  account  for  *1074 
profits  has  already  been  considered  {c). 

Where,  however,  the  surviving  partners  and  the  executors  are 
diiferent  persons,  and  the  executors  distinctly  lend  part  Loans b- ex 
of  their  testator's  assets  to  his  surviving  partners,  the  ecutors. 
latter  are  only  liable  to  pay  interest  for  it,  at  the  rate  agreed  upon 
with  the  executors.  In  such  a  case  the  legatees  are  not  entitled  to 
a  share  of  the  profits  made  by  means  of  the  money  lent,  although  in 
lending  it  the  executors  may  have  been  guilty  of  a  breach  of  trust, 
and  the  borrowers  may  have  known  that  the  money  belonged  to 
the  deceased  {d).  A  fortiori,  if  the  executors  are  authorized  to 
lend  part  of  the  assets  of  the  deceased  to  his  surviving  partner?, 
they  will  not  be  accountable  for  the  profits  they  may  make  by  the 
employment  in  their  trade  of  money  lent  to  them  by  the  executors 
in  pursuance  of  their  authority  {e)  :  nor,  in  such  a  case  as  is  now 
supposed,  will  the  executors  be  responsible  for  the  money  if  lost,  if 
they  took  such  security  for  its  repayment  as  having  regard  to  the 
will  of  the  testator,  it  was  their  duty  to  take  (/). 

It  sometimes  happens  that  the  executor  of  a  deceased  partner  is 
taken  into  partnership  by  the  surviving  partners,  and   Exeoutorbe- 
a  question  then  arises  whether  the  profits  received  by  panner' 
the  executor  as  partner  belong  to  him  personally,  or  to  the  estate 
M'hich  he   represents.      This    must  depend  on  the  circumstances 
under  which  the  executor  became  a  partner.     If  he  became  a  part- 

(a)  See  WUson  v.  Moore,  1  M.  &  K.  145,  §  30. 

127  and  337;  Booth  r.  Booth,  1  Beav.  (e)  Parker  v.  Bloxam,  20  Beav.  204: 

125,  and  compare  Ex  parte  BarneicaU,  Vyse  v.  Foster  L.  R.  7  H.  L.  318,  and 

6  De  G.  M.  &  G.  801.  8  Ch.  300,  ante,  p.  989,  where  the  tos- 

{b)  Travis  v.  Milne,  9  Ha.  141.  ta tor's  capital  wiij?  not  got  in  at  the  tim.^ 

(f )  Flockton  V.  Bunning,  ante,  p.  985.  appointed,  and  one  of  the  executors  was 

{d)  See  Stroud   r.    Gwyer;  28  Beav.  a  surviving:  partner. 

130;  Flockton  v.  Bunning,  8  Ch.  823,  '     (/)  Paddon  v.  Richardson,  7  De  G. 

note,  and  ante,  p.  98.3;  23  i:  24  Vict.  c.  M.  it  G.  563.  ' 

1413 


*10T5  EIGHTS    OF    LEGATEES,    ETC.,    OF    THE    DECEASED.       [bOOIC   IV. 

iier  in  his  representative  cluiracter,  or,  as  in  Cook  v.  Colliiigrid^-e  ((/), 
under  circumstances  entitling  the  legatees  to  treat  him  still  as  their 
trustee,  he  must  account  for  any  profits  M'liioh  lie  ma_y  have 
obtained   as   a  partner.     On    the   other   hand,  if,  as   in  Simpson 

V.  Chapman  (A),  he  became  a  ])artner,  not  in  his  repre- 
*1075     sentative   *character,    nor    under   such    circumstances   as 

those  above  mentioned,  the  profits  accruing  to  him  as  a 
partner  will  be  his  own,  and  not  form  part  of  the  assets  for  which 
he  must  account  as  executor. 


Specific  heqvests  of  shares. 

A  specific  bequest  by  a  partner  of  his  share  in  the  partnership 
Legacy  of  a        dearly  does  not  entitle  the  legatee  to  become  a  partner 

share  in  a  ,  i  rv' 

partnership.  himsell  unlcss  there  IS  some  agreement  to  that  eliect 
binding  upon  the  surviving  partners.  The  right  of  the  legatee  is 
simply  to  be  paid  the  amount  due  to  the  testator  at  the  time  of  his 
death  in  respect  of  his  share  (^);  and  also  under  the  circumstances 
and  subject  to  the  qualifications  already  noticed  {k),  to  receive  a 
proportion  of  the  profits  made  since  the  testator's  death.  As  be- 
tween the  legatee,  however,  and  the  executor,  the  legatee  is  enti- 
tled to  have  the  share  kept  in  the  business,  subject  only  to  the  su- 
perior right  of  the  executor  to  sell  the  testator's  personal  estate  for 
the  payment  of  debts,  (l) 

A  bequest  of  a  partner's  capital  has  been  held  to  include  what 
was  due  to  him  in  respect  of  advances.  [?n) 

It  has  been  held  that  the  legatee  of  a  deceased  partner's  share  in 
the  ffood-will  of  the  partnership  business  could  not  sue 

Legatee  of  o  r  i 

good-will.  ^]jg  surviving  partners  for  a  sale  of  the  good-will  and 

payment  of  his  share,  although  the  bequest  had  been  assented  to  by 
the  executors,  {n)  This  case  was  somewhat  peculiar,  as  in  truth 
the  surviving  partner  was  entitled  to  everything  which  gave  a  salea- 
ble value  to  the  good- will,  {o) 

[g)  Jax;.  607,  ante,  p.  983.  (m)  Bevan  v.  A.-G.,  4  Giff.  361.    A 

(7j)  4  De  G.  M.  &  G.  154,  ante,  p.  bequest  of  the  use  of  capital  employed 

986.  in  trade  gives  an  absolute  interest  in  it. 

(0  Farqutarr.  Hadden,  7  Ch.  1.  See  Terry  v.  Teny,  33  Beav.  232. 

{k)  Ante,  p.  1072.  (?0   Robertson    v.    Quiddington,     29 

(0  See  Fryer  v.  Ward,  31  Beav.  602,.  Beav.  529. 

wli.ii-e  the  legatee  had  an  option.  (o)  See  on  this  subject,  ante,  p.  859. 

1414 


CilAl'.  I.]  DEATH    AND    ITS    CONSiCQU  KNCKS.  *1076 

A  specific  bequest  of  a  sluue  in  a  ])artner»liip  will  be  adeemed  if 
the  testator,  after  he  has  niade  his  will,  leaves  tlie  firm    j^.'^^^^^jP^'^'p °^ 
and   receives  his  share;   but  so  long  as  he  remains  a  shares. 
l)artner,  there  will  be  no  ademption,  although   by  some 
agreeihent  subsequent  *to  the  date  of  the  will,  the  amount     *1076 
of  his  share  may  have  been  varied,  {j)) 

A  legatee  is  not  entitled  to  receive,  out  of  the  estate  of  his  testa- 
tor, any  pai-t  of  the  bounty  intended  for  him  by  the  i^^^^^y^,, 
testator,  until   the  legatee  has  i^aid  all  his  own  obliga-   ^"[/."uo'' 
tions  in  the  sha])e  of  debts  owing  to  tlie  testator's  es-  tesiator. 
tate.     This  principle  is  strongly  illustrated  by  Smith  v.  Smith,  {q) 
There  a  father  who  had  advanced  money  to  a  firm  in  j,,^,;„,  ^, 
which  his  son  was  a  partnei-,  died,  having  bequeathed  ^^"'^''• 
])art  of  his  residuary  estate  to  the  son.     The  father's  executors  were 
held  entitled  to  retain  the  wh<;le  amount  of  the  partnership  debt 
DUt  of  the  son's  share  of  the  residue,  although  the  debt  was  barred 
by  the  statute  of  limitations  when  the  father  died. 

Shares  in  companies  will  not  ordinarily  pass  under  a  bequest  of 
moneys,  bonds,  or  securities.  (?')     But  under    special  ^jf^^^!;.'?^  ^Jn^. 
circumstances  they  will  pass  even  under  a  bequest  of   panks. 
money,  as  in  Knight  v.  Knight  (s),  where  share  certificates  were  in 
an  envelope  endorsed  "  to  be  considered  as  money  and  given  to 
A.  B."     A  bequest  of  shares  will  ordinarily  pass  stock,  {t) 

Where  a  person  entitled  to  various  kinds  of  shares  in  a  company 
bequeaths  some  of  them  without  saying  which  in  particular,  the 
learatee  can  select  which  he  pleases,  {u) 

A  legacy  of  shares  in  a  company  is  not  adeemed  by  the  conver- 
sion of  such  shares  into  stock  {v)\  nor,  necessarily,  by  the  amalga- 
mation of  that  company  with  another,  {x) 

A  legatee  of  shares  may,  of  course,  decline  to  accept  them,  and  he 
may  do  so  although  he  accepts  another  legacy  under  the  same  will,  {y) 

(jp)  Buckwell  ».   Child,    Anst.    260;  relied  on  on  this  point;  Moirice  r.  Ayl- 

laiis  V.  Walker,  ib.  3C9.  mer,  10  Ch.  14S,  was  affirmed  on  Ap- 

(?)  3  GifF.  263.  peal.    See  L.  R.  7  H.  L.  717,  and  Oake^ 

(r)  Huddleston  r.  Goldsbnr.v,  10  Bi^av.  v.  Oakes,  9  Ha.  6t")6.  was  overruled. 

hi";  Ogle  V.  Knipe,  8  Eq.  434;  Collins  r.  (i<)  Millard  v.  Bailey,  1  Eq.  378. 

Collins,  12  Eq.  454.  [v)  Oakes  v.  Oakes,  9  Ha.  66G,  and 

(s)  2  Giff.  616.  the  last  note  but  one. 

{t)  Morrice  v.  Aylraer,  10  Ch.    148:  (a?)  See  Phillips  v.  Turner,  17  Bear. 

Trinder  v.  Trinder,  1  Eq.  695.     Oakes  194. 

r.  Oakes,  9  Ha.  606,  contra  cannot  be  (y)  Long  r.  Kent,  6  N.  R.  354. 

1415 


*1078  DEATH    AND    ITS    CONSEQUENCES.  [bOOK  IV. 

Absolute  Where  a  share  in  a  company  is  bequeathed  to    a 

legacies.  person  absolutely,  the  executors  should  transfer  it  to 

the  legatee  as  soon  as  possible,  in  order  that  the  liability  of 
*1077     the  testator's  estate  in  ^respect  of  it  may  be  put  an  end 

to.  (s)  If  the  legatee  is  not  sui  juris,  and  the  share  cannot 
be  transferred  into  his  name,  the  position  of  the  executors  becomes 
embarrassing.  If,  however,  they  do  nothing  with  the  share,  but 
simply  take  the  dividends  as  executors,  they  will  not  render  them- 
selves personally  liable  to  creditors  (a);  nor  will  they  be  liable  to 
be  made  contributories,  otherwise  than  in  their  representative  ca- 
pacity, (b)  But  it  may  happen  that,  unless  the  executors  transfer 
the  shares  into  tlie  names  of  themselves  or  some  other  persons,  the 
shares  will  become  forfeitable;  and  in  that  case  (the  legatee  of  the 
share  being  still  supposed  to  be  not  sui  juris)  the  executors  should, 
for  their  own  protection,  apply  for  the  direction  of  the  Court. 

Where  shares  are  bequeathed  to  one  person  for  life  with  remain- 
Legacies  for  ^^^'  ^'^  another,  they  ought  nevertheless  to  be  sold,  nn- 
^'*'''  less  it  is  clearly  the  testator's  intention  that  they  shall 

be  retained  in  specie,  {e)  If  they  are  intended  to  be  enjoyed  in 
specie,  the  position  of  the  executors  again  becomes  embarrassing; 
for  if  they  transfer  the  shares  into  the  name  of  the  tenant  for  life, 
there  is  nothing  to  prevent  him  from  selling  them  for  his  own  use; 
and  in  case  of  a  sale  of  the  shares  by  him,  the  remainderman 
would  naturally  seek  to  make  the  executors  responsible  for  their  loss. 
If,  on  the  other  hand,  the  executors  procure  the  shares  to  be  trans- 
ferred into  their  own  names  as  trustees  for  the  legatees,  a  personal 
liability  in  respect  of  the  shares  will  be  incurred  by  the  executors, 
and  that  liability  will  not  be  limited  by  the  amount  of  the  assets 
of  the  testator.  Unless,  therefore,  the  executors  can  retain  the 
shares  without  transferring  them,  they  should,  for  their  own  safety, 
apply  for  the  direction  of  the  Court. 

Where   shares    are  bequeathed    to   one  person  for  life,  with  re- 
mainder to  another,  and  are  transferred  into  the  name  of  the  tenant 
for  life,  they  will,  on  his  death,  be  transferable 
Probate  duty.     *1078     into  the  *iiame  of  the  remainderman  without 

{z)  See  Keene's  Executors'  case,  3  De-  ries. 
G.  M.  &  G.  272.  (c)  See  Blann  v.  Bell,  2  DeG.  M.  &  G. 

{«)  Ness  17.  Annstrong,  4  Ex.  21.  775;  Thornton  v.   Ellis,  15  Beav.  193; 

(h)  This  subject  will  be  adverted  to  Crowe  r.  Crisford,  17  ib.  507;  and  see  as 

hereafter  when  treating  of  Contribute-  to  shares  in  partnerships,  ante,  1070. 
1416 


CIIA]'.   1.]         KIGIIT3    OF    LEGATEKS,    ETC.,    OF    THE    DECEASED.  *1070 

beiii;^  covered  by  the  probate  duty  paj'able  in  respect  of  the  tciumt 
for  life's  estate,  {d)  Such  shares,  in  fact,  form  no  part  of  his  estate, 
and  are  covered  by  the  duty  payable  in  respect  of  the  estate  of  the 
orjfjinal  testator. 

Where  shares  are  bequeathed,  not  specifically,  to  one  person  fur 
life,  and  after  his  death  to  another,  the  money  yielded  income  before 
by  them  before  sale  will  not  necessarily  belong  to  the  ^'^''^• 
tenant  for  life;  for,  according  to  the  case  of  Dimes  v.  Scott  (e),  the 
tenant  for  life  is  only  entitled  to  the  income  which  would  have 
been  obtained  if  the  shares  had  been  sold  and  the  produce  invested 
in  consols,  at  the  end  of  the  year  from  the  testator's  death:  the  in- 
come thus  ascertained  being,  however,  p  lid  from  the  date  of  the 
death.  This  rule  applies  wiiere  the  testator's  residuarj'  estate  con- 
sists of  shares  when  he  dies.  But  it  has  been  held  that  the  rule 
does'not  apply  where  the  executors  themselves  make  an  unauthor- 
ized investment;  and  that  in  such  a  case  the  tenant  for  life  is 
entitled  to  the  income  actually  yielded  by  the  investment,  and  the 
remainderman  is  not  entitled  to  mure  than  a  restoration  of  the 
original  capital,  {f) 

When  the  legacy  is  specific,  the  rule  in  Dimes  v.  Scott  does  not 
apply,  the  legatee  taking  whatever  the  shares  may  yield,  {y)  So 
where  the  shares,  although  not  specifically  bequeathed,  are  directed 
by  the  will  not  to  be  sold  for  a  certain  time,  what  they  yield  dur- 
ing that  time  will  belong  to  the  tenant  for  life.  (A) 

It  appears  to  be  now  settled,  that  when    shares  are  specifically 
bequeathed,  and  the  will  contains  no  special  directions  pay^iemof 
to  the  contrarv,  all  calls  made  upon   the  shares  in  the  *^*^'^- 
testator's  lifetime  nuist  be  borne  by  his  general  personal    estate; 
whilst  all  those  made  after  his  death  must  be  borne  by  the  legatee 
taking  the  shares,  {i)     There  are,  indeed,  cases  which  show 
that  *calls  made  after  the  testator's  death  are  payable  out     *1079 
of  his  general   estate,  and  not  by  the  specific  legatee  (^); 

{d)  Hennell  v.  Strong,  25  L.  J.  Ch.  by  the  Court  for  the  benefit  of  infant.-^, 

407.  see  Lambert  v.  Rendle,  3  N.  R.  247. 

(e)  4  Russ.   195,  and  see    Feams    v.  (/)  See  Re  Box,  1  Hem.  &  M.  hh2,  and 

Young,  9  Ves.  549.  Day  r.  Day,  1  Dr.  &  Sm.  261,  whei-e  all 

(/)  See  Stroud  ».  Gwyer,  28  Beav.  the  previous  cases  are  reviewed.    See, 

l:JO.  also,  Bevan  v.  Waterhouse,  3  Ch.   D. 

(g)  Infra.  752,  as  to  a  direction  to  pay  calls  out  of 

(/()  See  Green  r.  Britten,  1  DeG.  J.  &  income  and  not  out  of  capital. 

Sm.  G49.     Where  the  sale  is  postponed  (A-)  Blount   v.    llipkins,   7    Sim.   51 . 

1417 


•1080 


DEATH   AND    ITS    CONSEQUENCES. 


[book    IV. 


but  tliese  cases  are  not  to  be  relied  upon,  except  where  the  pay 
inent  of  the  calls  would  have  been  a  condition  precedent  to  the 
completion  of  the  testator's  own    title  to   the  shares  if  he  himself 
had  lived  (Z),  and  the  calls  are  made  before  the  specific  lo^'atee  is, 
bj  the  terms  of  the  will,  to  have  the  shares,  (m) 

Where  shares  are  specifically  bequeathed,  and  calls  npon  them 
Indemnity  are  pavable  out  of  a  testator's  residuurv  estate,  a  fund 
falls.  ouf,ait  to  be  set  apart  tor  the  indemnity  or  the  si)eciric 

legatee  (n);  but,  where  the  assets  of  the  deceased  are  insulHcient 
for  the  payment  of  his  debts,  no  fund  to  meet  future  calls  ought  to 
be  set  apart  to  the  prejudice  of  even  simple  contract  creditors,  (o) 

A  specific  legatee  of  a  share  in  a  partnership  or  company  is  entitled 
to  all  ordinary  profits  and  dividends  declared  after  the 
testator's  death  ( jy);  unless  although  declared  after  his 
death  they  were  earned  and  ought  to  have  been  declared  before,  {q) 
But  profits  or  dividends  declared  before  a  testator's  death  (r),  or 
declared  afterwards  when  they  were  earned  and  ought  to  have  been 
declared  before  {s)^  prima  facie  form  part  of  his  general  estate,  and 
do  not  pass  to  the  specific  legatee  of  the  share;  and  the  same  rule 
a|>plies  to  dividends  declared  before  his  death,  but  the  actual 
"■''1080  payment  of  which  is  postponed  until  '''^afterwards,  {t)  But 
there  may  be  special  circumstances  excluding  this  rule,  {u) 

A  dividend-  declared  before  the  death  of  a  tenant  for  life,  but 
not  pa3^able  until  afterwards,  belongs  to  his  estate,  and  not  to  tlie 
remainderman,  {ic) 


Rights  to 
lirolits,  &c. 


Clive  V.  Clive,  Kay,  600;  Jacques  v. 
Chambers,  4  Ra.  Ca.  499,  correcting  S. 
C.  2  Coll.  435;  V/right  v.  Warren,  4 
DeG.  &  S.  3G7. 

{I)  As  to  tills  qualification,  see  Arm- 
strong V.  Burnet,  20  Beav.  424;  Ad- 
dams  V.  Ferick,  26  ib.  384;  and  Day  v. 
Day,  uhi  supra. 

(rn)  Re  Box,  1  Hem.  &  M.  522,  where 
the  testator's  residuary  estate,  including 
the  shares,  was  bequeathed  to  A  for 
life,  and  after  his  death  the  shares  were 
specifically  bequeathed  to  B,  and  the 
calls  were  made  in  A's  lifetime. 

(«)  Jacques  v.  Chambers,  4  Ra.  Ca. 
499. 

(o)  "Wentworth  v.  Chevell,  3  Jur.  N. 
S.  805.    See,  too,  Read  v.  Blunt,  5  Sim. 

1418 


567.  and  compare  Atkinson  v.  Grey,  1 
Sim.  &  G.  577.     See  ante,  p.  1049. 

{j})  Jacques  v.  Chambers,  2  Coll.  435; 
Wright  W.Warren,  4  DeG.  &  S.  367; 
Browne  v.  Collins,  12  Eq.  586;  Ibbotson 
V.  Elam,  1  Eq.  188. 

{q)  Browne  v.  Collins,  12  Eq.  586. 
But  see  Ibbotson  v.  Elam,  1  Eq.  188. 

(r)  See  the  next  two  notes. 

(s)  Browne  v.  Collins,  12  Eq.  586. 

(t)  De  Gendre  v.  Kent,  4  Eq.  283; 
Lock  i:  Venables,  27  Beav.  598;  Wright 
V.  Tuckett,  1  J.  &  H.  266. 

(m)  As  in  Clive  v.  Clive,  Kay,  600. 
which  turned  on  the  special  wording  of 
the  company's  deed  of  settlement. 

{x)  Wright  V.  Tuckett,  1  J.  &  H.  266. 


ClI.Vl'.  I.]         EIGHTS    OF    LEGATEES,    ETC.,    OF    THE    DECEASED.  *lUSl 

In  determining  the  relative  rights  of  a  tenant  for  life,  and  a  re- 
nuiindernian  of  shares  specifically  bequeathed,  a  dis-  Distinction  be- 
tinction  is  taken  between  dividends  and  bonuses,  i.  dcnl^isifud" 
f.,  between  pa^'uients  in  resi)ect  of  profits  recently  ^'*""'**^- 
accrued  and  properly  divisible  as  such,  and  payments  in  respect 
of  accumulations  of  profits  forming  part  of  a  company's  capital. 
Payments  of  the  first  kind,  whether  called  dividends  or  bonuses, 
or  partly  one  and  partly  the  other,  are  income,  and  belong  to 
the  tenant  for  life,  if  the  sum  payable  is  ascertained  and  -declared 
after  the  testator's  death  (y);  whilst  payments  of  the  last  kind  are 
treated  as  capital,  and  ought  to  be  invested,  (s)  But  these  rules 
are  subject  to  exception;  and  a  dividend  declared  after  a  testator's 
death  in  respect  of  profits  recently  accrued  must  be  treated  as  cap- 
ital, if  it  has  been  lawfully  capitalized  by  the  company  or  the  part- 
ners, {a)  On  the  other  hand,  in  Maclaren  v.  Stainton  (J),  a  bonus 
arising  from  money  paid  to  a  company  under  a  compromise  with  one 
of  its  own  shareholders  was  held  payable  to  the  specific  legatee  of 
his  shares,  and  not  to  his  residuary  legatee. 

♦Where  part  of  the  profits  accruins:  during:     *1081  p^^  of  income 

-I  i  .->  &  ^       by  tenant  lor 

the  life  of  the  tenant  for  life  are  capitalized  by  ^^^'^■ 

the  conipau}',  he  has  no  right  to  have  the  loss  of  income,  which  he 

hereby  sustains,  made  good  by  the  remainderman,  (c) 

Interest  on  a  debt  accrues  de  die  in  dlern^  and  is  apportionable  at 
common   law;  and  shares  of  profits  and  dividends  are  Apportionment 

,  ,  T  .,  ,     „„     o      n,     IT-  of  interest  and 

now    apportionable  under  the  act  33  &  34  Vict.    c.    dividends. 
35.     If,  therefore,  a  testator  bequeaths  debentures  to  one  person  for 
life,  and  afterwards  to  another,  and  dies  shortly  before  the  current 
interest  on  the  debentures  is  payable,  so  much  only  of  that  interest 
as  accrued  after  the  death  of  the  testator  will  belong  to  the  tenant 

(//)  Compare  Hopldns'   trust,   18  Eq.  v.  Boswell,  2  Jur.  N.  S.  1005,  where  the 

006;  Plumbe  v.  Niekl,  6  Jur.  N.  S.  529;  House  of  Lords  held,  that  upon  the  true 

Price  V.  Anderson,  15  Sim.  473;  Preston  construction  of  a  Scotch  deed,  bonuses 

r.   Melville,  16  ib.  163;  and   Barclay  r.  belonged  to  an  infiint's  estate,  and  not 

Wainwrig-ht,  14  Ves.  66  (in  which  the  to  the  person  who,  on  his  death  imder 

payments  were  held  to  be  income),  with  21,  became  entitled  to  the  stocks  which 

the  cases  in  the  next  note.  yielded  them. 

{z)  Straker    v.   Wilson,   6  Ch.    503;  (a)  Barton's  Trusts,  5  Eq.  238.     See, 

Ward  V.  Comb,    7  Sim.   6:34;  Witts  v.  also,  Straker  v.  Wilson,  6  Ch.  503. 

Steere,  13  Ves.  363;  Paris  v.  Paris.   10  {b)  3  DeG.  F.  &  J.  202,  revereing  27 

Ves.    185;  and  Brander  v.  Brander,  4  Beav.  460. 

Ves.  800,  in  which  the  payments  were  (c)  See  Stroud  v.  Gwyer,   2S  Beav. 

held  to  bo  capital.    See,  also,  Cuming-  130. 

1419 


*1082  DEATH    AND    ITS    CONSEQUENCES.  [bOOK  IV. 

for  life,  (d)  And  it  is  apprehended  that  now  if  there  is  a  specific 
bequest  of  shares  in  a  company,  and  the  testator  dies  a  few 
days  before  a  dividend  upon  tliein  is  declared,  there  will  be  a  simi- 
lar apportionment  of  the  dividend  {e);  but  the  same  rule  does  not 
apparently  apply  to  bequests  of  shares  in  partnerships,  (y ) 

Other  circumstances  being  the  same,  the  price  of  shares  in  divi- 
dend-paying companies  naturally  rises  as  a  dividend  day  ap- 
proaches; in  fact,  the  price  includes  a  proportionate  part  of  the  ac- 
cruing dividend;  nevertheless,  as  between  a  tenant  for  life  and  a 
remainderman  the  price  realized  by  a  sale  of  shares  is  all  treated  as 
corpus,  without  reference  to  the  time  when  a  sale  is  made  (^);  and 
it  is  conceived  that  the  statute  33  &  34  Vict.  c.  35  has  not  altered 
the  law  in  this  respect. 

Where  sliares  are  bequeathed  to  executors  upon  trust  for  sale  as 

soon  as  conveniently  may  be  after  the  testator's  death, 

Liability  of  ex-  tliev  should  scU 'them  witliin  a  year  after  his 

tcutors  for  not  -^  «' 

selling  shares.  *1082  death:  and  in  a  *case  whei-e  they  were  kept 
unsold  for  many  years  and  the  company  was 
ultimately  wound  up,  the  estate  of  a  deceased  executor  who  sur- 
vived the  testator  only  thirteen  months  was  held  liable  for  the  loss 
sustained  by  not  having  sold  them  within  the  year  {h). 


{(l)  See  Rogers'  Trusts,  1  Dr.  &  Sm.      AUen,  4  Jur.  N.  S.  500. 


ooc 


(/)  See  Jones  v.  Ogle,   8  Cli.   192. 

(e)  Pollock  V.   Pollock,  18  Eq.   329,  See,  before  the  act,  Ibbotson  v.  Elam,  1 

coiTecting  Whitehead  v.  Wiiitehead,  16  Eq.  188;  Johnston  v.  Moore,  27  L.  J. 

Eq.  529.     In  Jones  v.  Ogle,  14  Eq.  419,  Ch.  45-3;  Browne  v.  CoDins,  12  Eq.  586. 

affirmed   on  appeal,  8  Ch.   192,   there  {g)   Scholefield  v.   Redfem  2   Dr.  & 

was  no  apportionment,  but  there  not  Sm.  182.     See,  also,  Freeman  v,  Wh't 

only  the  shares  but   the   dividends  on  bread,  1  Eq.  266. 

them  were  specifically  bequeathed.    See,  {h)  Graybum  tJ.  Clarkson,  3  Ch.  605; 

before  the  act,  Maxwell's  trusts,  1  Hem-  Sculthorpe  «.  Tipper,  13  Eq.  232.     Com- 

&  M.  610;  Bates  v.  Mackinley,  31  Beav.  pare  Marsden  v.  Kent,  5  Ch.  D.  698. 
280;  Clive  v.  Chve,  Kay,  600;  Hartley  v. 

1420 


GllAP,  II.] 


AilEKlCAN    JOIN'l- STOCK    COMPANIES. 


10S3 


CHAPTER    II. 


JOINT-STOCK  COMPANIES  IN  THE  UNITED  STATES.' 

1.     Joint-Stock   Companies  Existing  Independent  of  Statutory 

Regulation. 

Unincorporated  joint-stock  companies,  as  tliey  exist  in  tlie 
United  States,  are,  with  the  exception  ])erhaps  of  those  orojanized 
under  the  statutes  of  New  York,  merely  co-partnerships;  and,  as  a 
general  thing,  subject  to  all  the  rules  governing  that  branch  of  the 
law.'     The  shareholders  are,  therefore,  each  personally  liable  for  all 


1  In  this  chapter  it  is  not  propo.«ed  to 
treat  of  English  joint  stock  companies, 
that  subject  having  been  already  suf- 
ficiently treated  in  professed  works 
upon  that  subject,  nor  of  joint  stock 
corporations,  that  subject  belonging 
more  properly  in  a  work  upon  corpora- 
tions, but  of  unincorporated  joint  stock 
companies  and  of  those  companies 
organized  under  the  New  York 
statutes  upon  the  subject,  which, 
while  possessing  many,  if  not  most,  of 
the  attributes  of  corporations,  are  not 
such  to  eveiy  intent  and  purpose.  These 
companies,  though  organized  in  the 
State  of  New  York,  do  business  in 
many  other  States  of  the  Union,  so  that 
the  law  concerning  them  has  much 
more  than  a  local  importance. 

'■^  Vigers  v.  Sainet,  13  La.  300;  Tenney 
r.  N.  E.  Protective  Union,  37  Vt.  64; 
Manning  v.  Gasharie,  27  Ind.  399; 
Hedge's  Appeal,  63  Penn.  St.  273;  Tap- 
pan  V.  Bailey,  4  Met.  535  ;  Robbins  r. 
Butler,  24  111.  387;  Babb  v.  Reed,  5 
Rawle,  151;  Lafond  v.  Deems,  52  How. 


Pr.  41;  S.C.  1  Abb.  N.  C.  318;  Wells 
V.  Gates,  18  Barb.  554;  Dennis  v.  Ken- 
nedy, 19  Barb.  517;  Townsend 
Goewey,  19  Wend.  424,  428;  Cross  t\ 
Jackson,  5  Hill,  478;  Wilhams  r.  Bank 
of  Mich.,  7  Wend.  539;  in  re  Fiy,  Treas., 
etc.,  4  Phila.  129;  Kramer  v.  Arthurs, 
7  Penn.  St.  165. 

"Mere  partnerships,  as  to  every  person 
except  their  o^vn  stockholders,  they 
never  having  been  legally  incorporated. 
Whatever  name  such  a  company  may 
assume  and  use  in  the  transaction  of  its 
business,  it  is  a  partnership,  and  not  a 
corporate  designation."  Williams  r. 
Bank  of  Mich.  7  Wend.  539,  542,  per 
Walworth,  Chancellor.  See,  also, 
Skinner  r.  Dayton,  19  John,  -537;  Thom- 
as r.  EUmaker,  1  Pare.  Sel.  Eq.  Cas.  98; 
Butterfield  v.  Beardsley,   28  ^lich.  412. 

See,  however,  Livingston  r.  Lynch,  4 
John.  Ch.  573,  592,  where  it  wa.s  said 
by  Chancellor  Kent  that  the  evident 
character  of  the  membei-s  of  the  com- 
pany in  that  case  was  that  of  tenants 
in  common,  in  which  each  had  a  dis- 
1421 


1084 


AMERICAN    J0I>;T    STOCK    C0:MPAXIES. 


[book  IV 


the  debts  of  tlie  company,  no  matter  what  the  ])rivate  arrano^e- 
ments  among  tliemselves  may  be;'  and  tliis  notwithstanding  they 
attempt  to  arrogate  to  themselves  tlie  attri1)ntes  of  corporations  by 
doing  business  under  a  corporate  name,  and  appointing  certain  of 
tlieir  members  to  act  as  directors.'  The  fact  that  tlie  members  call 
themselves  stockholders  and  the  firm  an  association,  and  that  the 
number  of  members  is  considerable,  makes  not  the  sb'ghtest  diflfer- 
ence  as  to  the  real  nature  of  the  association.'  In  all  actions  at 
law  by  and  against  such  unincoi-porated  associations,  all  the 
members  must  be  made  parties  to  the  same,  as  in  the  case  of 
an  ordinary  partnership.  I^o  action  can  be  maintained  bj  or 
against  the  association  in  the  character  of  a  society  possessino- 
corporate  rights."     JSTor  can  such  an  association  sue  in  the  name  of 


tinct  though  undivided  interest  in  the 
estabhshmeut,  and  an  entire  dominion 
over  his  own  share  or  proportion  of  the 
propei-ty,  but  without  any  riq-ht  or  power 
to  bind  the  interest  or  regulate  the  enjoy- 
ment of  the  property  of  the  other  mem- 
bers. This  position  of  Chancellor  Kent 
was  approved  in  1852,  by  Taggart,  P.  J., 
in  Irvine  r.  Forbes,  11  Barb.  587. 

Persons  associating  themselves  to- 
gether under  articles  to  purchase  prop- 
erty and  to  carry  on  a  manufacturing 
business,  if  their  organization  be  so  de- 
fective as  to  come  short  of  creating  a 
corporation  within  the  statute,  become 
in  legal  effect  partners.  Whipple  v. 
Parker,  29  Mich.  ;:!70. 

iRobbins  v.  Butler,  24  111.  387;  Hess 
V.  Werts,  4  S.  &  R.  356;  Vigers  v. 
Sainet,  13  La.  300;  Tenney  v.  N.  E. 
Protective  Union,  37  Vt.  64;  Manning 
r.  Gasharie,  27  Ind.  399;  Hedges'  Ap- 
peal, 63  Pa.  St.  273;  Tappan  v.  Bailey, 
4  Met.  535;  Cutler  v.  Thomas.  25  Vt. 
73.  See,  also.  Skinner  v.  Dayton,  19 
John.  537;  Thomas  v.  Ellmaker,  1 
Pars.  Sel.  Eq.  Cas.  98. 

Where  the  articles  of  association 
provided  that  persons  having  dealings 
with  the  company  should  not  have  re- 
course for  their  debts   against  the  sep- 

1422 


avate  property  of  its  members,  but 
should  be  consirlered  as  having  given 
•  credit  to  then:  joint  funds  solely;  and 
that  the  tnistees  or  agents  of  the  com- 
pany should  have  no  authority  to  bind 
it  by  any  contract,  unless  it  contained  a 
restriction  to  that  effect:  Held,  that 
plaintiff  having  done  work  for  the  com- 
pany under  a  contract  by  parol  and  at- 
tended with  no  such  restriction,  might 
maintain  an  action,  not  upon  the  con- 
tract itself,  but  upon  the  quanfnin 
meruit,  either  against  the  agents  as 
having  made  themselves  personally 
liable,  or  against  the  individuals  com- 
posing the  association,  on  the  ground 
that  they  had  received  the  benefit  of 
the  plaintiff's  labor.  Sullivan  v. 
Campbell,  2  Hall,  271. 

5  Hess  V.  Werts,  4  S.  &  R.  356;  Wil- 
liams V.  Bank  of  Mich.  7  Wend.  539; 
542,  per  Walworth,  Chancellor  (cited 
s»^//-«  in  note);  McGre'ary  t'.  Chandler, 
58  Me.  537. 

3  Wells  r.  Gates,  18  Barb.  554;  Den- 
nis '■.  Kennedy,  19  Barb.  517. 

•^Pipe  V.  Bateman,  1  Iowa,  369;  Mc- 
GreaiytJ.  Chandler,  58  Me.  537;  Wil- 
liams V.  Bank  of  Mich.,  7  Wend.  542, 
per  Walworth,  Ch. 


AS    UNAFFECTED    TY    STATUTE. 


108:. 


criAP.  II.] 

any  officer  of  the  association  or  in  the  name  of  their  trustees.'  Xor 
can  an  action  at  law  be  maintained  by  one  member  against  an- 
other, which  involves  an  examination  of  the  partnership  accounts.' 
The  directors  of  such  an  unincorporated  joint-stock  company  stand 
in  the  relation  of  trustees  to  the  stockliolders;  and  any  gain  they 
may  reap  in  the  discharge  of  their  official  duties,  and  while  they 
continue  to  be  invested  witli  the  fiduciary  capacities,  inures  to  the 
benefit  of  the  cestuis  qxie  trustent.^ 

The  principal  difference  between  unincorporated  joint-stock  as- 
sociations and  partnerships,  relates  to  tlie  effect  of  a  transfer  of  a 
member's  interest  in  the  association.  In  the  case  of  a  partner.diip 
such  a  transfer,  in  the  absence  of  an  agreement  to  the  contrary,  as 
we  have  already  seen,  works  a  dissolution,  as  does  likewise  the 
death  of  a  partner.  In  the  case  of  joint-stock  associations  tliere  is 
usually  no  delectus  fcrsonm,  and  a  transfer  by  a  member  of  his 
shares  or  the  death  of  a  membc'r  does  not  dissolve  the  association.' 


'Niven  r.  Spickennan,  12  John.  401. 
See,  also,    McGreary  v.  Chandler,   58 
Me.  537. 
2  Bullarcl  v.  Kinney,  10  Cal.  60. 
No  action  ■  can  be  maintained  by  the 
treasurer  of  an  association,   not  incor- 
porated, against  one  upon  his  promise 
in  writing  to  pay  money  as  a  subscrip- 
tion, not  to  any  person  by  name,  but 
"to  the  treasurer"  of  the  association 
alone.    Ewing  «.  Medlock,  5  Port.  82. 
»/nre  Fry,  Treas.,  etc.,  4  Phila.  129. 
<Tyn-ell  v.  Washburn,  6  Allen,  466; 
Tenney  v.  N.  E.  Protective  Union,   37 
Vt.  64.     See,  also,  Troy  Iron  &  Nail 
Factory  w.  Corning,  45  Barb.  231. 

If  by  the  articles  of  a  trading  associa- 
tion it  is  apparent  that  it  -was  designed 
to  consist  of  many  members,  who  might 
from  time  to  time  cease  to  be  interested 
in  the  conccni,  by  voluntarj^  withdrawal 
or  death,  and  that  the  same  business 
should  be  continued  by  those  who 
sliould  remain,  and  by  such  as  might  be 
added  to  their  number  under  the  t<?rms 
of  the  articles,  the  death  of  one  of  them 
does  not  dissolve  the  association,  and 
thus  relieve  others  from  liability  to 
ooiitribute  for  debts   subsequently  con- 


tracted without  their  knowledge  or  con- 
sent.   Tyrrell  v.  AVashbum,  supra. 

In  such  an  association  as  between  re- 
tiring members  and  creditors  of  the  com- 
pany, such  retiring  members  remain  lia- 
ble ifor  all  existing  debts;  and  they  may 
be  liable  for  subsequent  debts  to  credi- 
tors who  had  knowledge  of  their  mem- 
bership, but  had  no  notice  of  their  with- 
drawal. As  among  themselves,  how- 
ever, their  rights  and  liabilities  may  be 
modified  by  special  a;  r  ?ement.  Tyn-ell 
V.  Washburn,  supra. 

The  articles  of  an  unincorporat  ■  d 
joint  stock  company  composed  of  three 
persons,  provided  in  substance  that  eitli- 
er  of  the  associates  might  sell  any  of  Ins 
shares  of  stock,  but  that  before  selling  t  > 
any  other  person,  he  should  offer  them  to 
the  association,  and  that  no  sale  should 
give  the  purchaser  any  control  in  iln' 
business  nor  any  interest  in  the  profits, 
imtil  scrip  should  be  issued  to  him 
by  the  other  a.?sociates  :  HchJ.  that  ii 
sale  of  shaves  without  an  otter  to  the  as- 
sociation was  valid,  but  did  not  consti- 
tute the  purchaser  a  partner,  nor  work  a 
dissolution  ;  but  that  the  purchiuser.  b.'- 
ing  registered  and  gjtting  his  certificate, 

1-123 


10S6 


AMERICAN   JOINT    STOCK   COMPANIES. 


[chap. 


n. 


As  respects  the  forfeiture  bj  a  member  of  his  interest  in  the 
company,  the  provision  in  the  articles  of  agreement  of  a  private 
joint-stock  company,  that  upon  default  by  a  stockholder  in  pay- 
ment of  assessments,  all  his  shares,  right  and  interest  in  the  associ- 


could  demand  and  receive  dividends  de- 
clared to  his  vendor,  on  a  power  of  at- 
torney from  him.  Harper  v.  Raymond, 
3  Bosw.  29  ;  S.  C.  7  Abb.  Pr.  142. 

The  implied  promise  of  one  holding 
moneys  for  a  joint  stock  association  in 
which  the  interests  of  the  members  are 
represented  by  certificates  transfeiTable 
at  will,  must  be  understood  to  be,  to  make 
payment  to  those  who  are  associates 
when  suit  is  brought,  and  where  one 
of  the  plaintiffs,  who  is  a  member  when 
suit  is  brought,  holds  by  assignment 
from  one  of  the  original  associates,  it  is 
not  necessary  that  the  declaration ,  men- 
tion the  assignment,  but  it  may  count  as 
upon  an  original  promise  to  all  the 
plaintiffs.  WiUson  v.  Owen,  30  Mich. 
474. 

In  mining  partnerships,  as  they  exist 
in  California,  there  is  usually  no  delectus 
jjersonce,  and  as  a  consequence  such  a 
partnership  is  not  dissolved  by  the  death 
of  a  partner,  or  a  sale  of  an  interest  by 
a  partner  to  a  stranger.  Taylor  i\  Cas- 
tle, 42  Cal.  367 ;  Jones  v.  Clark,  42 
Cal.  180  ;  Bainbridge  on  Mines,  42o. 

A  surviving  partner  has  in  such  case 
no  right  to  take  control  of  the  property 
as  survivor,  this  right  only  applying 
where  the  delectus  personce  exists. 
Jones  V.  Clark,  42  Cal.  180. 

A  stranger  by  his  purchase  of  shares 
in  such  a  partnership  presumptively  be- 
comes a  partner,  though  he  takes  no 
part  in  the  management  of  the  partner- 
ship affairs,  and  does  not  hold  himself 
out  to  the  world  as  a  paiiner.  Taylor 
V.  Castle,  42  Cal.  367. 

If  a  promissory  note  is  binding  on  a 
mining  partnership  as  a  valid  contract, 
such  partnership  continues  Uable,  at 
least  to  the  extent  of  the  partnership 
assets,  though  some  members  of  the 
1424 


company  have  parted  with  their  inter- 
ests— the  new  members  having  pur- 
chased with  knowledge  subject  to  the 
payment  of  partnership  debts.  Jones 
V.  Clark.  42  Cal.  180. 

The  recognized  and  established  usage 
on  the  part  of  such  a  finn  should  be 
taken  as  a  part  of  the  contract  of  part- 
nership. Taylor  v.  Castle,  42  Cal.  367. 
See,  also,  Jones  v.  Clark,  sup. 

So,  unincorporated  ditch  companies 
organized  for  the  sale  of  water  to  min- 
ers and  others,  the  stock  of  which  is 
bought  and  sold  at  the  pleasure  of  the 
owners,  without  consulting  the  co-own- 
ers, differ  from  ordinary  commercial 
partnerships.  Some  of  the  incidents 
of  a  partnership  pertain  to  such  com- 
panies, and  some  of  mere  tenancies  in 
common  likewise  pertain  to  them.  Mc- 
Connell  v.  Denver,  35  Cal.  365.  A 
member  of  such  a  company  has  no  gen- 
eral authority  by  virtue  of  his  member- 
ship to  bind  the  company  by  his  con- 
tracts.    McConnell  v.  Denver,  supra. 

Where,  however,  by  the  articles  of 
agreement  of  an  incorijorated  associa- 
tion for  the  regulation  of  their  business 
affairs,  it  was  stipulated  that  the  capi- 
tal stock  should  be  divided  into  shares; 
that  the  shares  should  be  transferrable ; 
and  that  trustees  should  be  appointed 
to  manage  the  affaii-s,  in  whom  all  the 
property  should  vest  in  trust;  and  in 
accordance  with  these  regulations  trus- 
tees were  appointed,  who  made  pur- 
chases of  real  and  personal  property, 
and  proceeded  to  the  transaction  of  bu- 
siness ;  and  shares  were  from  time  to  ti me 
transferred,  until  29-40ths  of  them  were 
held  by  one  pei-son;  Held,  that  a  sale 
by  him,  not  of  his  shares,  but  of  29-40ths 
of  all  the  land  and  property  which 
had    b'^lonTPd   to  thf  compnnv,  wn<3  a 


BOOK  IV.] 


AS    KI^GULATED    BY    STATUTE. 


los: 


ation  and  its  property  sliall  be  forfeited,  does  not  autliorlzc  the 
trii  tees  b}'  a  naked  declaration  to  make  a  forfeiture  against  wliicli 
a  court  of  e(|uity  will  not  tyrant  relief.' 


1—Joint-stocli  compani c8  or'ganizcd  under,   or  regulated  Jy,  stat- 
utes."^ 


The  principal  lepfislation  npon  the  su1)ject  of  joint  stock  com- 
panies not  possessing  all  the  attributes  of  C')r])orations,  is  to  be 
tound  in  the  statute  books  of  New  York;  and  as  the  companies 
organized  under  the  act  pf  1840,  and  the  subsequent  acts  amenda- 
tory thereof,  do  business  in  many  other  States  of  the  Union,  these 
statutes  have  been  thought  of  sutHcient  impoj-tance  to  warrant  their 
being  printed  in  a  note.' 


dissolution  of  the  association ;  and  that 
the  persons  who  owTied  the  shares  at  the 
time  of  the  dissolution,  were  entitled, 
according  to  the  number  of  their  shavi^s, 
to  all  the  avails  and  assets  of  the  com- 
pan}%  and  were  liable  to  contribute  in  the 
same  proportion  to  all  the  debts  of  the 
company.     Smith  v.  Virgin,  33  Me.  148. 

» Walker  v.  Ogden,  1  Biss.  287. 

An  incorporated  joint  stock  associa- 
tion was  formcil  to  operate  by  trade  and 
labor  in  a  distant  State.  Its  constitu- 
tion divided  the  stock  into  shares  of 
$500,  and  provided  that  each  member, 
by  subscrilnng  to  render  his  personal  la- 
bor, should  be  entitled  to  another  share, 
but  that  desertion  from  the  sei'vice 
should  forfeit  all  his  interest  in  the  asso- 
ciation. C.  became  a  stockholder,  but 
did  not  subscribe  for  personal  services. 
He,  however,  authorized  W.,  as  his  sub- 
stitute, to  labor  and  vote  as  represent- 
ing his  share  abroad,  and  W.  was  per- 
mitted to  vote  and  act  accordinglj', 
though  he  had  never  subscribed  for 
stock.  W.  afterwards  deserted  the  em- 
ployment: Held,  that  the  substitution 
conferred  upon  W.  no  share  in  the  stock, 
and  that  C.'s  interest  in  the  association 


was  not  forfeited  by  the  desertion,  al- 
though such  forfeiture  had  been  declared 
by  the  unanimous  vote  of  the  company. 
Cox  r.  Bodfish,  35  Me.  302. 

^  Not,  however,  including  those  pos- 
sessing all  the  attributes  of  corporations. 
See  the  introductory  note  at  the  begin- 
ning of  this  chapter. 

3  The  act  of  1849  (Laws  of  New  York, 
1S49,  ch.  258,  p.  389), "  in  relation  to  suits 
by  and  against  joint  stock  companies 
and  associations,"  is  as  follows; 

"§  1.  Any  joint  stock  company  or 
association,  consisting  of  seven  or  more 
shareholders,  or  associates,  may  sue 
and  be  sued,  in  the  name  of  the  presi- 
dent or  treasurer,  for  the  time  being,  of 
such  joint  stock  company  or  association, 
and  all  suits  and  pi'oceedings  so  prose- 
cuted by  or  against  such  joint  stock 
company  or  a.ssociation,  and  the  service 
of  all  process  or  papers  in  such  suit  and 
proceedings  on  the  president  or  treas- 
urer, for  the  time  being,  of  such  joint 
stock  company  or  association,  shall  have 
the  same  IbrL-e  and  eti'ect  as  regards  the 
joint  rights,  property  and  effects  of  such 
joint  stock  company  or  association,  as 
if  such  suits  and  proceedings  were  pros- 

^'  1425 


loss 


AMERICAN    JOIKT-STOCK    COMl'ANIES, 


[book  IV. 


With  respect  to  the  nature  of  the  associations  existing  nnder 
these  statutes,  notwithstanding  the  fact  that  a  considerable  number 


ecuted  in  the  names  of  all  the  share- 
holders or  associates,  in  the  manner 
now  provided  by  law. 

"§  2.  No  suit  so  commenced  shall 
abate  by  reason  of  the  death,  removal 
or  resignation  of  such  president  or  treas- 
urer of  such  joint  stock  company  or  as- 
sociation, or  the  death  or  legal  incapac- 
ity of  any  shareholder  or  associate  dur- 
ing the  pendency  of  such  suit ;  but  the 
same  may  be  continued  by  or  against 
the  successor  of  the  officer  in  whose 
name  such  suit  shall  have  been  com- 
menced. 

"§  3.  The  president  or  treasurer  of 
any  such  joint  stock  company  or  associa- 
tion, shall  not  be  liable  in  his  own  person 
or  property  by  reason  of  any  suit  prosecu- 
ted, as  above  provided,  by  or  ag-ainst 
him,  as  the  nominal  plaintiff  or  defend- 
ant therein,  provided  that  such  presi- 
dent or  treasurer  shall  not  be  exempted 
from  any  liability  to  which  he  may  be 
otherwise  legally  subject  as  a  stock- 
holder or  shareholder  in  such  joint  stock 
company  or  association. 

"§  4.  Nothing  herein  contained  shall 
be  construed  to  deprive  any  plaintiff  of 
the  right,  after  judgment  shall  be  ob- 
tained against  any  joint  stock  company 
or  association,  as  above  provided,  from 
suing  any  or  all  of  the  shareholders  or 
associates  therein,  individually,  as  now 
provided  by  law,  or  of  the  right  to  pro- 
ceed, in  the  first  instance,  against  the 
persons  constituting  any  such  joint 
stock  company  or  association,  in  the 
manner  now  provided  by  law ;  but  if  it 
shall  appear  to  any  court  in  which 
any  suit  shall  be  prosecuted  otherwise 
than  is  provided  in  the  first  section 
of  this  act,  that  the  same  is  so  prose- 
cuted for  the  purpose  of  vexatiously  and 
oppressively  enhancmg  costs,  such  court 
shall  not  allow  any  more  costs  to  be 
taxed  and  recovered  in  such  suit  than 

1426 


would  be  taxable  and  recoverable  in 
case  such  suit  was  prosecuted  in  the 
manner  provided  in  the  first  section  of 
this  act. 

"§  5.  Nothing  herein  contained  shall 
be  construed  to  confer  on  the  joint  stock 
companies  or  associations  mentioned  in 
the  first  section  of  this  act,  any  of  the 
rights  or  privileges  of  corporations,  ex- 
cept as  herein  specially  providid." 

In  1851  (Laws  of  1851,  ch.  455,  p. 
838),  th'e  act  of  1849  was  amended  as 
follows: 

"§  1.  The  act  entitled,"  &c.  *  *  * 
"  is  hereby  extended  to  any  company  or 
association  composed  of  not  less  than 
seven  persons,  who  are  owners  of  or 
have  an  interest  in  any  property,  right 
of  action  or  demand,  jointly  or  in 
common,  or  who  may  be  liable  to  an 
action  on  account  of  such  ownership  or 
interest;  and  the  suits  and  proceedings 
authorized  by  said  act  may  be  brought 
and  maintained  in  the  manner  therein 
provided,  as  well  for  any  cause  of  action 
heretofore  existing  as  for  any  that  may 
hereafter  accnie." 

In  1853  (Laws  of  1853,  ch.  153,  p. 
283),  the  4th  section  of  the  said  act  of 
1849  was  amended  to  read  as  follows: 

"§  4.  Suits  against  any  such  joint  stock 
company  or  association,  in  the  first  in- 
stance, shall  be  prosecuted  in  the  man- 
ner provided  in  the  first  section  of  tht.- 
said  act;  but  after  judgment  shall  beob- 
taineil  against  any  such  joint  stock  com- 
pany or  association,  as  above  provided, 
and  execution  thereon  shall  be  returned 
unsatisfied  in  whole  or  in  part,  suits 
may  be  brought  against  any  or  all  of 
the  shareholders  or  associates,  individu- 
ally, as  now  provided  by  law;  but  no 
more  than  one  suit  shall  be  brougjitand 
maintained  against  said  shareholders  at 
any  one  time,  nor  until  the  sani?  sliall 
have  been  determined,  and  execution 


CHAP.  II.] 


AS   KEGULATED    BY    STATUTE. 


1089 


of  cases  seem  to  regard  them  as  nothing  more  than  partnersliips, 
and  governed  by  the  same  rules  as  partnerships,  except  so  far  as 
the  statute  has  changed  such  rules,'  as  for  example,  respecting  the 
method  of  suing  and  being  sued,  other  and   more  authoritative 


issued  and  returned,  unsatisfied  in  whole 
or  in  part.  No  death  removal,  resigna- 
tion of  officers  or  shareholders,  or  sale 
or  transfer  of  stock,  shall  work  a  disso- 
lution of  any  such  joint  stock  company 
or  association  as  against  the  parties 
suing  or  being  sued  by  such  company, 
as  herein  provided,  or  as  against  any 
creditor  or  person  having  any  demand 
against  such  company  at  the  time  of 
any  such  death,  removal,  resignation, 
sale  or  transfer." 

In  1854  (Laws  of  1854,  ch.  245,  p. 
558),  the  previous  acts  upon  the  subject 
were  amended  and  added  to  as  follows: 

"§  1.  Whenever,  in  pursuance  of  its 
articles  of  association,  the  property  of 
any  joint  stock  association  is  represent- 
ed by  shares  of  stock,  it  may  be  lawful 
for  said  a.ssociation  to  provide  by  their 
articles  of  association  that  the  death  of 
any  stockholder,  or  the  assignment  of 
his  stock,  shall  not  work  a  dissolution 
of  the  association ;  but  it  shall  continue 
as  before,  nor  shall  such  company  be 
dissolved,  except  by  judgment  of  a  court 
for  fraud  in  its  management  or  other 
good  cause  to  such  court  shown,  or  in 
pursuance  of  its  articles  of  association. 

"§2.  Said  association  may  also,  by 
said  articles  of  association,  provide  that 
the  shareholders  may  devolve  upon  any 
three  or  more  of  the  partners  the  sole 
management  of  their  business. 

"  §  3.  This  act  shall  in  no  way  be 
construed  to  give  said  associations  any 
rights  and  privileges  as  corporations." 

In  1867  (Laws  of  1867,  vol.  1,  ch. 
289,  p.  576),  an  act  was  passed  to  au- 
thorize joint  stock  companies  and  asso- 
ciations to  purchase,  hold  and  convey 
real  estate  as  follows: 

"Sectiux  1.  It  shall  be  lawful  for 
any    joint  stock  company  or  associa- 


tion to  purchase,  hold  and  convey  real 
estate  for  the  following  purposes: 

*'  1.  Such  as  shall  be  necessary  forit« 
immediate  accommodation  in  the  con- 
venient transaction  of  its  business;  or 

"2.  Such  as  shall  be  mortgaged  to 
it  in  good  faith,  by  way  of  security  for 
loans  made  by  or  moneys  due  to  such 
joint  stock  company  or  association;  or 

"  3.  Such  as  it  shall  purchase  at  sales 
under  judgments,  decrees  or  mortgages 
held  by  such  joint  stock  company  or  as- 
sociation. 

"  The  said  joint  stock  company  or  as- 
sociation shall  not  purchase,  hold  or 
convey  real  estate  in  any  other  case  or 
for  any  other  purpose;  and  all  convey- 
ances of  such  real  estate  shall  be  made 
to  the  president  of  such  joint  stock  com- 
pany or  association,  as  such  president, 
and  who,  and  his  successors,  from  time 
to  time,  may  sell,  assign  and  convey  the 
same,  free  from  any  claim  thereon 
against  any  of  the  shareholders,  or  any 
person  claiming  under  them,  or  any  or 
either  of  them." 

The  provisions  of  the  cons;titution  of 
New  York  toucliing  the  question  are  as 
follows: 

Art.  8,  §  1.  "Corporations  maybe 
formed  under  general  laws." 

Id.  §  3.  "  The  term  coi-porations,  as 
used  in  this  article,  shall  be  construed 
to  include  all  associations  and  joint 
stock  companies  having  any  of  the  pow- 
ers or  privileges  of  corporations,  not 
possessed  by  individuals  or  partner- 
ships." 

'  Sec  Lafond  v.  Deems,  52  How.  Pr. 
41;  S.  C.  1  Abb.  N.  C.  318;  Wells  r. 
Gates,  18  Barb.  554;  Dennis  v.  Ken- 
nedy, 19  Barb.  517;  Moore  r.  Brink,  4 
Ilun.  402;  S.  C.  6  N.  Y.  Supreme  Ct.  22. 

]4?7 


1090  AMERICAN   JOINT-STOCK    COMPANIES.  [bOOK  IV. 

and  well  considered  cases  regard  them  substantially  as  corporations. 
With  respect  to  the  nature  of  these  associations,  Barnard,  J.,  speaking 
in  ISGT,  of  joint-stock  companies,  organized  under  said  statutes, 
said:  "They  are  organized,  not  as  simple  partnerships,  but  with 
written  articles  of  association  framed  under  and  with  reference 
to  the  statute  laws  on  the  subject.  The  first  act  was  passed  in 
the  3'ear  1S49.  It  was  amended  in  the  jea.r  1851,  and  again  in 
185 i,  A  further  act  passed  at  the  session  of  18G7,  authorized  these 
companies  to  hold  real  estate  in  perpetual  succession.  By  an  ex- 
amination of  all  these  statutes,  it  will  be  found  that  joint-stock 
companies  possess  the  following  qualities  or  attributes  of  corpora- 
tions :  I.  They  can,  like  corporations,  sue  and  be  sued  in  a  single 
or  collective  name,  to-wit,  the  name  of  their  president  or  treasurer. 
2.  Their  property  or  capital  is  represented  in  shares  and  certificates 
of  stock,  differing  in  no  respect  from  shares  and  stock  certificates  in 
corporations.  3.  The  death  of  a  member,  his  insolvency,  or  the 
sale  or  transfer  of  his  interest,  is  not  a  dissolution  of  the  company. 
4.  They  have  perpetual  succession,  or  what  is  sometimes  called  the 
immortality  of  corporations.  5.  They  can  take  and  hold  real 
and  personal  estate  in  a  collective  capacity  and  in  perpetual  succes- 
sion. These  are  all  attributes  of  a  corporation,  and  if  we  look  into 
the  books  for  elementary  definitions,  we  shall  find  that  corporations 
have  no  other  attributes  except  the  technical  one  of  a  common  seal, 
to  distinguish  them  from  common-law  partnership.  On  the  other 
iiand  simple  partnerships  have  none  of  the  attributes  or  qualities  here 
mentioned.  Mere  names  are  of  but  little  importance.  Looking  at 
tlie  substance  and  nature  of  things,  it  is  plain  that  in  respect  to  the 
absence  of  a  common  seal  merely,  the  joint-stock  associations  are 
like  partnerships.  In  the  other  and  vastly  more  material  respects 
mentioned,  they  are  like  corporations,  although  they  are  not  declared 
to  be  such  by  the  legislative  acts  referred  to."  *  *  *  "  As  to 
personal  and  individual  liability,  that  is  an  incident  both  of  part- 
ncrshi])s  and  corporations,  uniform  and  invariable  in  the  one  case, 
subject  entirely  to  the  legislative  will  in  the  other."* 

So  in  "VVestcott  v.  Fargo,'  it  was  held  that  the  president  or  treas- 
urer of  a  joint-stock  company  or  association  consisting  of  seven  or 
more  members,  is,  under  the  provisions  of  the  act  of  1849,  amended 
by  the  act  of  1853,  ch.  153,    and  under  the  provisions  of  the  consti- 

1  Watcrbury  t'.  Merchants'  Union  Ex-      Pr.  N.  S.  163. 
press  Co.    50  Barb.  157;  S.  C.  3  Abb.  2  gi  N.  Y.  542. 

1428 


CUAP.  II.]  AS   REGULATED    BY    STATUTE.  1091 

tutiou  (Art.  8),  relative  to  corporations,  to  be  regarded  for  the  pur- 
poses of  an  action  against  the  company  substantially  as  a  cor])ora- 
tion  sole. 

So  in  Sandford  v.  Supervisors  of  New  York,*  it  was  lield  that 
joint-stock  associations  organized  under  the  laws  of  1849,  ch.  258, 
and  of  1854,  ch.  245,  are  corporations  by  virtue  of  the  constitution, 
notwithstanding  the  proviso  of  the  act  of  1854,  that  said  "  act  shall 
in  no  court  be  construed  to  give  said  associations  any  rights  and 
privileges  as  corporations,"  and  that  they  are  therefore  liable  to 
taxation  on  their  ea]Mtal. 

The  question  has  arisen  and  been  decided  in  several  cases,  as 
to  what  is  the  status  in  other  States  of  a  joint-stock  association 
organized  under  the  statutes  above  referred  to,  and  a  diversity  of 
opinion  prevails  upon  tlie  subject.  In  the  recent  case  of  Fargo, 
Pres't  of  the  Am.  Exp.  Co.  v.  Louisville,  X.  A.  &  C.  llwy.  Co.," 
decided  May  3,  ISSl,  in  the  United  States  Circuit  Court  for  the 
District  of  Indiana,  it  was  held  that  a  New  York  joint-stock  coni- 
]xiny,  possessing  the  right  by  the  law  under  which  it  was  organized, 
to  sue  and  be  sued  in  the  name  of  its  president  or  treasurer,  was  a 
citizen  of  the  State  of  New  York  in  the  same  sense  that  corpora- 
tions are  citizens  of  the  States  under  whose  laws  they  are  organ- 
ized; and  that  such  joint-stock  company  might  by  the  comity  of 
States,  sue  and  be  sued  in  the  name  of  such  officer  in  the  Federal 
courts,  as  a  citizen  of  New  York,  even  though  shareholders  of 
such  joint-stock  company  were  citizens  of  the  same  State  as  the 
adverse  party  to  the  suit.  The  court  considered  that  in  determin- 
ing what  such  joint-stock  companies  are,  regard  was  to  be  had 
to  their  essential  attributes,  rather  than  to  any  mere  name  by 
which  they  might  be  known;  and  that  if  the  essential  franchises 
of  a  corporation  were  conferred  upon  a  joint-stock  comjiany,  it  was 
none  the  less  a  corporation,  because  the  statute  called  it  something 
else,  or  even  designated  it  as  an  "  unincorporated  association." 

'  15  How.  Pr.  172.  AVheii  an  association  of  persons  as- 

See,  however,  Bell  v.  Streeter,  N.  Y.  snme  a  name,  which  implies  a  corporate 

Trans.   26  Jan.   1872,  p.  6.      See  the  bod}',    and  exercise   corporate  powei-s, 

constitutional  provision  above  refeiTcd  they  will  not  be  heard  to  deny  that  they 

to,  quoted  si<pr((  in  the  note  containing  are  a  corporation.     United  States  Ex- 

the  N.  Y.  statutes.  press  Co.  r.  Bedbury,  34  111.  4o9;  Clark- 

'13  Chicago  Legal  News,  277.     See,  son  r.  E.  &  N.  S.  Dispatch,  6  Bradwtl!. 

also,   Habicht  v.  Pemberton,  4  Sanclf.  284. 


658,  per  Duer,  J. 


1429 


1092  AMEPJCAN   JOINT-STOCK    COMPANIES.  [cOOK  IV. 

In  Cutler  v.  Thomas,*  it  was  said  that  the  liability  of  individ- 
ual members  of  an  unincorporated  joint-stock  company  formed  in 
Canada,  growing  out  of  the  association,  must  be  judged  of  bj  the 
law  of  Canada,  where  the  association  was  formed,  and  where  their 
])]ace  of  business  was,  though  a  bill  of  excliange  drawn  by  them 
might  be  governed  bj  the  laws  of  the  place  where  it  is  made  payable. 

On  the  other  hand,  in  Massachusetts  it  is  held  that  the 
statutes  in  question  are  local  in  their  operation,  as  regards  reme- 
dies for  debt  against  the  company;  that  in  Massachusetts  such 
a  conipany  is  a  mere  partnership,  and  that  the  members  may  be 
sued  in  Massachnsetts  in  the  first  instance  as  partners  for  such  a 
debt,  notwithstanding  the  provision  of  the  New  York  statute  that 
no  suit  shall  be  maintained  on  the  demand  against  the  individual 
members,  nntil  judgmenthas  been  rendered  against  the  company  in 
the  name  of  the  president  or  treasurer,  and  execution  thereon  re- 
turned unsatit^lied.^ 

As  to  the  method  of  organization,  and  the  associations  to  which 
the  statute  a])plies,  the  act  of  1849  did  not,  it  seems,  until  extend- 
ed by  the  act  of  1S51,  apply  to  associations  wherein  the  members 
were  not  shareliolders  or  stockholders.'  It  is  not,  however,  neces- 
saiy  to  the  existence  of  an  association  under  the  act  of  1849,  that 
thci'c  should  be  any  subscription  in  writing  by  its  members,  and, 
although  to  endure  longer  than  one  3''ear,  it  is  not  within  the  stat- 
ute of  frauds.  The  statute  requires  no  greater  formalities  in  that 
respect  for  its  formation,  than  for  the  formation  of  an  ordinary  part- 
nership.* It  is  not  necessary  that  certiiicates  of  stock  or  scrip 
should  be  issued,  or  that  a  person  should  be  formally  declared  a  stock- 
liolder  in  order  to  entitle  him  to  the  rights  and  make  him  liable  to 
the  duties  of  membership;  in  order  to  become  a  proprietor  it  is  only 
necessary  that  he  should  subscribe  the  articles  of  association.* 

A  social  club,  though  without  formal  constitution  and  by-laws, 

'25Vt.  73.  it  was  held  that  persons  who  subscribe 

'^Taftv.  Ward,  106  Mass.  518;  S.  C.  for  shares  in  a  joint  stock  company  and 

111  id.  518;  Gott  ?'.  Dinsniore.  Ill  id.  45,  pay  deposits,  but   do   not  comply  with 

^  Fvuigsland  v.  Braisted,  2  Lans.  17.  the  full  conditions  of  tlie  association, 

*  Nat.  Bank   of  Schuylerville  v.  Van  and  never  become  entitled  to  profits,  are 

Derwerker,  74  N.  Y.  234.  not  liable  for  debts  unless  they  are  ac- 

^  Dennis  v.  Kennedy,  19  Barb.  517.  tive  in  contracting  them,  or  hold  them- 

See,    also,   WeUs  v.   Gates,    18  Barb.  selves  out    as  partners.      West    Point 

554.  Foundry  Ass'n  v.  Brown,  3  Edw.  Ch. 

Prior  to  the  passage  of  the  act  of  1849  284. 

1430 


CIIAI'.  II.] 


AS    REGULATED    BY    STATUTE. 


1093 


and  without  purposes  of  profit  or  pecuniary  advantage,  may  be 
licld  liable,  in  an  action  under  the  statute,  as  a  joint-stock  association, 
or  association  of  seven  or  more  persons  having  a  common  interest.' 
The  riglits  and  capacities  of  joint-stock  companies  organized  un- 
der said  statutes,  and  the  rights  and  liabilities  of  their  members, 
have  alreadj'  been  considered  to  some  extent.  As  to  tlie  necessar\- 
parties  to  actions  by  and  against  such  associations,  it  is  not  neces- 
sary under  the  statute  that  the  individuals  comprisiiif'  the  mem- 
I)ership  of  such  a  company  consisting  of  more  than  seven  asso- 
ciates, should  be  made  parties  to  an  action  by  or  against  it. 
The  action  is  well  brought  by  or  against  tlie  president 
or  treasurer  of  the  association,  named  as  plaintiff  or  defendant.' 
An  action  against  the  president,  secretary  and  treasurer  is  improp- 
erly brought.'  In  a  comi)laint  in  an  action  by  an  officer  of  a  joint- 
stock  company,  the  allegation  that  the  company  is  a  joint-stock 
company  or  association  consisting  of  more  than  seven  shareholders 


*  Ebbinghousen  v.  Worth  Club,  4  Abb. 
N.  C.  oOO.  Contra,  Tark,  r.  Simmons, 
10  Hun.  128. 

^Oleiy  V.  Brown,  51  IIow.  Tr.  92; 
National  Bank  of  Schuylorville  v.  Van 
Derwenter,  74  N.  Y.  2:34;  Tibbetts  v. 
VAood,  21  Barb.  650;  DeWitt  v.  Chand- 
ler, 11  Abb.  Pr.  459. 

A  member  of  a  voluntary  unincorpora- 
ted association  for  purposes  of  pleasure 
cannot  maintain  an  action  in  his  own 
name  upon  a  contract  made  with  the  as- 
sociation, nor  has  he  an  interest  therein 
which  he  can  so  transfer  that  his  as- 
signee can  maintain  an  action  against 
the  contractor  with  the  association.  Nor 
can  one  member  maintain  an  action  at 
law  in  behalf  of  the  association  against 
another  member  upon  any  agreement 
made  with  the  association.  McMahon 
r.  Kauhr,  47  N.  Y.  67. 

The  statute  of  Conn.  (Gen.  Stat.  lit. 
1,  §  65)  provides  that  any  number 
of  persons  associated  as  a  voluntary  as- 
sociation, not  having  corporate  powers, 
but  having  some  distinguishing  name, 
may  b^  sued  by  the  name  by  which  the 
association  is  known:  Jlehl,  that  a 
military  company  formed  by  voluntary 


enlisfni'-nt  under  the  laws  of  th^  State, 
and  known  as  "Co.  G,  Second  Regi- 
ment, Conn.  National  Guard,"  was  a 
voluntary  association  under  the  statute, 
and  might  be  sued  by  that  name.  Fox 
V.  Narramore,  36  Conn.  376. 

Where  such  a  company  had  occupied 
certain  leased  premises  as  an  ai-mory, 
and  the  commanding  officer  had  re- 
ceived from  the  State  a  sum  of  money 
for  the  purpose  of  paying  the  rent  of 
such  premises,  which  money  had  not 
been  paid  to  the  lessor,  but  had  been  ap- 
plied for  the  benefit  of  the  company  in 
another  manner,  it  was  held  that  the 
company  was  liable  to  the  lessor  in  an 
action  for  money  had  and  received,  for 
the  money  so  received  by  the  command- 
ing officer.  Fox  v.  Narramore,  36 
Conn.  376. 

By  statute  in  Ohio,  an  action  to  en- 
force against  a  partnership  a  liability 
of  the  finn,  may  be  brought  against  the 
partnership  either  in  the  name  of  the 
firm  or  in  the  names  of  the  partners  who 
compose  it,  at  the  option  of  the  plaintitf. 
See  Whitman  v.  Keith,  18  Ohio  St.  1:J4. 

"*  Schmidt  t.  Gunther,  5  Daly,  452. 

1431 


109J: 


AMERICAN    JOINT -STOCK    COMPANIES. 


[book  IV, 


or  associates,  is,  under  tlic  act  of  IS-iO,  a  material  and  issuable  al- 
legation.* The  complaint  in  such  action  need  not,  however,  state 
the  names  of  seven  of  the  associates.  It  is  sufficient  if  it  avers 
that  the  association  consists  of  seven  associates  and  upward.^  The 
provisions  of  the  act  of  184:9  in  relation  to  suits  by  and  against 
joint  stock  companies  and  associations,  have  been  held  to  refer  only 
to  unincorporated  companies  and  associations.'  But  inasmuch  as 
the  later  decisions  already  referred  to  regard  joint-stock  associations 
as  quasi  corporations,  this  decision  must  be  regarded  as  qualified 
by  them.  The  acts  of  IS-iO  and  1851  have  been  held  not  to  em- 
brace the  fire  co'.npanies  of  New  York."  Tlie  acts  of  1849  and  1851 
conferred  upon  the. officers  tlierein  authorized  to  sue  and  be  sued,  no 
right  to  sue  except  in  cases  where  the  shareholders  or  associates 
could  before  have  prosecuted.  The  intent  of  the  statutes  was  to 
obviate  the  inconvenience  of  joining  all  the  shareholders  or  a.-^soci- 
ates  as  parties;  to  facilitate  an  existing  right  of  action,  and  not  to 
create  a  new  one."  Said  acts,  wei'e  intended  to  apply  to  suits  hav- 
ing in  view  a  remedy  against  the  joint  property  and  effects  of  such 
companies  and  associations.  Wliere,  therefore,  an  action  merely 
seeks  to  restj-ain  an  unincorporated  association  hj  injunction  from 
carrying  into  effect  its  resolution  of  suspension  against  a  member 
of  the  association,  it  is  not  witliin  the  meaning  of  said  acts,  and  is 
not  well  brought  against  the  president  merely. ° 


'Tiffany  v.  Williams,  10  Abb.  Pr. 
204. 

An  action  brought  against  "  The  City 
Club,"  of  over  seven  persons,  may  be 
sustained  where  the  complaint  express- 
ly charges  that  the  defendants  were 
members  of  and  partners  in  an  associa- 
tion or  organization  known  as  "The 
City  Club, ' '  that  existed  on  and  prior  to 
May,  1869,  and  up  to  Aug.  1, 1870  (dur- 
ing which  time  the  claim  was  created 
by  them),  either  as  original  debtors  or 
as  assignees  of  a  lease  (a  balance  of  rent 
being  claimed)  for  the  two  years,  which 
is  alleged  to  have  been  made  to  three  of 
the  defendants,  by  authority  of  the  de- 
fendants, and  as  agents,  and  for  and  in 
behalf  of  all  of  them,  and  for  their  use, 
and  which  they  used  and  enjoyed.  Wal- 
ler r.  Thomas,  42  How.  Pr.  337. 

1432 


2Tibbetts  v.  Blood,  21  Barb.  650. 

^  New  York  Marbled  Iron  Works  v. 
Smith,  4  Duer,  362. 

niasterson  v.  Botts,  4  Abb.  Pr.  130. 

^  Corning  r.  Greene,  23  Barb.  33;  af- 
firmed, 26  N.  y.  472,  note. 

^  Rorke  v.  Ptussell,  2  Lans.  244. 

Persons  who  become  members  of  a 
voluntary  association  which  is  neither  a 
co-partnership  nor  a  corporation,  are 
bound  by  its  rules,  not  being  in  conflict 
with  the  law  of  the  land;  and  the  courts 
can  interfere  no  farther  than  to  hold  the 
association  to  a  fair  and  honest  admin- 
istration of  those  iides.  White  v.  Brow- 
nell,  4  Abb.  Pr.  (N.  S.)  162;  2  Daly, 
329.  See,  also,  Leech  v.  Harris,  2 
Brewst.  571;  Lowry  tJ.  Stotzer,  7  Phila. 
397. 

A  member  is  not  bound  by  an  exf>r- 


CIIAl'.  II.]  AS    KEGULATKD    V.Y    STATUTE.  1005 

The  judi^iiieiit  in  an  action  a;^ainst  the  president  under  the  stat- 
ute, and  execution  thereon,  are  properly  against  the  president  as 
such,  and  they  bind  only  the  joint  property  of  the  association,  not 
the  individual  ])ropertj  of  the  president,  nor  the  separate  ])roperty 
of  the  individual  members.' 

Under  the  act  of  1840,  as  amended  by  the  act  of  1853,  actions 
against  a  partnership  or  association,  consisting  of  seven  or  more  per. 
sons,  must  be  brought  against  the  president  or  treasurer  of  such 
association,  and  the  remedy  against  their  joint  jiroperty  exhausted 
before  an  action  can  be  brought  against  one  or  more  of  the  indi- 
vidual associates.'  When  the  judgment  and  execution  against  the 
company  fail  to  secure  satisfaction  of  the  debt,  then  an  action 
against  the  associates  directly  is  proper.'  Under  said  acts  no  action 
lies  against  the  individual  members  ujjon  the  judgment  obtained 
against  tlie  company.^  The  judgment  against  the  president  for  a 
debt  owed  by  the  company  does  not  preclude  the  individual  mem- 
bers, when  sued  for  the  same  debt,  from  contesting  their  liability  for 
the  debts  of  the  company.^  At  most,  such  judgment  against  the 
president  can  be  no  more  tlmn  prima  facie  evidence  in  the  plaintiffs 
favor,  in  a  subsequent  action  against  the  associates.  It  will  not 
maintain  his  right  to  recovei',  where  the  evidence  shows  that  the 
judgment  so  recovered  exceeds  the  amount  for  which  the  associa- 
tion or  its  members  were  liable  in  the  action.'  The  liability  of  in- 
dividual members  of  a  joint-stock  company,  after  judgment  and 
execution  returned  unsatisfied  against  the  com  pan}',  under  the   act 

cise  of  power  on  the   part  of  his  fellow  partnership,  equit}'  will  not  interfere, 

members  to  which  he  lias  not  assented.  Olery  v.  Brown,  51  How.  Pr.  92;  "White 

or  which  is  not  derived  from  the  law  of  v.  Brownell,  2  Daly,  329;   4  Abb.  Pr. 

the  land.     Leech  v.  Hams,  2  Brewst.  (N.  S.)  162. 

571.  See,  also,  Lo^\Ty  «.  Stotzer,  7  Pliila.  i  National   Bank  of  Schuylerville   r. 

097.  yan  Derworker,  74  N.  Y.  234;  Allen  r. 

Equity  will  take  cognizance  of  and  Clarke,  65  Barb.  563. 

enforce  the  rules  and  refrulations  of  so-  Mxobbins  r.  Wells,  18  Abb.  Pr.  191; 

cieties  within  the  line  of  order,  and  to  S.  C.  26  How.  Pr.  15;  1  Robt.  666;   Al- 

correct    abuses.     Potter    v.    Search,    7  len  v.  Clark,  65  Barb.  563. 

Phila.  443.     See,  also,  Lowry  v.  Stotzer,  See,  also,  Kingsland  r.    Braisted,    2 

7  Phila.  397.  Lans.  17 

Where  there  is  open  to  an  expelled  ^  Allen  r.  Clark.  65  Fiarb.  563. 

member  of  a  voluntary  association   a  ■•  Withorhead  r.  Allen,  3  Keyes,  562; 

remedy  under  its  constitution  and  laws  S.  C.  4  Abb.  A  pp.  Dec.  628. 

for  a  review  of  the  proceedings  for  his  *  Allen  v.  Clark,  65  Barb.  563. 

expulsion,  and  in  case  of  eiTor  for  his  *  Allen  r.  Clark,  sup. 
restoration,  and  the  association  is  not  a 

1433 


109G  AMEKICAN    JOINT    STOCK    COMPANIES.  [bOOK  IV. 

of  1849,  as  amended  by  the  act  of  1853,  is  that  of  partners,  and 
consists  in  the  original  demand  against  the  company,  not  the 
iudgment  against  it.'  The  complaint  mnst  therefore  allege  a  sub- 
sisting cause  of  action  against  the  company,  on  the  original  de- 
mand. Alleging  that  the  company,  became  indebted  to  plaintiff 
ibr  goods  sold,  without  alleging  a  sum  now  due,  or  a  breach  in  any 
form,  is  not  enough,  even  where  judgment  and  execution  unsatis- 
fied are  alleged.^  A  creditor  of  a  joint-stock  association  must  pro- 
ceed against  the  surviving  shareliolders  before  an  action  can  be 
maintained  against  the  representatives  of  a  deceased  shareholder.^ 

As  to  actions  between  a  joint  stock  company  and  its  members,  it 
is  not  a  valid  objection  to  an  action  against  a  joint-stock  company 
in  the  manner  prescribed  by  the  statute,  that  the  plaintiffs  are 
members  of  the  company."  And  where  the  articles  of  association 
of  an  unincorporated  joint-stock  company  provide  that  the  board  of 
director.-i  thereof  may  prosecute  and  recover  in  an  action  at  law  any 
and  every  assessment  upon  the  shares  of  stock,  an  action  against 
one  of  the  associates  to  recover  an  assessment  upon  his  stock  may, 
under  the  articles  and  the  act  of  1849,  be  maintained  in  the  name 
of  the  president  of  the  association.' 

As  to  actions  between  the  meml)ers  themselves,  the  rule  does 
not  appear  to  be  different  from  that  which  prevails  between  the 
members  of  an  ordinary  partnership,'  a  subject  which  has  already 
been  considered  in  a  preceding  chapter. 

'  Witherhead  v.  Allen,  3  Keyes,   562;  atecl)  and  indorsed  by  another  for  tlie 

S.  C,  4  Abb.  App.  Dec.  628,  reversing-  S.  purpose  of  raising  money  for  the  use  of 

C.   28  Barb.    661.      Compare  Miller  v.  the  association,  is  paid  and  taken  up  by 

White  50,  N.  Y.  137,  reversing  S.  C.  10  a  third,  the  latter  cannot   maintain   an 

Abb.  Pr.  N.  S.  385;  59  Barb,  434.  See,  action  against  the  maker  and  first  in- 

also,  Moore  v.  Brink,  4  Hun,  402  ;  S.  C.  dorsor.  to  recover  back  the  money  ad- 

6  N.   Y.   Supreme   Court,  22  ;    Kmgs-  van.  ed  by  him,   until  tin  account  has 

kind   V.    Braisted,    2  Lans.  17.  been  taken  between  the  parties.     Crater 

"WitherheadtJ.  Allen,  swp-ffl.  v.   Bmmger,  45  N.  Y.  545;    S.  C.  54 

3  Moore  v.  Brink,  4  Hun,  402  ;  S.  C.  6  Barb.  155  (1865),  foUowIng  Gridley  v. 
N.  Y.  Supreme  Court,  22.  Dole,  4  N.  Y.  486. 

4  Westcott  v.  Fargo,  61  N.  Y.  542 ;  Plainfff.  defendant  and  others  were 
S.  C.  6  Lans.  319  ;  Saltsman  v.  Shults,  shareholders  in  a  joint  stock  enterprise 
14  Hun   256.  to  purchase  and  improve  lands  contain- 

See,  however,  Schmidt  v.  Gunther,  5  ing  a  mineral  spring,   and  held  such 

Daly, '542.  lands  as  tenants  in  common.     Plaintitf 

=  Bray  v.  Farwell,  3  Lans.  495.  made  and  paid  for  certain    improvc- 

« Where  a  note  made  by  one  member  ments,  and  assessed   the  cost  ratably 

of  a  joint  stock  association  (unincorpor-  upon  each  shareholder.    Plaintiff  provtd 

1434 


CHAP.  II.] 


AS    KEGULATKD    V.Y    STATUTE. 


109; 


Respecting  real  estate  conveyed  to  a  joint-stock  association,  it 
was  held  in  Iloiuell  v.  Earp^  that  the  i-ii^lit  of  sucli  association 
to  liold  such  real  estate  can  only  be  questioned  l>y  the  ])eople. 

In  the  settlement  of  the  aifairs  of  an  unincur])orated  joint- 
stock  association  it  is  of  no  consequence  as  affectini^  the  rii^hts  of 
tlie  associates  entitled  to  an  interest  tiierein,  that  the  legal  title  to 
land  belono-inf;  to  the  association  has  been  taken  in  the  name  of 
one  of  the  associates  or  in  a  third  person' 

As  respects  the  consolidation  of  joint-stock  companies,  where  the 
articles  of  association  of  a  company  prohibit  the  union  or  consol- 
idation of  the  company  with  any  other,  without  the  consent  of  a 
majority  of  the  stockholders,  but  contain  a  clause  providing  for  an 
amendment  of  the  articles  by  a  concurrent  vote  of  two-thirds  of  the 
executive  committee,  and  a  majority  of  the  trustees,  the  author! t}' 
to  amend  the  articles  of  association  gives  no  power  to  take  away 
from  the  stockholders  the  power  to  prohibit  the  merging  of  the 
company  with  any  other  company,  which  they  liad  expressly  re- 
served for   their   own    protection;  and   such   authority  to    amend 


that  he  made  a  gtatoincnt  to  defendant 
of  the  amount  assessed  upon  him;  that 
defendant  took  the  figures  on  a.  paper 
and  said  he  "would  pay  him  (plaintiff) 
the  money  ;  "  would  "be  over  in  a  few 
days  and  settle  up — square  up:  "  Held, 
that  the  admission  of  a  liability,  coupled 
with  a  promise  to  pay,  was  sufficient  to 
authorize  a  recovery  by  plaintiff  against 
defendant.  Wright  v.  Putnam,  2 
Thomp.  «fe  Cook,  455. 

The  charter  of  an  incorporated  com- 
pany, after  declaring  that  tlie  stock- 
holders should  be  jointly  and  severally 
personally  liable  for  the  payment  of  all 
debts  or  demands  contracted  by  the 
company,  and  that  any  person  having 
a  demand  against  the  company  might 
sue  any  stockholder,  etc.,  and  recover 
the  same  with  costs,  further  provided 
that  before  such  suit  upon  any  demand, 
etc.,  judgment  must  be  obtained  there- 
on against  the  company,  execution  is- 
sued and  returned  unsatisfied,  etc.  : 
lldd,  that  the  charter  placed  the  stock- 
holders upon  the  same  footing  as  if  they 


had  not  been  incorporated,  making 
them  answerable  for  demands  against 
the  company  like  partners;  and  conse- 
quently one  stockholder,  though  a  cred- 
itor of  the  company,  could  not  mainta'u 
an  action  at  law  for  his  demand  against 
the  others  or  either  of  them:  Bailey  r. 
Bancker,  3  Hill,  188. 

One  member  of  a  voluntary,  unin- 
corporated association  for  purpose's  of 
pleasure,  cannot  maintain  an  action  at 
law  in  behalf  of  the  association  against 
another  member  upon  any  agreement 
made  with  the  association  :  McMahon 
V.  Rauhr,  47  N.  Y.  67. 

As  to  the  principles  regulating  con- 
tribution among  the  associates  of  a  joint 
stock  company,  see  Morrissey  v.  Weed, 
12  Hun.  491. 

'21  Hun,  :39;i 

As  to  the  wife's  not  bMug  entitled  to 
dower  in  real  estate  hold  in  trust  by  one 
of  several  persons,  partnei-s  in  a  specu- 
lation, see  NicoU  v.  Ogd-^n,  29  111.  ;32:3. 

-  Barker  v.  White,  58  N.  Y.  204;  But- 
tertield  v.  Beardsley,  23  Mich.  412. 

1435 


lO'JS  AMERICAN    JOINT    GTOC'K    COMPANIES.  [bOOK  IY. 

should  be  construed  as  intendcil  lor  sucli  ameaduients  as  are  perti- 
nent to  the  business  and  objects  for  which  the  association  was  or- 
ganized.' 

In  case  of  the  consolidation  of  two  joint-stock  companies,  al- 
tliuugh  a  dissenting  shareholder,  like  a  retiring  partner  in  an  ordi- 
nary partnership,  is  not  obliged,  in  the  absence  of  an  express  agree- 
ment to  that  eifect,  to  surrender  liis  interest  in  the  property  to  his 
remaining  associates  at  an  estimated  valuation,  but  has  the  right  to 
have  the  valuation  actually  ascertained  by  a  sale,  in  the  ordinary 
manner  of  closing  up  partnerships  where  there  is  no  express  stipu- 
lation; jet,  where  the  amount  of  dissentient  stock  is  quite  incon- 
siderable in  comparison  with  the  stock  whose  owners  have  ac- 
quiesced in  the  agreement  of  consolidation,  the  court  will  order 
the  consolidated  company  to  give  bond  with  sureties,  conditioned 
that,  upon  final  judgment  all  the  property  transferred  to  it  shall,  if 
so  required  by  the  judgment,  be  delivered  into  the  custody  of  the 
court,  for  the  protection  of  all  the  shareholders.  *  Dissenting  stock- 
liolders  have  no  absolute  right  to  have  a  sale  at  the  commencement  of 
the  litigation,  as  soon  as  the  property  has  been  handed  over  to  a  re- 
ceiver. If  they  are  entitled  to  have  the  property  sold,  their  right  is 
to  have  it  sold  w4ien  they  have  recovered  judgment.  All  they  can 
claim  is,  that  the  property'  shall  be  preserv^ed  until  judgment,  so  that 
their  rights,  as  then  ascertained  and  declared,  may  be  enforced.' 

The  infidelity  or  misconduct  of  some  or  even  all  of  the  trustees  or 
managers  of  a  joint-stock  association,  affords  no  ground  for  taking 
away  the  rights  of  the  shareholders  who  constitute  the  company, 
either  by  dissolving  it  or  taking  away  its  management  and  placing 
it  in  the  hands  of  an  officer  of  the  court.  In  such  case,  the 
principles  of  remedial  or  preventive  justice  go  no  farther  than  to 
enjoin  or  forbid  the  misconduct,  or  to  remove  the  unfaithful  officer.'' 

'  Blatcliford  v.  Ross,  54  Barb.  42  ;  S,  contain  a  stipulation  that  the  associa- 

C.  37  How.  Pr.  110.  tion  shall  not  be  dissolved  before  the  ex- 

^McVicker  v.  Ross,   55  Barb.  247;  S.  piration  of  the  term  limited  for  its  dn- 

C.  37  How.  Pr.  474.  ration,  without  the  unanimous  consent 

^  McVicker  v.  Ross,  supra.  of  the  shareholders,  cannot  be  volunta- 

^  Waterbuiy  v.  Merchants'  Union  Ex-  rily  dissolved,  except  by  the  unanimous 

press  Co.  50   Barb.   157;  S.  C.  3  Abb.  consent  of  all  the  shareholders  ;  if  such 

Pr.  N.  S.163.  consent  cannot  be  had,  then  application 

A  joint  stock  association,  formed  in  must  be  made  to  a  court  to  decree  a  dis- 

the  State  of  New  York  for  the  purpose  solution.     Von  Schmidt  v.  Huntington, 

of  canymg  on  business  in  California  for  1  Cal.  55.    It  being  found  impracticable, 

a  definite  period,  the  articles  of  which  however,  to  keep  the  company  together, 

1436 


CHAP.  II.]  AS    KKGL'LATKD    BY    STATUTE.  1099 

Upon  tlie  dissolution  of  a  joint-stock  association,  it  is  the  duty 
of  the  trustees  to  convert  the  assets  into  money,  and  distribute  the 
proceeds  among  the  stockhohlers.  They  have  no  right  to  exchange 
the  assets  of  the  old  association,  or  any  portion  thereof,  for  the 
stock  of  any  corporation,  without  the  consent  of  all  the  stock- 
holders. A  stockholder  not  consenting  to  such  exchange  may  re- 
cover the  value  of  his  stock  so  wrongfully  disposed  of.' 

or  to  prosecute  :*accossfully  the  contem-  the  company.  Von  Schmidt  v.  Hunting- 
plated  enterprise,  under  the   articles  of  ton,  siq)ra. 

association,  tlie  court  decreed  a  dissolu-  •Frothingham  v.  Barnej',  6  Hun,  366. 
tion  and  the  distribution  of  the  effects  of 

1487 


GENERAL  INDEX. 

[The  references  are  to  the  mnrpinul  pages.] 


ABANDONMENT 

of  right,  an  answer  to  an  action  to  enforce  it,  908 

ABATEMENT, 

plea  in,  abolished,  467 

in  action  aj^ainst  unincorporated  companies,  501 
to  scire  facias,  524,  525 

ABORTIVE  COMPANIES, 

expenses  of  forming,  118 

calls  on  subscribers  to,  120 

recoveiy  back  of  deposits  by  subscribers,  117-123,  953 

recovery  of  subscriptions  to,  120,  197,  953 

ABSENTEES 

from  meetings,  how  I'ar  bound  by  what  takes  place  at,  550 

ACCEPTANCE, 

of  bills.     See  Biu.s  of  Exchange 

of  shares,  100,  et  seq,    See  Shares,  Allotment 

ACCORD  AND  SATISFACTION, 

when  a  defense  to  an  action  for  an  account,  971 

ACCOUNT, 

old  action  of,  1022,  note  (A-) 

between  co-owners,  65,  1022,  note  {k) 
between  merchants,  454 
action,  before  the  .Jtidicature  Acts,  by  one  partner  against  anothei 
for  not  rendering  an.  1026 
for  balance  of  an,  1027 
for  matters  involving  the  taking  of  an,  1029 
for  matters  not  involving  any,  1026 
persons  entitled  to  an,  945 
co-owners,  6:5-()9 
partners,  945 

persons  interested  in  the  estate  of  a  deceased  partner,  945 
tiaistee  of  bankrupt  partner,  945 
sub-partners,  946 

servants  sharing  profits,  19,  20,  40,  946 
action  for.     See  action 

who  may  bring,  945,  946 

against  whom,  945  , 

costs  of,  97;5 
not  dismissed  because  plaintiff  entitled  to  damages,  ST6 
where  no  dissolution  is  sought,  947 

(1439) 


1102  GENERAL    INDEX. 

ACCOVm— roijfi  mi  rrJ. 

Action  for — coiitimied, 

where  a  limited  as  clistinguishecl  from  a  general  account  is  desired,  947 

in  respect  of  illegal  transactions,  198 

where  a  company  is  abortive,  961 

discovery,  in,  955 

in  cases  of  exclusion,  949 

secret  benefit  procured  by  one  partner,  948 
of  the  dealings  of  several  connected  firms,  954 
of  subscriptions  to  abortive  companies,  953 
of  benefits  obtained  by  one  partner  at  the  expense  of  the  firm,  571, 

et  seq. 
of  profits  derived  from  use  of  partnership  property,  575 
of  profits  derived  by  one  partner  by  reason  of  his  connection  with  the 

firm,  572 
of  profits  made  by  the  use  of  the  capital  of  a  partner  since  a  dissolu- 
tion, 976,  ef  seq.    See  Profits,  Account  of 
of  several  partnerships,  954 

for  contribution  between  promoters  of  companies,  1022.    See  Contri- 
bution 
defenses  to  action  for,  961.     See  Defense 
denial  of  partnership,  961 
statute  of  limitations,  963 
stated  account,  967 
award,  970 
payment,  971 
parties  to  actions  for 

between  partners  generally,  877,  et  seq. 
by  sub-partner,  878 
by  defrauded  purchaser  of  shares,  879 
against  executors  of  deceased  partner,  878 

surviving  partners  not  necessary  parties  to  action  by  legatees,  1066 
some  on  behalf,  etc.,  when  sutKcient,  886 
misjoinder  of  plaintiff's,  890 
period  over  which  an  account  is  to  extend,  974 

time  from  which  the  account  is  to  be  taken,  974 
time  up  to  which  the  account  is  to  be  taken,  975 
of  dealings  prior  to  commencement  of  partnership,  975 
of  subsequent  profits  when  a  dead  or  retired  j)artner's  capital  has  been  left 

in  the  concern,  976-991 
deci-ee  for  a  partnership,  972 
forms  of,  972 
just  allowances,  974 
mode  of  taking  matters  involved  in,  973 
decree  for,  on  the  administration  of  the  estate  of  a  deceased  partner,  1030 

ACCOUNT  STATED, 

a  defense  to  an  action  for  an  account,  967 

by  a  majority  binding  minority,  967,  note  (?») 

impeachment  of,  for  fraud,  etc.,  968 

between  the  executors  of  a  deceased  partner  and  his   surviving  partners, 

effect  of,  lii09 
action  for  balance  of,  not  restrained  because  there  are  others  unsettled,  998 

ACCOUNTS, 

of  partnership  generally,  800 
imputation  of  payments  m  cases  of,  422 
not  to  be  taken  bafliwards,  425 

right  to  keep  accounts  of  successive  firms  separate,  429 
transfer  of  debt  from  one  to  another,  430 
effect  on  incoming  partner,  426 

between  merchant  and  merchant,  time  within  which   actions   concerning 
must  be  brought,  453-459 

1440 


GENERAL    INDEX.  1103 

ACCOUNTS— <!OM/(H  ued. 

false  rentlored  by  one  partner,  315 

approved  of  by  majority,  when  binding  on  minority,  •^)99,  9G7,  note^w) 
conclusive  for  one  pvn-pose  but  not  for  another,  8;j9 
power  of  one  partiK.'r  as  to,  264 
fraudulent,  814,  et  seq. 

effect  of  keeping:  erron^'ous  on  right  to  dissolve,  228 
on  dissolution.  838,  97."j 

of  dealings  before  commencement  of  partnership,  975 
profits  after  dissolution,  976 
effect  of  confusion  of,  on  right  to  interest,  789 
penalties  for  falsifying,  destroying,  &c.,  808 
eti'ect  of  non-observance  of  agreement  to  take  periodical,  840 
reopening,  839 
effect  of  acquiescence  in,  902 
adoption  of,  by  shareholders,  effect  of,  968 

misrepresentation  as  to  state  of,  a  ground  for  rescinding  conti-acts,  816,  931 
when  taken  before  the  hearing,  955 
surcharging  and  falsifying,  969 

evidence  on  which  partnership  accounts  are  taken,  991 
special  directions  as  to  taking  of,  992 
•  injunction  to  restrain  publication  of,  1002 
audit  of,  812 
examination  of,  by  board  of  trade,  813 

by  inspectors  appointed  by  company,  813 
by  one  executor,  933  note  [a) 
mode  of  keeping  partnership  accounts,  80  ',  et  seq. 
duty  to  keep  and  the  right  to  inspect  partnership  accounts,  807,  et  seq. 

in  ordinary  partnerships,  ib. 

in  companies  generally,  809 

in  banking  and  insurance  companies,  813 

in  companies  governed  by  the  Companies  act,  1862,  812 
mandamus  to  permit  inspection,  809 

ACCOUNTANT, 

inspection  of  documents  by,  959 
employment  of,  by  court,  993 

ACKNOWLEDGMENT, 

effect  of,  as  regards  the  statute  of  limitations,  456 
when  made  by  one  partner,  456 
See  Ratification,  289;  Laches,  902 

ACQUIESCENCE, 

of  plaintiff  in  what  is  complained  of,  when  a  bar  to  relief,  603.  902 
of  subscriber  of  a  company  in  change  of  scheme,  effect  of,  112 

ACT  OF  PARLIAMENT, 

what  companies  lial.ile  for  expense  of  special,  395 
company  required  by  statute  to  pay  expenses  of,  1021 
See  Statute 

ACTIONS, 
1.  Generally 

general  remarks  on,  466,  872 
general  principle  as  to  parties,  467 
effect  of  Judicature  acts,  467 

no  distinction  between  le<ral  and  equitable  rules,  467 
no  action  defeated  by  nonjoind'^r  or  misjoinder,  467 
pleas  in  abatement  abolished,  467 
as  to  persons  jointly  entitled  or  liable,  467,  484 

severally,  467,  484 
joint  and  several  claims  may  be  joined,  468 
parties  required  by  defendant  may  be  ioined.  468 

•"  :  441 


110 J-  GENERAL    INDEX, 

kC'YlO'^B—confhiued. 

1.  Generally — confinnpiJ. 

etfect  of  Judicature  acts — continned. 

some  or  one  may  sue  on  behalf  of  all,  468 

partners  may  sue  or  be  sued  in  name  of  firm,  468,  476,  876 

discovery  of  partners,  468 
name  of  firm  should  not  be  used  unless  all  can  sue,  468 

as  to  use  of,  where  partners  have  changed,  468 
as  to  service  ofwTit  where  name  of  firm  is  used,  475 
partners  should  be  defendants 

who  are  debarred  from  suhig,  469 
who  have  released,  469 
firm  may  sue  a  partner,  877 
partner  may  sue  his  firm,  469 

firms  with  common  partner  may  sue  each  other,  469 
as  to  defenses  founded  on  conduct  of  one  partner,  469,  470 
on  proceedings  under  Bills  of  Exchange  act,  468,  note  (6) 
where  conduct  of  one  pai'tner  a  defense,  472,  473 
■    for  an  injunction.     See  Injunction 
a  receiver.     See  Receiver 

rescission  of  contract.     See  Rescission  of  Contract 
specific  performance.     See  Specific  Peuformance 
making  good  breaches  of    trust,  904 
setting  aside  agreement,  903 
defenses  to.     See  Defenses. 
laches,  902,  et  seq. 

illegality,  198,  et  seg.     See  Ii,i,egai,ity 
to  obtain  payment  out  of  the  funds  of  the  company.  382 
against  directors  improperly  appointed,  897 
to  recover  deposit,  117.  et  seq. 

where  there  has  been  fraud,  953 
in  respect  of  legal  rights,  475,  et  scq. 

equitable  rights,  485,  et  seq. 
in  case  of  fraud,  parties  to,  486 

for  account  not  dismissed  because  plain tiif  entitled  to  damages,  876 
where  a  change  has  occurred  in  the  firm  since  the  right  accrued,  486 
where  one  partner  exceeds  his  authority,  484 
ex  delicto,  480-482 

non-joinder  not  pleadable  in  abatement,  467 
one  liable  if  others  not  disclosed,  483 
statutory  exceptions.  483 

against  corporations  on  instrumen's  not  under  seal.     See  Contracts. 
may  be  brought  by  unknown  principals,  478 
on  contracts  with  A.  &  Co. ,  476 
by  and  against  firm,  211,  466,  475,  482,  872 

2.  by  partners  against  non-partners,  475,  et  seq. 

implied  powers  of  partner  as  to,  473 
on  contracts  under  seal,  475 
on  bills  and  notes,  476 

in  name  of  firm,  476 

accepted  for  honor,  476 
on  ordinary  contracts,  477 
for  torts,  480,  485 
for  libel,  480 
ejectment,  481 

by  incoming  partner,  487 — 489 
by  retired  and  continuing  partners,  488,  489 
by  sui'viving  partners,  470 — 471,  490 
by  trustees  of  bankrupt  partners,  490,  491 
by  solvent  partner,  491 
by  dormant  partners,  478 
by  nominal  partners,  478 

1442 


I 


GENERAL    INDEX.  11U5 

ACTIOI^B— continued. 

2.  by  partners  ag:ainst  non-pai-tnors — conliiiue(7. 

when  to  Ije  brought  bj'  one  partner  only,  478,  479 

may  be  brought  in  name  of  tliose  not  named,  477 

non-joinder  not  pleadable  in  aliatement,  467 

when  one  partner  colludes  with  defendant,  481 

where  contract  not  made  with  firm,  479 

by  one  firm  against  another  where  one  partner  is  common  to  both, 469,  1031 

when  a  defense  against  one  partner  is  a  defense  against  all,  212,  409,  470 

3.  by  non-pai-tners  against  partners,  482,  et  seq. 

on  contracts,  482 

not  binding  firm,  484 
for  torts,  485 
against  incoming  partners,  487 

retired  and  continuing  pai-tners,  488 
sui-vivmg  partners,  490 

where  the  executors  of  the  deceased  are  also  being  sued,  1055,  et  seq. 
effect  of  change  in  firm,  486 
against  solvent  and  banki-upt  partners,  491 
infant  partners,  482 
■  dormant  partners,  483 
for  administration  of  estate  of  deceased  partner  by  creditors  of  the  firm, 
1053 

by  separate  creditors  of  deceased  partner,  1070,  et  seq. 
legatees,  1070,  et  seq. 
next  of  km,  1070,  et  seq. 

4.  betwe'^n  partners 

for  dissolution,  220,  880,  943.     See  Dispolxjtion 
should  be  in  the  Chancery  Division,  943 
parties  to,  878,  880,  et  seq. 
next  friend  of  lunatic  may  bring,  226 
statement  of  claim  in,  943 
injunction  in,  944 

judgment  for,  given  before  the  hearing,  944 

may  be  brought,  although  the  partnership  could  be  woimd  up  under 
the  Companies  act,  944 
for  an  account,  943,  945,  et  seq. 

who  entitled  to  bring,  945,  946.     See  Account 
may  be  ordered  before  the  hearing,  955 
defenses  to,  901,  et  seq.    See  Account 
for  discovery,  945,  et  seq. 

defenses  to,  901,  et  seq.    See  Discovery 

general  doctrines  as  to  interference  of  the  court  between  partners, 
894  et  seq. 

of  rule  not  to  interfere  except  to  dissolve,  894 

not  to  interfere  in  matters  of  internal  regulation,  895 
fraud  and  misconduct,  896,  897 
controlling  minority,  902 
controlling  niiyority,  900,  et  seq. 
effect  of  Juilicatnre  acts  on,  467,  et  seq.  1023 
as  to  actions  relating  to  real  property,  1023 
goods,  1023 
•  damages,  1023 

parties  to,  877,  et  seq. 

gi-ncral  rule  that  one  partner  could  not  sue  another  at  law,  1029 
when  an  action  at  law  would  lie,  1024 
on  agreements  for  partnership,  1019 
account,  1022,  and  note  (/.■) 
for  money  paid  by  mistake  in  accounts,  1028 
on  agreement  to  mdemnify,  1028 
ejectment,  481,  1024 
ti-espass,  1024 

1443 


1106  GENERAL   INDEX. 

ACTIOXS— co»/nn?('f7. 
4.  between  partners — continued. 
trover,  1025 
covenant,  1025 
assumpsit  or  debt 

for  breach  of  express  agreement,  482,  1019,  1025 
for  not  furnishing  capital,  &c.,  1026 
».        for  not  contributing  to  expenses,  1026 
for  not  indemnifying  co-partner,  1028 

for  not  accounting  to  co-partner  for  money  received  to  his  use,  1028 
on  an  award,  1027 
for  balance  of  account,  1027 
on  bills  and  notes,  1027.     See  Bills 
for  penalty  on  breach  of  agreement,  1025 
for  rent,  1028 

for  conti-ibution,  1029.    See  Contribution 
to  particular  loss,  1029 

where  one  partner  has  paid  more  than  his  share,  1029 
for  amount  of  vahiation,  1027 

in  respect  of  matters  involving  questions  of  account,  1029.  See  Account 
for  money  had  and  received  for  use  of  the  firm,  1030 
for  improper  sale,  1080 
for  the  recovery  of  partnership  property,  1030 

of  deposit  agreed  to  be  paid,  1019 
back  of  deposit,  122,  1019 
defendants  in  such  actions,  1020 
conduct  of  one  partner  a  defense,  212,  468,  469 
for  share  of  the  produce  of  sale,  1030,  1031 
for  share  of  suiplus  on  dissolution,  1032 
for  matters  unconnected  with  partnership  business.  1026 
between  two  firms  with  a  common  partner,  469,  1031 
between  a  partner  and  his  own  firm,  211,  469,  909,  ef  seq. 
injunction  to  restrain  by  persons  claiming  share  of  bankrupt  or  dead  part- 
ner, 997 
between  persons  who  have  agreed  to  become  partners,  1019 
by  and  against  trustee  of  bankrupt  partner,  490,  491 
by  and  against  firms,  466 — 491 
for  account,  945,  et  seq.     See  Account 

discoveiy,  955,  et  seq.    See  Discovery 
for  administiation  of  estate  of  deceased  piirtner.     See  Administration 
by  surviving  partners,  1045 
5.  by  and  against  companies 
generally,  492 

incorporated  companies,  492,  et  seq.  892 
companies  empowered  to  sue  and  be  sued,  495 
other  unincorporated  companies,  500 
unmcorporated  companies  and  their  members,  874 

on  general  doctrines  as  to  interference  between  members  of  companies,  894, 
et  seq. 

of  rule  not  to  interfere  except  to  dissolve,  894 
nor  in  matters  of  internal  regulation,  895 
fraud  and  misconduct,  896,  897 
controlling  majority,  900,  et  seq. 
minority,  902 
on  bill  accepted  by  company,  of  which  plaintiff  is  a  member,  1031 
security  for  costs,  493 
secretary  for  time  being,  874 
by  and  against  public  officers,  495,  881 

of  companies  governed  by  7  Geo.  IV,  c  46,  495 
7  Will.  IV.  &  1  Vict.  c.  73,  500 
foreign  companies,  493 
on  instruments  not  under  seal.    See  Contracts 

1444 


GENERAL    INDEX.  1107 

ACTIONS— co«fun<fr7. 

5.  by  and  against  companies — continued. 

on  contracts  answerable  out  of  funds  of  company,  382 

6.  between  companies  and  their  shareholders 

generally,  10:32 

promoters  and  subscribers,  1019,  1021 
incorporated  companies  and  their  members,  1032 
unincorporated  companies  and  their  members,  874 
public  officers  and  shareholdars,  873 
officers  for  the  time  being  and  shareholders,  874 
pursers  of  cost- book  companies  and  members  of  company,  875, 

note  (g) 
creditors  (at  the  instigation  of  a  company)  and  shareholders,  875 
particularly  for 

calls,  1033 

evidence    1034 
dividends,  1035 

not  registermga  person  as  a  shareholder,  114 
wrongfully  forfeiting  shares,  7ol,  note  (a) 

7.  against  promoters  and  directors.     See  also  Promoters 

for  recovery  back  of  deposits,  953,  1019 
ibr  misrepresentation,  926 
•     for  contriVmtion,  1022 

for  not  disti-ibuting  sui-plus  assets,  412,  note  (e) 
between  promoters  of  companies,  1021 

8.  miscellaneous 

by  Attorney-General,  493,  494,  901 

against  subscribers  tor  the  recovery  of  their  subscriptions,  1019 

against  shareholdci-s  (by  creditors),  sci.  fa.  517,  520.     See  Execution 

at  the  instigation  of  the  company,  875 

on  sales  of  shares.    See  Sale  of  Sharks 

by  seller  of  shares  against  pvuxhaser,  719 

by  purchaser  of  shares  against  seller,  718 

by  brokers  against  their  employers,  731 

against  sheriff  for  share  of  produce  of  sale  of  partnership  firm,  1031 

damages  recoverable  for  breach  of  contract  for  sale  of  shares,  719 

specific  performance,  720 

for  misrepresentation  and  fraud,  923,  et  seq. 

ACTORS. 

illegal  partnerships  between,  191 

ADEMPTION 

of  legacies  of  shares,  1075 

ADJOURNED  MEETINGS,  546,    See  Meetings 

ADMINISTRATION 

of  estate  of  deceased  partner.     See  Deceased  Partner.    Death 
partner  cannot  prove  in  competition  with  the  creditors  of  the  firm, 

1055 
action  for,  by  surviving  partners,  1045 
creditoi-s  of  the  firm   1053 

separate  creditors,  legatees,  or  next  of  kin  of  deceased, 
1066 
effect  of,  on  rights  of  creditors,  1050,  et  seq. 

ADMINISTRATOR.    See  Executor 

ADMISSIONS 

may  be  shown  to  have  been  mistaken,  242,  note  f^) 
of  person  that  he  is  a  partner,  not  conclusive,  94.  95 
of  one  partner  ;  when  evidence  against  co-partner,   264 
after  dissolution,  413 

1445 


1108  GENEKAL   INDEX. 

ADMISSIONS— cow^mMe^?. 

of  one  partner,  etc. — continued, 

when  binding  on  firm,  264 

in  name  of  firm  after  banki-uptcy,  224. 
of  one  promoter,  when  evidence  against  another,  96,  note  {m) 
by  directors  of  companies,  264,  265 
by  one  partner,  effect  on  Statute  of  Limitations,  456 

ADVANCES 

to  a  firm  by  trustees  after  the  partners  are  changed,  209 
how  distinguished  from  capital,  610 
securities  for,  effect  of  change  in  fii-m  on,  214 
by  partner,  777 
by  dii-ectors,  779,  800 
right  to  reimbursement,  760,  et  seq. 
interest  on,  786 

effect  of  declining  to  make  farther,  223,  1011,  note  (7t), 
See,  also  Loans 

ADVENTURE.    See  Paktnership 

ADVERTISEMENTS 

evidence  of  partnership,  97 
of  dissolution  of  partnership,  415 
effect  of,  415,  416 

not  inserted  in  "Gazette,"  unless  signed  by  all  the  partners,  408 
partner  ordered  to  sign,  408 
when  to  be  stamped,  416 
See,  also,  Notice. 

AFFIDAVITS 

by  public  ofiicers,  form  of,  499 

AGENCY, 

general  doctrines  of 

as  regards  partnerships,  236,  et  seq. 
effect  of  change  or  dissolution  of  firm,  209 
when  a  partner's  agency  coaimences,  385 
when  it  ends,  403 
as  regards  companies,  240,  et  seq. 

companies  in  process  of  formation,  240 
foiTiied,  255 
as  regards  promoters  of  companies,  241 
dormant  partners,  237 
directors,  244—246 
subscribers,  241 
servants  of  company,  246 — 248 
termination  of,  by  notice,  403 
continuing  for  purposes  of  winding  up,  411,  412 
liability  of  persons  sharing  profits,  depends  on,  39 

See,  also,  Agent;  Authority;  Implied  Powers;  LiABiLiTr 

AGENT, 

appointment  of  agent  for  firm,  265 

each  partner  agent  for  firm,  208,  236 

promoters  of  companies  not  each  other's  agents,  241 

shareholder  not  agent  of  company,  240,  243 

acts  not  done  by  requisite  number  of,  are  invalid,  244 

of  company  to  act  in  judicial  proceedings,  how  appointed,  494 

of  company,  effect  of  informal  appointment  of,  247 

being  fomied,  241 

formed,  243 

director  of,  when,  244 

other  persons,  246 
exceeding  his  authority,  liability  of,  366 
1446 


GENERAL    IXDKX.  llU'J 

AGKNT — continued. 

of  firm,  to  whom  to  account,  490,  note  in) 

right  of,  to  indemnify  from  his  principal,  755 

liability  of,  for  acts  donfi  for  non-existr-nt  principal,  368 

liability  of  principal  for  torts  and  frauds  of,  297 

for  for  foreign  principals  usually  contract  as  principals,  477  (o) 

See,  also,  Agency;  AuTxiourrr;  Implied  Powers;  Liability 

AGREEMENT 

for  partnorship,  see  Contekts,  Book  I.,  chap.  1 

unconcluded,  26,  27 

proof  of,  87 

action  on,  1019 

specific  performance  of,  914 

laches  a  d  .'fense  to  an  action  to  enforce,  905 

rescission  of,  for  fraud,  923,  et  seq. 
between  partners 

deteimines  what  is  partnership  property,  643 

may  be  evidence  of  a  partnership.  97 

how  far  it  aff 'cts  third  parties,  •ii').  ft  seq. 

construction  of,  see  Articles  op  Partnership 
to  take  shares,  100,  et  seq. 

need  not  be  in  writing.  711 

completed  by  allotment,  102 

action  for  breach  of,  718,  et  seq. 

specific  performance  of,  720 

directors  cannot  release  from,  741 
See,  also.  Contracts  ;  Rescission  op  Contract  ;  Specific  Perform- 
ance ;  Consideration 
ALIEN 

partners,  78 

ALLOTMENT 

invalid,  when,  106,  107 

with  notice  of  change  of  scheme,  112 

time  for.  108 

notice  of,  must  be  given,  102 

what  sufficient,  102,  103 

applicant  may  dispense  with  notice  of,  103 

revoking  application  for  shares  before,  101,  102 

letter  of,  what,  102 

requires  a  penny  stamp,  102 

production  of,  in  actions  for  deposits,  117,  note  (e) 
cancellation  of  improper,  742 
See,  also,  ScRir;  Shares 

ALLOTTEES. 

of  scrip  and  shares 

registration  of,  without  his  knowledge  does  not  bind  him.  102 
acting  as  shareholders,  effect  of,  103,  note  (.•*) 

payment  by,  when  a  condition  precedent  to  becoming  a  shareholder,  125, 
note  ((■) 
See  Allotment;  Calls;  Contributories;  Scrip;  Shareholders; 
Shares 

ALLOWANCES 
in  respect  of 

trouble,  extra  work,  &c.,  774 

to  executors  and  surviving  partners,  1046 
treating  customers,  779 

outlays  generally,  777  ^_  ' 

money  paid  in  dist'harge  of  debts,  778 

useless  expenses,  778  *  *  trr 

1447 


1110  GENERAL   INDEX. 

ALLOWANCES— fOMimuerf. 

Indian,  775 

unauthorized  outlays,  778 

charges  for  valuation,  779 

outlays  on  the  property  of  one  partner,  780 

expenses  incurred  for  firm,  but  not  charged  to  it  in  previous  account, 

779 
unexplained  expenses,  779 
secret  service  money,  779 
advances  generally,  777.    See  Advances 
liabilities  and  losses,  781 
losses  attributable  to  one  partner  only,  783 

misconduct  or  negligence,  783 
illegal  acts,  771 
loans  by  directors,  779,  780 
interest,  786 

agreements  as  to,  886 
Just,  774,  et  seq. 

See  CoNTNiBUTiON;  Indemnity 

AMALGAMATED  COMPANY, 

liability  of,  402  .      ^^^ 

on  bills  given  for  the  debts  of  the  constituent  companies,  25f 

AMALGAMATION  OF  COMPANIES, 

meaning  of,  see  Higg's  case,  2  H.  &  M.  666 
right  to  effect,  292,  (306  ,  .       o.a 

general  power  of  managing  does  not  give,  819 
injunction  to  restrain,  1002 
effect  of,  on  sureties,  214 
on  securities,  214 
liabilities,  463,  465 
on  policy  holders,  464 
See  Companies 

AMENDMENT  ,    ^, 

where  plaintiff  should  have  sued  on  behalf  of  himself  and  others,  887 
in  the  name  of  the  company,  see  Addenda 

ANNUAL 

list  under  Companies  act  1862,  175 
accomits,  effect  of  not  taking,  848,  et  seq. 

ANNUITY 

in  lieu  of  profits,  or  out  of  profits,  36,  44 
to  widow,  agreements  as  to,  853 

ANSWER  IN  CHANCERY, 

evidence  of  partnership  by,  97 
denying  partr^ership,  962  _ 
discovery  when  partnership  was  denied  in,  962 
See  Payment  into  Court 

APOTHECARIES, 

partnership  between  unqualified,  188 

APPEAL, 

APPEARANCE,  ^        ,   ,    ,^    ^  ^        .no       i    r  ^ 

one  partner  can  authonze  efatry  of,  on  behalf  of  finii,  473,  note  (g-) 

APPLICATION  OF  MONEY,  .,^     ^  ;,  ,^.    ^      a,    c  ;  q«i 

firm  not  liable  for  money  because  it  has  had  the  benefit  ot  it,  dbl 

APPLICATION  FOR  SHARES.     See  Shakes;  Allotment;  Contkibtjtoky 
1448 


GENERAL   INDEX.  1111 

APPOINTMENT 

held  by  firm,  effect  of  change  of  partners  on,  209 
held  by  one  partner 

official,  8:J3 

atrrecments  as  to,  833 

vahuition  of,  on  dissolution,  1018 

when  assets,  C51 
of  othcers,  mandamus  to  compel,  1037 

APPORTIONMENT 

of  premiums,  71-75 

of  mterost  and  dividends,  1081 

of  profits,  lOSO 

APPRENTICES, 

discharge  of,  on  change  in  firm  to  which  tliey  are  bound,  213,  note  (A.) 

APPROPRIATION  OFi'AYMENTS, 
generally,  419 — 432 
discharge  of  retired  partner  by,  422, 

estate  of  deceased  partner  by,  422,  et  seq. 

dormant  partner  by,  423 

surety  by,  425 
'    where  one  partner  pays  his  o^vn  debt  with  moneys  of  firm,  419 
where  there  is  a  single  current  account,  425 
where  there  are  several  distinct  accounts,  427 
where  dividend  is  paid  on  several  debts,  how  applied,  422,  430,  431 
cases  in  which  rule  applicable  to  single  accounts  does  not  apply,  427 
against  creditor  as  well  as  debtor,  425 
effect  on  incoming  partners,  426 
where  debts  owing  to  finn  and  member  of  it,  432 
in  cases  of  fraud,  431,  432 

ARBITRATION, 

staying  actions,  &c.,  after  agreement  to  refer,  868 

power  of  partner  to  bind  firm  by  submission  to.  265,  473,  474 

effect  of  agreement  for,  on  action  for  account,  970 

dissolution  of  partnership  by,  222,  note  (if) 

usual  clauses  relating  to,  868 

clause  in  articles  as  to,  applies  to  partnership  continued  after  expiration  of 

term,  824 
by  companies,  265 

See  Award 

ARBITRATOR, 

power  of,  on  general  submission,  870 
under  Lands  clauses  act,  359 
cannot  appoint  receiver,  870 

ARREST 

for  debt,  effect  of,  434 

effect  of,  on  charging  order,  695 

ARTICLES  OF  ASSOCIATION,  168.    See  Association;  Deed  op  Settlement 

ARTICLES  OF  PARTNERSHIP, 

illegal  clauses  in,  do  not  necessarily  make  the  partnership  illegal,  180 

proof  of,  not  essential  to  establish  a  partnership,  92,  94 

to  be  drawn  up,  30,  831 

effect  of  retrospective,  96,  831 

effect  of  deferring  execution  of,  as  regards  creditors,  386 

not  dating,  831 

actions  for  broaches  of,  1019 

specific  performance  of  clauses  in,  914,  et  seq.     See   Si'ECiric  Pkkkokm- 

ANCK 

1440 


1112  GENERAL    INDEX. 

ARTICLES  OF  PARTNERSHIP— w»fm»aZ. 

general  rules  for  construing-,  817,  e,t  seq. 

not  intended  to  define  all  the  rights  and  duties  of  partners,  817 

to  be  construed  with  reference  to  object  of  partners,  818 

and  so  as  to  defeat  fraud,  819 

and  the  taking  of  unfair  advantages,  819 

provisions  in,  may  be  tacitly  waived,  820 

effect  of  practice  of  company,  822 

extend  to  partnership  continued  after  the  time  fixed  for  determination, 
822,823 
of  d'rectory  and  imperative  clauses  in,  824 
of  fundamental  and  suljsidiary  clauses,  827 
of  optional  clauses,  827 
remarks  on  clauses  in,  817 

usual  clauses,  830 

nature  of  the  business,  880 

commencement  of  the  partnership.  831 

future  formal  articles,  831 

name  or  style  of  firm,  832 

duration  of  the  partnership,  832 

premiums.  832 

property  of  the  firm,  832 

capital  of  firm,  832,  et  seq. 

appointments  held  by  partners,  833 

prohibitions  against  carrying  on  iDusiness,  854 
after  sale  of  the  business,  854 

deeds  and  papers  in  the  custody  of  firm  of  solicitors,  858 

good-will,_  833,  859  et  seq. 

bringing  in  debts  as  capital,  835 

getting  in  debts  on  dissolution,  865 

assignmeit  of  share  of  outgoing  or  deceased  partner,  &c.,  866 

indemnity  to  be  given  by  continuing  to  outgoing  partner,  tV'c,  867 

effect  on  lien,  867 

reference  of  disputes  to  arbitration,  868 

penalties  and  liquidated  damages,  871 

trade  secrets,  &c.,  833 

patents,  833 

inventions,  833 

amount  of  debts,  835 

allowances,  836 

interest,  836 

moneys  to  be  drawn  out,  836 

conduct  of  partners,  837 

effect  of  covenant  to  be  true  and  just,  &c.,  837 

servants,  837 

attention  to  be  given  to  business,  837 

powers  of  majority,  838 

powers  of  one  pf.rtner  by  agreement,  838 

partnership  books,  838 

solicitor's  papers,  858 

mode  of  taking  accounts,  838 

conclusiveness  of  settled  accoun,ts,  839 

retiring  from  firm,  840 

sale  of  share,  841 

oflFer  of  share  to  co-partner,  and  puicliase  by  him,  841  et  seg. 
■    dissolution,  843 

insolvency  of  member,  843 

insanity  of  member,  843 

notices  of  dissolution,  841 

expulsion,  844  et  seq. 

valuation  of  share,  846  et  seq. 

introduction  of  new  partners,  851  et  sea. 

1450 


GENERAL   INDEX.  1113 

ARTICLES  OF  PARTNERSHIP— co«^ni<ed. 
remarks  on  clauses  in — continued. 
settled  share,  8-J2 

transmission  of  share  to  non-partners,  852 
annuities  to  widows,  &c.,  853 

ASSETS  .      ,  ^       ,  .    ,     . 

of  deceased  partner,  effect  of  continuing  them  m  the  partnership  busmess, 

1070  et  seq. 
liability  of  directors  for,  if  lost,  593 

See,  also,  Administration;  Deceased  Partneh;  Deatu. 

ASSIGNMENT 

of  debt,  by  one  partner,  260 

effect  of,  as  regards  set-off,  510 

how  to  be  made  since  the  Judicature  act,  487 
of  share  in  partnership,  697 

effect  of,  as  regards  dissolution,  229 

position  of  assignee,  697  et  seq. 

right  of  assignee  to  an  account,  698.  946 

by  outgoing  to  continuing  partner,  866 
of  shares  in  companies.     See  Shares  ;  Transfer  of  Shares 
of  partnership  assets  for  benefit  of  creditors,  266 

ASSOCIATION 

articles  of,  under  act  of  1862, 168 

effect  of  provision  in,  for  payment  of  antecedent  debt,  396 

effect  of  alteration  of,  on  liability  of  subscriber  of  the  memorandum,  170 

on  shareholder,  115,  note  (r) 
controlled  by  the  memorandum  where  they  are  inconsistent,  169,  559 
memorandum  of,  under  act  of  18G2,  168.    See  Memorandum  of  Associa- 
tion 

ASSUMING 

to  act  as  corporation,  192 

ATTACHMENT 

against  corporations,  518 
of  shares,  697 

ATTAINDER, 

effect  of,  230,  note  (n) 

ATTORNEYS.    See  Solicitors 

wan-ant  of,  given  by  one  partner,  474 

partnerships  between,  190,  216,  244,  299,  303,  828,  376,  392, 404,  417,  540,  7 <o 

ATTORNEY-GENERAL, 
a<;tion  by,  493,  901 

AUCTION, 

sale  of  shares  by,  718 

share  of  debtor  under  fi.  fa.,  689,  note  (c) 

AUDIT 

does  not  bind  shareholders,  811,  note  {h) 

AUDITORS 

of  accounts,  812 

AUTHOR  AND  PUBLISHER, 
partners  in  profits  only,  21 
partnerships  between,  duration  of,  219 
liability  of,  to  creditors,  339,  387 

1451 


1114  GENEEAL   IKDEX. 

AUTHORITY, 

to  hold  out  as  partner,  49  et  scq. 

of  one  partner  to  act  for  fii-m,  236  et  seq. 

after  dissolution,  408-412 

of  dormant  partner,  237 

in  cases  of  extraordinary  necessity,  238 

of  promoters  of  companies  to  act  for  each  other,  241 
to  bind  subscribers,  241 

of  shareholder  to  bind  company,  243 

of  directors,  244  et  seq. 

directors  not  liable  for  honest  mistakes,  as  to  extent  of,  881 

of  one  partner,  liability  of  firm  for  untrue  statements  as  to,  314,  815 

excess  of,  effect  of  notice  of,  325,  334 
liability  of  agent  in  cases  of,  366 

revocation  of  brokers',  to  buy  shares,  731 

See  Agency;  Agents;  Implied  Powers. 
AWARD, 

money  awarded  to  one  partner,  when  it  does  not  belong  to  firm,  645 

dissol  vrng  partnership,  authorized  by  general  admission  to  arbitration,  844,  870 

disposing  of  business,  effect  of,  857 

a  defense  to  an  action  for  account,  970 

mistakes  in,  when  set  right,  970 
See  Arbitration. 

BAILIFF, 

to  distrain,  appointment  of,  by  one  partner,  279 

BALANCE, 

of  account,  action  byone  partner  against  another  for,  1027 

in  hands  of  partner,  interest  on,  788 

sheet 

BANK  NOTES, 

issue  of  185  note, 

liability  of  limited  company  issuing,  384 

BANK  OF  ENGLAND, 

privileges  of,  185  note 

BANKERS, 

illegal  partnerships  between,  184  et  seq. 

returns  to  be  made  by,  185 

issue  of  notes  by,  185  note 

number  of  persons  who  may  be  in  partnership  as,  187 

receipt  of  deposits  by,  effect  of  proving  in  an  action  for  their  recovery, 

122 
liability  of,  for  misapplication  of  money,  304,  309 
account  with  assent  to  transfer  of,  277 
may  pay  cheques  drawn  by  de  facto  directors,  275 

BANKING  ACCOUNT. 

directors  having  no  power  to  borrow  may  overdraw,  273 

BANKING  COMPANIES 
shares  in 

transfer  of,  711 

not  within  the  Statute  of  Frauds,  674 

nor  within  the  Mortmain  acts,  674 
power  of  directors  of,  to  borrow  money,  270 
issue  of  notes  by,  185,  note 
liable  for  securities  carelessly  lost,  300 

See  Companies  Governed  by  7  Geo.  4,  c.  46,  p.  165;  Public  Officers 
unincorporated  associations  for  banking  purposes,  when  partners, '' 

1452 


GENERAL    INDEX.  1115 

BANKRUPT 

partners  need  not  join  in  suing  on  joint  contract,  491 

court  of  bankriaptcy  may  restrain  action  against,  491 
public  officer.  499 

shareholder,  liability  of,  to  calls  made  before  bankruptcy,  641 
to  future  calls  barred  by  the  order  of  discharge,  641 
See  Bankruptcy 

BANKRUPTCY, 

consequences  of 

dissolves  firm,  224 

assignee  a  tenant  in  common  witTi  the  solvent  partner,  224 

as  regards  the  bankrupts,  and  their  power  of  dealing  with  the  assets   of 

the  firm,  405 
as  regards  the  solvent  partners,  and  their  power  of  dealing  with  the 

assets  of  the  firm,  405 
as  regards  agreements  between  partners  affecting  their  property,  655 
actions  by  and  against  partners  in  cases  o^",  490,  491 
return  of  premiums  in  event  of,  72,  76 
petition  for,  by  creditor  whose  debt  is  merged,  452 

BENEFIT 

of  money,  effect  of  having  had,  "01  et  seq. 

of  contract,  361 

resulting  from  connection  with  firm,  575 

BENEFIT  BUILDING  SOCIETY, 

company  may  not  hold  shares  in,  86 

BEQUEST 

See  Legacy  • 

BILL  IN  PARLIAMENT, 

agreement  to  withdraw  opposition  to,  401 

BILL  (  F  SALE, 

of  partner's  share  under  fi.  fa,,  689 

unregistered,  not  void  against  liquidator  of  company,  see  4  Eq.  010 

BILLS  OF  ACCOUNT, 

evidencing  partnership,  97 

BILLS  OF  EXCHANGE, 

proof  of  partnership  by  means  of,  97 

issue  of,  by  bankers,  185,  note 

do  not  merge  debt  to  secure  which  they  are  given,  440 

power  of  one  partner  to  bind  finn  by,  266 

■when  given  for  his  own  private  debt,  329 

when  given  after  dissolution,  404-407,  440 
power  of  directors  to  bmd  company  by,  267 
form  of,  under  Companies  act,  1862,  360 
may  be  under  seal.  360 
power  of  public  officer,  496 
authority  to  transfer,  268 
to  indoi-se  in  name  in  which  it  is  drawn,  267 
one  ptirtner  taking,  in  satisfaction  of  debt,  277 
agent  taking,  drawn  by  him  in  satisfaction  of  debt,  277 
drawn  by  one  partner  on  firm,  offoct  of,  212 

fii-m  on  another  where  common  partners,  212 
for  old  debt,  a  fraud  on  new  partner,  393 
action  by  firm  on,  475 
accepted  for  honor,  476 
acceptance  of,  need  not  be  signed,  346 
of  firm,  one  partner  cannot  sue  others  on.  1030 

undertaking  of  one  partner  to  provide  for,  when  due.  2.^2 
one  partner  has  no  power  to  guarantee  payment  of,  on  account  of  firm,  281 

I4r)8 


1116 


GENERAL    INDEX. 


BILLS  OF  EXCE A'^GE— cnnfinued. 

injunction  to  restrain  negotiation  of,  997 
who  liable  on,  340  et  spq. 

effect  of  form  of,  340 

when  name  of  firm  is  on  them,  329.  331,  340 

when  name  of  firm  is  not  on  them,  344 

where  two  firms  with  same  name,  341  et  seq. 
where  name  of  firm  same  as  individual,  342 
rpistake  in  name,  effect  of,  345 
liability  of  directors  on,  350 

liability  of  mcoming  partner  for  bills  accepted  by  co-partners  for  old  debt,  393 
how  to  be  accepted  by  companies 

governed  by  7  &  8  Vict.  c.  110,  p.  356,  note  (q) 
by  8  &  9  Vict.  c.  16,  p.  357 
nnder  Companies  act,  1862,  359 
given  by  continuing  partner  for  old  debt,  effect  of,  438  et  seq. 
actions  by  partners  on,  476 

action  by  one  partner  againsff  another  for  not  taking  up,  1028 
action  by  one  partner  agamst  another  on,  1027 
in  what  trading  partnerships  implied  power  to  draw,  266 
See,  also,  Promissory  Notes 

BILLS  OF  EXCHANGE  ACT, 

proceedings  under,  not  altered  by  Judicature  acts,  468,  note  (n) 

BLANK. 

in  deeds,  705 

transfers  of  shares  in,  706 

signed  by  allottee,  effect  of,  102,  note  (n) 

BOARD  OF  DIRECTORS, 

acts  not  done  by  a,  how  far  binding  on  company,  245.     See  Directors 

BOARD  OF  TRADE, 

inspection  of  accounts  by,  813 

jurisdiction  over  register  of  companies,  163 

change  of  company's  name,  164 
articles  in  table  A.  (Companies  act,  1862),  169 
life  assurance  companies,  814 
BONA  NOTABILIA, 

shares  in  partnerships  are,  661 

BOND, 

implied  power  of  partner  as  to,  278 
merges  simple  contract  debt,  452 
of  company,  validity  of,  though  irregularly  issued,  254 
Lloyd's,  271 
See  Debenture 

BONUSES, 

right  of  legatee  of  shares  to,  1080 
distinguished  from  dividends,  1080 

BOOK  DEBTS, 

future  may  be  mortgaged,  271.     See  Debts 

BOOKS, 

agreements  as  to  custody  of  partnership,  838 

specific  performance  of,  917 
delivery  of,  to  receiver,  1014 
entries  in,  are  evidence  against  all  the  partners,  991 

after  dissolution,  213 
when  directors  have  unplied  notice  of  contents  of,  739,  note  [q) 

1454 


GENERAL    INDEX.  HIT 

BOOKS— confvnml. 

production  of,  in  actions  for  account,  958,  et  seq. 
effect  of  withhoklingr,  on  taking  accounts,  993 
See  further,  Accounts;  Inspection. 

BORROWING  MONEY, 

power  of  one  partner  to  bind  firm  by.  266,  269 

irregular  exercise  of,  258,  et  f>eq.  271 

in  case  of  urgent  necessity,  288 
power  of  directors  to  bind  company  by,  269 

liability  of  company  where  power  is  exercised  irregularly,  272 
advances  by  directors,  779,  780 
debentures,  270 
Lloyd's  bonds,  271,  367 

distinction  between  borrowing  money  and  getting  things  on  credit.  273 
distinction  between  boiTOwing  money  and  increasmg  aipital,  273,  274 
effect  of  having  had  benefit  of,  as  regards  creditors,  272,  301 
liability  of  directors  who  borrow  money  in  excess  of  their  authority,  3G7 

BREACH  OF  TRUST, 

liability  for,  joint  and  several,  374 
,  by  one  partner,  liability  of  firm  for,  374 
liability  of  estate  of  deceased  partner  for,  1052 
'       notice  of,  effect  of,  2,s9 

defense  to  action  for  specific  performance,  920.  921 
notice  of,  by  one  partner,  when  not  notice  to  firm.  288 
by  not  getting  in  share  of  deceased  partner.  1070 
remedy  for,  when  barred  by  Statute  of  Limitations,  455 
effect  of  lapse  of  time  on,  455 
following  money,  313,  976  et  seq. 
investing  in  shares,  602 
See  Trustee;  Tuusts 

BROKERS, 

who  are,  721 

difference  between  them  and  jobbers,  721,  note  (r) 

sale  of  shares  through,  730.     See  Sale  of  Shares 

brokers'  charges,  734 

usages  of,  721  et  seq. 

distinguished  from  rules  of  Stock  Exchange,  721,  722,  734 
right  of,  to  indemnity  from  their  employers,  732 
revocation  of  authority  of,  731 
duty  of,  employed  to  sell,  730 
duty  of,  employed  to  buy,  731 
duty  to  procure  transfer,  726 
duty  of  pin-ehaser  to  indemnify,  731 
puichase  and  sale  of  illegal  shares  by,  735 
partnership  between  unqualified,  187 
discovery  by,  187 

BROKERS'  TICKET,  722 
custom  as  to,  722 
See  Sale  of  Shares 

BUBBLE  ACT,  THE,  191  et  seq. 

BUBBLE  COMPANIES.    See  Abortive  Companies 

BUILDING  SOCIETY.    See  Benefit  BuiLnixo  Society 

BURGLARY. 

One  paitner  cannot  cammit  as  to  the  house  of  the  firm,  643 

BUSINESS, 

of  partnership,  limits  the  authority  of  a  partner  to  act  for  finn.  236  rf  fxq. 

1455 


11  !  S  GEKEKAL   INDEX. 

BUSINESS— roHf;»Hef7. 
right  to  transact 

in  partnerships,  540 

in  companies,  541 
agreement  not  to  carry  on,  854 

when  implied,  856 

specific  perfbmiance  of,  857 
company  cannot  transfer,  606 
embarking  in  a  new  kind  of,  600 
effect  of  selling  on  right  to  carry  on,  854,  855 
effect  of  award  disposing  of,  857 
of  partnership,  agreements  as  to,  830 
transfer  of,  by  company,  606 
purchase  of,  by  company,  292,  29 
See  Good-will 

BY-LAWS, 

power  of  making,  547 

invalid  if  not  made  by  proper  authority,  605 
See  Companies 


CALLS, 

generally,  623 

by  whom  to  be  made,  624 

in  companies  governed  by  7  Geo.  4,  c.  46,  624 

7  Wm.  4  &  1  Vict.  c.  73,  624 

8  &  9  Vict.  c.  16,  624,  63:! 

_  Companies  act,  1862,  624,  633 
by  directors,  de  jure,  624 
ty  improper  persons,  624 
by  insufficient  number  of  persons,  625 
purser  of  mining  company  can  sue  for,  148  note.  875  note,  1033 
different  kinds  of,  623 
are  specialty  debts,  640,  1033,  1049 
compelling  shareholder  to  pay  by  causing  him  to  be  sued  by  a  creditor,  8 

not  yet  due,  10:34,  note  (») 
demand  for  not  notice  of  allotment,  203  note  (s)    ' 
mortgage  of,  271  and  note  [z) 
in  cost-book  companies,  how  made,  624 

may  be  sued  for  by  the  purser,  148  note,  875  note,  1033 
for  prospective  expenses  not  improper,  627,  6:30 

otherwise  in  cost-book  companies,  627 
effect  of  loss  of  capital  on  liability  to  pay,  615 

increasing  capital,  615 
actions  for,  1033  et  seq. 

statutory  enactments,  1033 
pleadings  in,  10:33 
defenses  to,  6:36,  1034 
evidence  in,  1034 

after  shares  have  been  forfeited  for  non-payment  of,  639 
by  purser  of  cost-book  company,  148,  note  {g) 
forfeiture  of  shares  for  non-payment  of,  639 
for  what  they  may  be  made,  625 
for  starting  company,  625 
for  carrying  on  business  of  company,  626 
for  improper  purposes,  627 
for  the  indemnity  of  a  shareholder,  628  note  (6) 
for  repayment  of  capital  returned,  when,  629 
before  capital  has  been  subscribed,  625 
mandamus  to  make,  628 
action  to  compel  the  making  of,  628 
amount  of,  to  be  made,  628 

I4w6 


GENERAL   INDEX.  1115 

CALLS — continued. 

interest  on,  629  and  note  (^),  748  note  [h),  751  note  (0 

when  considered  as  raade,  C31 

lien  on  shares  for,  G84 

payment  of,  a  condition  precedent  to  a  transfer  of  shares,  637 

persons  liable  to  pay,  6:U,  640 

scrip  holders,  625 

Bubscribers,  0:54 

under  Companies  act,  1862,  p.  635 

in  companies  formed  under  8  and  9  Vict.  c.  16,  p.  634 

to  abortive  companies,  120 

shareholders,  635 

duration  of  liability,  637 

by  statute,  639 

cestui  que  trust,  127 

infants,  636 

persons  who  are  shareholders  in  substance,  127  et  Sfj. 

retired  shareholders.  637 

legatees  of  sViares,  1078 

persons  induced  to  take  shares  by  fraud,  636 

persons  who  have  sold  their  shares,  637 

executors,  640,  1033  note  (//),  1048 

trustees  in  bankruptcy,  641 
mode  of  making,  629 

irregularities  in  making,  629,  630 

resolutions  making,  630 

prospective  calls,  630 
intervals  between  successive  calls,  631 
minutes  of  meeting  making  call,  632 
notice  of  calls,  632 

irregular,  632 

form,  632 

evidence,  633 

under  Comjianies  act,  1862.  633 
must  be  made  fairly,  627 
iiyunction  to  restrain  making  of,  898 

refused  if  the  call  is  not  illegal,  895 
granted  if  illegal,  9!i0 
as  to  paying  in  advance  and  taking  them  back  for  fees,  596,  note  (hj) 
future,  may  be  proved  for,  641 
order  of  discharge  bars  all,  641 
does  not  prevent  transfer  of  shares  until  made,  703 
interest  on,  when  payable  after  forfeiture,  751,  note  {t) 

CALLS  ON  CONTRIBUTORIES, 

after  forfeiture,  747 

CANAL  COMPANIES. 

shares  in,  not  within  the  Mortmain  acts,  674 
See  Companies  governed  by  8  &  9  Vict,  c.  16 

CANCELLATION 

of  improper  allotment,  742 
of  shares 

as  to  validity  of.  619,  742 

See  Rescission  op  Contracts;  Surrender  of  Shares 
'of  registration,  163,  164 

CAPACITY  OF  PARTNERS,  77 

infants,  80 
lunatics,  83 
married  women,  84 
corporations,  86,  251 

«  1457 


1120  GENERAL    I>;DEX. 

CAPACITY  OF  VATiT'SEn^— continued. 

separate  finns,  86 
companies,  8(5,  251 
aliens,  78 
felons,  80 
outlaws,  80 

CAPIAS.    See  Execution 

CAPITAL, 

1.  of  partners 

generally,  610 

how  distinguished  from  advances,  610 

action  by  one  partner  against  another  for  not  contributing,  1026 

of  the  firm,  agreements  as  to,  832 

interest  on,  786 

bequest  of  partner's,  what  it  passes,  1075 

increasing  capital,  273,  611 

continued  employment  of,  976  et  seq. 

losses  of,  how  shared,  676 

paying  profits  out  of,  791 

2.  of  companies. 

generally,  611 

paying  dividends  out  of,  605 

annual  return,  as  to,  621 

varying  the  amount  of,  612 

effect  of  vaiying  the  amount  of,  as  stated  in  the  prospectus,  613 

division  of,  into  shares,  613 

nominal  and  paid  up,  613 

effect  of  exhausting,  615 

increasing,  273,  611,  61^ 

by  preference  shares,  618,  621 
reducing,  605.  619 
dividing,  620 

conversion  of,  into  ptock,  621 
of  cost-Viook  mining  companies,  615 
of  companies  governed  by  8  &  9  Vict.  c.  16,  p.  616-618 

Companies  act,  1S62,  p.  618-622 
26  &  27  Vict.  c.  118,  p.  617 
loss  of,  a  cause  of  dissolution,  223 

power  to  increase,  not  same  as  power  to  borrow,  274,  611 
subscription  of,  when  necessary  before  calls  are  made,  625,  626 

before  commencing  business,  108,  62->,  626 
position  of  shareholder  who  has  received  a  return  of,  629 

CARRIERS. 

actions  against,  483 

co-pailners  need  not  be  joined,  484 

notice  to  one  of  a  firm  of,  effect  of,  288 

CARTS. 

names  on,  evidence  of  partnership,  97 

CASH. 

shares  must  be  paid  in  when,  614 
payment  in  what  is,  614 

CERTIFICATE, 
sen  D   1  \l'o 

may  become  transferable  by  delivery  by  usage,  124,  709 
of  title  to  shares,  145 
duty  to  grant,  145 
company  cannot  dispute  truth  of,  145 

is  liable  to  damages  if  untrue,  301 

1458 


GENERAL    INDEX.  1121 

CERTIFICATE— con  fimtcrl. 

of  title  to  shores — continued. 

in  companies  governed  by  8  &  9  Vict.  c.  16,  p.  in6 

by  Companies  act,  1862,  170 
delivery  of,  not  necessary  to  complete  transfer,  711 
shows  only  the  legal  title  to  the  shares,  145 
of  registration  under  Companies  act.  1862,  163 
copies  of  when  evidence,  163 

CESTUI  QUE  TRUST. 

of  shares  in  companies 
not  f'hareholders,  127 
liability  of 

to  indemnify  trustee,  730 
to  pay  calls,"  127 

to  creditors,  36.    See,  too,  Breach  op  Trust 
CHAIRMAN, 

contract  with,  when  binding,  248 
contracts  with,  for  time  being,  340 
at  meetings  of  directors,  56") 
See,  too,  Directors;  Meetings;  Actions. 

CHANGE  IN  CONSTITUTION.    See  Majority 

one  dissentient  can  forbid,  600 

CHANGE  IN  FIRM, 
effect  of,  208 

on  sureties,  212 

on  securities,  214 

on  actions  by  and  against  it,  486 

as  regards  set-off,  504 

CHANGE  OF  NAME  OF  COMPANY,  164,  177 
effect  on  sureties,  214 

CHANGE  OF  SCHEME 

between  company  as  projected  and  as  formed,  109  et  seq. 
See  Prospectus 

CHARGE  OF  DEBTS 

on  estate  of  deceased  partner,  effect  of,  455 

CHARGING  ORDERS,  694  et  seq. 

effect  of,  on  right  to  receive  dividends,  797 
on  shares  held  in  trust.  694,  note  (r) 
only  in  "  public  companies,"  695 
on  shares  in  cost-book  companies,  696 

CHARTER 

parties,  274 

CHARTERS, 

grant  of,  150 

acceptance  of,  150 

surrender  of,  150,  607 

applications  to  crown  for  new,  606,  607 

injunction  to  restrain,  150,  note  {a),  606,  607 
departing  from,  151,  193 
validity  of,  151 
scire  facias  to  repeal,  151 
obtained  by  fraud,  943 
illegal  use  of,  193 

1459 


1122  GENERAL   INDEX. 

CHARTERED  COMPANIES, 
formation  of,  150 
members  of,  not  partners,  151 
who  are  members,  178 

liability  of  shareholders  of,  383.    See  Charters;   Companies;   Corpora- 
tions 

CHEQUES,  ,  ,  .        „.. 

firm  bound  by,  though  drawn  by  one  partner,  274 
of  directors,  275,  note  {t) 

liability  of  company  on,  347 
valid,  thougrh  irregularly  signed,  829 
bankers  may  pay,  drawn  by  de  facto  directors,  275 
directors  not  liable  on,  if  account  overdrawn,  275 

CHOSES  IN  ACTION, 
shares  not,  663 

CIRCULARS. 

evidence  of  partnership,  97 

notice  of  dissolution  by,  416 

issued  by  directors,  when  imputable  to  company,  321 

CLERGY, 

may  be  partners,  77 

CLUBS. 

not  partnerships,  56 

COACH  OWNERS, 

partners  in  profits  only,  20 

liability  of,  for  each  other's  negligence,  299  . 

CODE  CIVIL. 

definition  of  partnership  in,  2 

COGNOVIT 

given  by  one  partner,  474 

COLLIERY.    See  Mines 

COLLUSION. 

releases  given  by,  293,  294 

COLLYER,  his  definition  of  partnership,  2. 

COLONIAL  COMPANIES,  154,  note  {a) 
empowered  to  sue,  154,  note  (o) 

COLONIAL  JUDGMENT 

does  not  merge  debt  for  which  it  is  obtained,  451,  note  {d) 
action  on,  521,  note  (i) 

COMMENCEMENT, 

of  partnership,  29 

presumptive  date  of,  385  et  seq.,  831 

agreements  as  to,  831 
of  liability  of  partners  for  each  other's  acts,  885  et  seq,  ' 
of  liability  of  shareholders,  394 
of  powers  of  directors,  402 

COMMISSION, 

effect  of  dividing,  between  partners,  36 
of  bankruptcy.    See  Bankruptcy 

COMMITTEE, 

of  lunatic  partner,  225 

exercising  right  of  pre-emption,  225,  note 

1460 


GENERAL   INDEX.  1123 

COMMITTEE  OF  MANAGEMENT, 

members  of,  not  each  other's  agents,  242 

COMMON  LAW, 

legality  of  companies  at,  192 
extent  of  liability  of  partners  at,  375 

COMMON  PARTNER.    See  Connected  Firms 
actions  between  firms  with,  1031 

COMMON  SEAL,  352,  &c.    See  Seal 

COMMON  STOCK 

not  essential  to  partnership,  18,  19 

COMMUNITY 

of  profit.    See  Partnership  ;  Profits 

COMPANIES.    See  Joint  Stock  Companies  in  the  U.  S. 
1.  Companies  generally,  99 

classification  of,  12  et  seq.,  146, 

historical  sketch  of  statutes  relating  to,  5 

table  of  statutes  relatmg  to,    11 

distinguished  from  partnerships  and  corporations,  4,  99 

abortive.     See  Aboutivp:  Company 

actions  by  and  against,  492.     See  Actions 

agency,  doctrines  of,  240.     See  Agent 

amalgamated.     See  Amalgamated  Companies 

banking.     See  infra,  Nos.  2,  5,  7,  and  8, 

calls  on  shareholders  of.     See  Calls 

capital  of,  612.     And  see  Capital 

in  companies  governed  by  8  and  9  Vict,  c,  16,  p.  616 
acts  of  1862-7,  p.  618 

division  of,  into  shares,  613 

increasing,  611 

reducing,  605,  611,  619 

loss  of,  effect  of,  615 

nominal  and  paid  up,  613 

varyiny  amount  of,  613 

effect  of  company  commencing  business  before  capital  is  subscribed 
108 
chartered.    See  Charter  ;  and  infra.  No.  3 
constitution  of.  departing  from,  606 
contracts  of,  proper  form  of,  352.    See  Contracts 

ratification  of,  258,  355 
cost  book.    See  Cost-book  Mining  Company 
directors  of.    See  Directors 
dissolution  of, 

causes  of.  251  et  seq. 
execution  against,  517  et  seq.    See  Execution;  Public  Officer 
empowered  to  sue  and  be  sued,  154 
forming  and  formed,  101 
formation  of,  146  et  seq. 

under  special  acts  of  Parliament,  154 
funds  of,  not  to  be  applied  to  unauthorized  purpose,  1001.    See  Majority; 

In.iunction 
fraud  upon,  by  all  existing  members,  591 
illegal.     See   Illegal  Partkeuships 
Inchoate,  32 
incorporatf?d 

by  charter,  150 

See  Charter;  Corporation;  and  infra,  Nos.  3  and  5 
incorporated 

by  Act  of  Parliament,  154 

1461 


1124:  GENERAL   INDEX. 

COMPANIES— coH/iH«^f7. 

incorporated — co)(  t  in  ued. 

See  CoRroRATiON;  and  infra.  No.  6 
by  registration,  163.     See  infra,  Nos.  4  and  7 
joint-stock.     See  hfra,  No.  2,  3,  4,  5  and  7 
liability  of.     See  Liability 

for  goods  supplied  to,  on  credit,  291 
for  money  borrowed,  269,  270.    See  Borkowing  Monet 
for  acts  of  its  directors,  244.    See  Directors 
for  statements  of  directors,  294.     See  Fraud 
for  irreirular  acts  of  directors,  253,  367 
for  !  c     "''agents  irregularly  appointed,  247 
und  r  C  ^    oanies  act  1862,  245 
for  t.    s  of  promoters,  395.    See  Promoters 
on  bii.    of  jxchange,  267,  360.    See  Bills  of  Exchange 
on  proix.-.-.fc-or}'  notes,  267,  350,  360 
on  instruments  sealed  by  agents  abroad,  360 
on  unsealed  instraments,  356,  et  seq. 
liability  of  shareholders  in.     See  Liability  ;  Shareholders 
lien  on  shares  of  members,  684.     Lee  Lien 
limited.     See  Limited  Liability 
management  of,  540,  et  seq. 

interference  with,  by  courts  of  equity  895,  et  seq.    See  Injunction 
members  of, 

power  of,  567. 
number  of  members,  76 

See  Shareholders 
name  of,  164,  177 

notice  to,  what  is,  290.     See  Notice 

privileged  by  Letters  Patent,  see  infra,  No.  3  • 

promoters  of, 

are  not  partners,  31 

bound  to  act  with  good  faith  in  dealings  witb  companieg,  580  et  seq. 
liability  of  companies  for  acts  of,  390 
See  Promoters 
property  of,  what  is,  643 — 647. 

prospectus  of  natm-e  and  effect  of  100.    See  Prospectus 
public,  what  are,  14,  695 
public  officers  of.     See  Public  Officer 
railway.     See  i)ifr(t,  No.  6,  and  Railway  Company 
ratification  by,  258 
registers  of.     See  Register 
i'egistered.     See  infra,  Nos.  4  and  7 
regulations  of, 

directors  bound  to  observe,  571 
directory  and  unperative,  824-830 
public  affected  with  notice  of,  252 
scrip,  123.    See  Scrip 
service  of  writs  on,  494,  note  (s) 
set-off  in  actions  by,  511,  e<  seq.    See  Set-OFF 
shares  in.     See  Shares 
shareholders,  may  be,  86 
sale  of  shares.     See  Transfer  of  Shares 
starting  too  soon,  108 
subscriptions  to,  returning,  117-123 
winding  up  of.    See  Winding  up 
votes,  566 
2.  Companies  governed  by  7  Geo.  4,  c.  46  (banking) 
are  public  companies,  14,  695,  696 
formation  of,  146 
who  are  shareholders  in.  161,  534 
returns  to  the  Stamp  Office  to  be  made  by,  and  effect  of,  162 

1462 


GENERAL   IXDEX.  1125 

COMPANIES— co>!/mwefZ. 

actions  by  and  against,  492,  et  seq.    See  Actions 
transfer  of  shares  in,  16;:> 
calls  on  shareholders  in,  624 

for  reimbursement  of  shareholders  proceeded  against  by  creditors,  62S 
dipcoverj'  of  shareholders  in,  by  cn'ditors,^  .022 
liability  of  shareholders  in,  to  creditors,  531 

See  Liability 
members  for  the  time  being,  531 
former  members,  532 

how  shareholders  in,  are  to  be  proceeded  against  by  creditors  of  the  compa- 
ny.    See  Sci.  Fa. 
execution  against  shareholdere  in,  531 

for  separate  debt,  695,  696 
lien  of,  686,  687 

management  of  affairs  of,  541,  542 
pviblic  officers  of.     See  Pubj^ic  Officer 

3.  Companies  governed  by  7  Wm.  4  (fe  1  Vict,  c.  73  (the  Letters  Patent  act) 
nature  and  formation  of,  152 

are  not  corporations,  153 

are  public  companies,  14,  696 

who  are  members  of,  153 
actions  by  and  against,  500 

execution  against,  535 
calls  on  shareholders  of, 

by  whom  to  bo  made,  624. 
calls  for  reimbursement  of  sharehoMers  of,  628,  note  {b) 
discovery  of  shareholders  in,  by  creditors,  522 
liability  of  shareholders  in,  to  creditors,  535 

how  shareholders  in,  are  to  be  proceeded  against  by  creditors,  521,  535 
management  of  affairs  of,  541,  542 
payment  of  dividends  by,  797 
transfer  of  shares  in,  153.     See  Transfer  of  Shares 

4.  Companies  governed  by7&  8  Vict.  c.  110  (the  Joint-stock  companies  regis- 

tration act) 
provisional  registration  of,  178_ 
registration  of,  under  Companies  act  1862,  165 
are  public  companies,   14,  695 
who  are  shareholders  in,  125,  178 

when  formalities  have  not  been  observed,  126 
contracts  on  behalf  of,  how  to  be  made,  356,  and  note  {g) 

when  made  with  the  directors,  553,  591 
liability  of  shareholders  of,  to  creditors,  521.     See  Sci.  Fa. 

5.  Companies  governed  by  7  k  8  Vict.  c.  113  (Banking  companies  act) 

nature  and  formation  of,  178 

liability  of  shareholders  of,  to  creditors,  521.     See  Scr.  Fa. 

6.  Compiuiies  governed  by  8  it  9  Vict.  c.  16  (Companies  clauses  act) 

are  public  companies,  14,  696 

accounts  of,  809 

capital  of,  616 

calls  on  subscribers  to,  624 

Ijy  whom  to  be  made,  633 

for  reimbursement  of  shareholders,  628,  note  {h) 
certificates  of  shares  in,  156 
constitution  of,  552 
contracts  of,  proper  form  of,  357 

when  between  company  and  its  directors,  553,  590 
directors  of,  appointment,  powers,  and  duties  of,  552,  et  seq. 
delegation  of  powers  of  directors,  5^)5 
right  of  directors,  to  indemnity,  555 
dividends  of,  pnyment  of,  797 
formation  of,  155  iapo 


1126  GENERAL    INDEX. 

COMPANIES— fOH^iMwerf. 

inspection,  shareholder's  rights  to,  558 

lien  of,  686 

liability 

of  company  on  unsealed  contracts,  357 

of  shareholders  to  creditors,  536 

how  to  be  proceeded  against  by  creditors,  521.    See  Sci.  Fa. 
management  of,  552 
i-egistor  of  members  under,  157 

proper  form  of,  1 57 

rough  share  book,  158 
unsealed,  158 

not  conclusive,  158 

right  of  company  to  put  person  on,  159 

effect  of  improper  insertion,  159 

company  not  estopped  by,  160 

correction  of,  160 
shareholders  in,  who  are,  156 

powers  of,  556,  et  se^. 

discovery  of,  by  creditors,  522 

register  of,  157 

meetings  of,  556 

votes,  557 
shares, 

forfeiture  of  745 

transfer  of,  161 
right  to  retire  from,  737 

7.  Companies  governed  by  Companies  acts  of  1856-1858 
formation  of,  179 

registration  of,  166 

8.  Companies  governed  by  Companies  acts  in  1862-1867. 
registration  under,  163,  et  seq.     See  Registration 

by  companies  not  formed  under,  176,  559 

certificate  of,  163,  169 

effect  of,  163,  169 
change  of  name  by,  164 
formation  of  companies  under,  168,  558 

memorandum  of  association,  168 
articles,  168 
table  A,  169,  561 

power  to  change  from  unlimited  to  limited,  559 
members  of, 

who  are,  170, 

where  company  not  formed  under  act,  178 

powers  of,  567 

meetings,  564 

notice  convening,  565 

resolutions,  565 

chairman  565 

votes,  566, 

proxies,  566 

minutes,  567 

register  of,  171.    See  Registration  of  Shareholders 
correction  of,  171,  et  seq. 

on  winding  up,  175 
inspection  of,  175 
need  not  be  sealed,  175 

right  to  retire,  738  et  seq. 
annual  list  and  summary  to  be  made,  175 
forfeiture  of  shares  in,  747.    See  Forfeiture  of  Shares 
payment  of  dividends  under,  799 
capitals  of,  618.    See  Capital 

1464 


GENERAL    INDEX.  Ill'" 

COMPANIES— coH<iHi<ecf. 

calls.     See  Calls  on  SnAREHOi^Eiis  ;  Calls  on  Contributories 

persons  to  make,  624 

persons  liable  to  pay,  636 

when  shares  have  been  sold,  637 
management  of  company's  affairs,  560 
exammation  of  company's  affairs  by  inspectors,  560. 
directors  of,  561.     See  Directors 

appointment,  561 

disqualification,  562 

removal,  562 

pay,  562 

meetings,  562 

delegation  of  powers,  562 

duties  of,  562,  563 
contracts,  proper  form  of,  359,  360.    See  Contracts 
lien  of.  686.     See  Lien 

transfer  of  shares  in.     See  Transfer  of  Shares. 
2.  Companies  registered  under  act  of  1862,  but  not  formed  under  it 
registration  when  necessary.     See  Registration 

effect  of,  177 

mode  of,  177 
change  of  name,  177 
members,  who  are.  178 

in  companies  formed  originally  under  7  &  8  Vict.  c.  110,  p.  178 

under  7  &  8  Vict.  c.  113,  p.  178,  179 
under  acts  of  1856-58.  179. 

COMPANIES  CLAUSES  ACT.    See  Companies  Governed  by  8  &  9  Vict.  c.  16 

COMPENSATION 

for  trouble,  774 

to  directors,  776  , 

to  receivers,  1013. 

COMPLETING 

after  dissolution,  what  was  begun  before,  411  et  seq. 

COMPOSITIONS  IN  BANKRUPTCY, 

efiect  of,  on  joint  debt  on  separate  liability,  435 

COMPROMISE, 

power  of  one  partner  to  bind  finn  by,  277 
for  allowing  shareholders  to  retire,  740 
with  doubtful  shareholders,  741 
directors  not  Liable  for  making  when,  594 

CONCEALING  NAME 

and  yet  holding  out,  49 

CONCEALMENT, 

when  a  fraud,  321,  324,  924 

CONDITIONAL 

offer  to  take  shares,  105 

CONDITIONS, 

what  are  precedent  and  what  not,  125  note  (i),  834 

payment  by  allottee  when  a  condition  precedent,  125  note  (») 

contracts  of  partnership  on,  27,  et  seq. 

acceptance  of  shares  on,  105 

in  partnership  articles.    See  Articles  of  Partnersuip 

CONDUCT 

of  partners,  agreements  as  to,  837 

1465 


1128  GENEKAL    INDEX. 

CONFIDENCE, 

dpstruction  of,  a  ground  for  dissolution,  227 
CONNECTED  FIRMS.     See  Common  Partner 
actions  between,  469,  1031 
notice  to  one  is  notice  to  both,  287 
action  ag'ainst,  not  necessarily  multifarious,  1059 
liability  of,  on  each  others'  bills,  where  name  is  the  same,  341  et  seq. 
CONSENT 

■to  retirement  of  partner  from  firm,  735 
to  transfer  of  shares,  701 

necessity  of,  701,  702 
infonnally  given,  703 
obtained  by  fraud,  invalid,  703 
duty  to  procure,  703,  712,  726 

CONSIDERATION 

of  a  contract  of  partnership,  70.     Book  I.,  cap.  II. 

of  the  recovery  back  of  premiums,  71. 
in  cases  of  fraud,  71 
where  the  consideration  has  failed,  72 
when  partnership  ceases  sooner  than  was  expected,  73 
return  of  pi-emium  where  no  time  was  fixed  for  the  continuance  of  the 
partnership,  73 

for  discharge  of  old  partner,  437 

of  the  recovery  back  of  subscriptions  to  companies,  117_ 

subscriber  to  a  scheme  not  at  liberty  to  retire  from  it,  unless  it  has  failed, 

m 

subscribers  to  abortive  comjianies  not  liable  for  expenses  incurred  in  at- 
tempting to  form  them,  118 
subscription  returnable  though  deed  signed,  121 

CONSOLIDATION.    See  Amalgamation 
of  shares  into  stock,  617 

CONSPIRACY, 

indictment  for,  710,711,  815.  816 

for  obtaining  settling  day  by  fraud,  710,  711,  816 

fraudulently  raising  or  lowering  the  price  of  shares,  711 

CONSTITUTION  OF  COMPANY 

limits  the  authority  of  its  directors,  250,  571 
power  to  vary,  821 

one  shareholder  can  forbid  change  in,  606 
applications  to  Parliament  for  powers  to  alter,  605 
injunction  to  restrain  change  in  607  note  {x) 

CONTEMPLATED 

partnerships,  27  et  seq. 

CONTINUATION  OF  PARTNERSHIP, 

clfect  of,  on  application  of  partnership  articles,  822,  823 
as  regards  the  duration  of  sub-partnership,  219 

CONTRACTS 

of  partnership,  18  ef  seq.     See  Partnership 
how  created  and  dissolved,  Book  1, 
unconcluded,  26 
conditional,  26 
consideration  of,  70 
proof  of,  87  et  seq. 

duration  and  dissolution  of,  218  et  seq.     See  Dissolution 
rescission  of,  923,  927 
specific  performance  of,  914 

1466 


GENERAL    INDEX.  1129 

CONTRACTS— fon/aii/f^. 

of  i)artnership — coiitinuerl. 

construction  of.    See  Articles  of  PARTNERsnip 
parliamentary,  155 
by  and  with  partners 
liability  on,  'o-'<6 

when  under  seal,  337,  475 

•when  not  under  seal,  337.    See,  too,  Bills  of  Exchange  and 

Promissouy  Notks  » 

■when  finn  is  not  named,  338 
when  joint  and  when  several,  365  et  seq. 
when  confined  to  the  iunds  of  the  firm,  377 
conduct  of  one  partner  a  defense,  212,  4G9,  470 
effect  of  chang^e  of  firm  on,  4ii6 
form  of  contract,  3,36,  339 
who  to  sue  on,  477 
when  firm  cannot  sue  on,  484 
effect  of  having  had  benefit  of,  361  et  seq. 

through  an  agent,  who  to  sue  on,  where  there  has  been  a  change  amongst 
the  pai'tners,  488 
of  companies  and  directors,  350  et  seq. 

promoters,  when  binding  on  company,  395 
proper  form  of,  3j2 

under  statutory  enactments,  356 
under  8  &  9  Vict.  c.  16,  p.  357 
under  Comi:)anies  act  1802,  359 
when  binding  on  company,  though  not  under  seal,  356 
ratification  of,  258,  355 

by  directors,  261 
do  not  bind  company  if  ultra  vires,  249,  401 
may  bind  company,  though  irregularly  entered  into,  253 

though  onteied  into  by  persons  without  authority,  247,    243 
liability  on,  when  limited  to  funds  of  the  company,  377  et  seq. 
on  promissory  notes,  360 
part  performance  of,  354  ' 

of  gas  companies,  357 
on  deeds  executed  abroad,  360 

when  required  to  be  signed,  only  binds  partners  who  sign,  339 
under  Companies'  seals  act  1864,  360 

when  public  officers  are  to  sue  and  be  sued  on,  495.    See  Public  Offi- 
cer 
between  directors  and  their  companies,  553,  590 
and  torts,  distinction  between,  373 
pi'nding,  by  partnership,  how  dealt  with  on  dissolution,  1018 

CONTRIBUTION, 

foundation  of  right  to,  753 
right  to,  excluded  by 
agreement,  754 
fraud,  754 
disobeying  instructions,  755 

application  of  this  doctrine  to  directors,  760,  765,  766 
gross  negligence,  783,  785 
illegality  of  transaction,  200,  757,  77Q 
agent's  right  to  indemnity  from  his  principal,  755.     See  Indemnity 
self-constituted  agent's  right  to  indemnity,  755,  756 
ti-ustees'  right  to  indemnity,  758 
pai'tners'  right  to, 
generally,  759 
in  respect  of 

services  performed  for  firm,  774 

after  dissolution,  775 
in  India,  775 

1467 


1130  GENERAL    INDEX. 

CONTRIBUTION— coHftHMed. 
in  respect  of — continued. 

outlays  and  advances,  777.     See  Allowances, 
debts,  liabilities,  and  losses,  770 

when  attributable  to  one  partner  rather  than  to  another,  783 
when  attributable  to  one  partner's  misconduct  or  negligence, 

783 
when  attributable  to  acts  done  bond  fide,  but  without  author- 
ity, 783 
when  firm  has  adopted  them,  784 
illegal  transactions,  770,  784  note  (a) 
actions  at  law  between  partners  for,  1026,  1029 
durectors'  right  to, 

generally,  759,  776 

where  they  have  exceeded  their  powers,  760 

in  respect  of 

personal  services,  776 
advances  to  company,  760  et  seq. 
difference  formerly  between  law  and  equity,  as  to,  768 
as  to  indemnity  before  loss  has  been  sustained,  768 
amount  payable  by  each  contributory,  769. 
as  to  contribution,  when  some  of  the  contributories  are  insolvent, 
769 
between  promoters  of  companies,  755,  1022 

action  for,  1021 
between  directors  inter  se,  597,  760,  773 
right  of  public  officer  to,  in  respect  of  judgment,  782 
right  of  shareholder  to,  in  respect  of  judgment,  782 
liability  of  estate  of  deceased  partner  to,  457 
liability  of  retired  shareholders  to  contribute  to  debts  of  company,  460 

et  seq. 
amongst  members  of  illegal  companies,  199,  770 
between  wrongdoers,  770 

CONTRIBUTORIES 

who  are  in  cost-book  mines,  147 

mortgagees,  287 
survivor  of  joint  shareholders,  875 

CONTROL 

of  directors  by  shareholders,  544 

CONVERSION 

of  share  of  deceased  partner,  when  it  is  bequeathed  for  life,  1071,  1077 
of  joint  estate  into  separate,  by  partnerships,  and  vice  versd,  654  et  seq. 

by  companies,  658 
of  realty  into  personalty,  667  et  seq. 

in  cases  of  partnership  for  fiscal  purposes,  672 
doctiine  as  to,  does  not  apply  to  co-owners,  671 
may  be  prevented  by  agreement,  671 

CONVEYANCE 

upon  trust  for  sale,  resolved  upon  by  a  majority  of  shareholders,  900 
upon  trust  for  creditors,  injunction  to  restrain,  1004 
See  Deed ;  Fraudulent  Conveyance 

CONVICTS 

cannot  be  members  of  a  partnership  or  company,  77 
administrator  of  property  of,  80 
to  what  extent  disabled,  80 

CO-OWNERS 

not  co-partners,  58 

joint  purchasers  of  goods,  58,  60 

1468 


1 


GENERAL   INDEX.  1131 

CO-OWNERS— conf'tnued.  " 

part  owners  sharing  the  produce  of  their  property,  24,  25,  59,  671 

co-ownership  and  co-partnership  compared,  58 

doctrine  of  conversion  does  not  api^ly  to,  671 

of  land,  65,  651,652 

of  mines,  61 

of  patents,  68 

of  copyrights,  68 

of  race-horse,  61 

of  ships,  66.    See  Snrps 

of  newspaper,  699,  note  (m) 

sharing  profits,  their  property  not  necessarily  partnership  property,  650 

lien  of,  63,  66,  683,  684 

remedies  of,  iyiter  se,  59,  63  et  seq. 

CO-OWNERSHIP 

and  co-partnership  compared,  58 

CO-PARTNERS  AND  CO-PARTNERSHIP. 
See  Partners;  Partnership 

COPYRIGHT, 

registering  in  name  of  partners,  208,  211 
rights  of  co-owners  of,  68 
indivisibility  of,  69  note 

CORPORATIONS, 

distinguished  from  partnerships  and  companies,  4 

may  be  in  partnership  with  individuals,  86 

may  be  a  shareholder,  86 

provisionally  registered  companies  have  no  right  to  act  as,  178 

presuming  to  act  as,  192,  195 

not  estopped  from  showing  act  to  be  ultra  vires,  250 

effect  of  taldng  security  not  authorized  by  its  constitution,  250  note  {g) 

name  of,  may  be  a  trade-mark,  210 

dissolution  of,  232 

exist  only  for  the  purposes  for  which  they  are  created,  251 

Eublic  bound  to  notice  regulations  of,  252 
ability  of,  on  contracts  not  under  seal,  352 

when  bound  by  contracts  not  under  seal,  353,  354 
by  statutory  enactments 

Metropolitan  gas  act,  357 
Companies  clauses  act,  357 
Lands  clauses  act,  359 
Companies  act  1862,  359 
Companies'  seals  act  1864,  360 
ratification  of  contracts  by,  258 
contracts  by,  to  pay  out  of  their  funds,  eflFect  of,  377 
actions  by  and  against,  492 
execution  against,  517 

limits  of  powers  of  the  members  of,  591,  592 
members  of,  cannot  change  its  constitution,  606,  607 
power  of  majority  of  members  of,  608 
unincorporated  associations,  when  partners,  499,  191 

CORRECTION, 

of  register  of  shareholders,  142,  171,  1038. 
of  mistakes  in  accounts.    See  Accounts 

COST-BOOK  MINING  COMPANIES, 
nature  of,  146 
formation  of,  146 

cost-book,  what,  147  . 

rules  of,  must  be  filed  in  the  Stannaries  Court,  147,  note  (c) 

1469 


1132  GENERAL    INDEX. 

COST-BOOK  MINING  COMVAl^JES— continued. 
customs  relating  to  must  be  proved,  148 
proof  of  membership  in,  148 

shareholder  in,  need  have  no  interest  in  the  mine,  as  land,  149 
signing  and  stamping  the  cost-book,  149 
pursuer  of,  147 

may  sue  by  their  pursuer,  495 
right  to  retire  from,  738 
whether  public  companies,  696 
power  of  majoirity  in,  542 
liability  of  shareholders  in,  to  creditors,  147 

for  debts  contracted  before  they  joined  the  company,  394 

for  goods  supplied  to  the  mine,  273,  291 
on  credit,  273 

for  money  borrowed,  273 

of  past  shareholder,  how  limited,  147 
actions  by  and  against  purser  of,  495,  875  note  (.7) 

by  purser  against  shareholders  of,  148  note  (//),  875  note  {g),  1033 

by  subscribers  to,  to  recover  their  deposits,  1020 
capital  of,  increasing,  615,  616 
execution  against  members  of,  539,  696 
registration  of,  149 
calls  in, 

how  made,  624 

purser  may  sue  for,  975  (c/),  1033 

ought  not  to  be  made, for  prospective  expenses,  627 
shares  in, 

not  within  the  Statute  of  Frauds,  674 

not  within  the  Mortmain  acts,  674 

forfeiture  of,  746 

relief  against,  910,  911 

title  to  be  shown  by  vendor  of,  712,  713 

transfer  of,  149,  701 

invalid  if  made  to  escape  liability,  701 
effect  of,  on  calls,  637 

as  to  interest  on  calls  in,  629 
COSTS,        _  _  _       ' 

of  action  for  dissolution  on  gi'ound  of  lunacy,  226 

account,  972 
of  application  to  rectify  the  register,  174  _ 

one  partner  bound  to  indemnify  firm  against,  if  he  sues  in  its  name.  473 
indemnif^dng  trustee  against,  when  solvent  partners  sue,  491 
security  for,  in  action  by  companies.  493 

bond  for,  not  ultrx  vires,  494 
of  action  by  one  member  of  a  company  on  behalf  of  himself  and  others,  89<] 

CO-SURETIES,    See  Sureties 

COUNTER-CLAIM, 

what  may  be  set  off  in,  503 

COUNTY  COURT, 

judgment  of,  against  company  execution  of,  521,  522 

COVENANTS 
not  to  sue, 

partner  may  join  in  suing  notwithstanding,  472 

when  not  equivalent  to  a  release,  433 
liability  of  partners  on,  337 

in  the  case  of  retired  partners,  439 
what  are  joint,  and  what  are  several,  482 
with  one  partner  on  behalf  of  fiiin,  479 
liability  several  as  well  as  Joint,  when,  369 

14T0 


CKNEKAL    IMJEX.  1133 

COVENANTS-co«/i;)»^(7. 

joint,  when  not  treated  as  joint  antl  R-veral,  372 

to  pay  out  of  funds,  ert'oct  of,  '611 

actions  by  partners  on,  470 

when  firm  cannot  sue  on,  479 

action  by  and  aj^'-ainst  public  officers  on,  496 

get-otf  in  actions  on,  50o  ef  seq 

not  to  cany  on  l)usinesR,  S.")'* 

action  by  ni;i'  paitin'r  aprauist  anotlK^on,  1025 
COVEKTURE.    See  man-ied  women 

CREDIT 

of  firm,  destruction  of,  not  pn-  se  a  ground  for  dissolution.  227 
See  BoKKowixG  Moa'ky 

CREDITOR, 

meaning  of  the  phrase  a  partner  is  a  creditor  of,  or  a  debtor  to,  his  own 

firm,  206 
of  firm  or  company,  has  no  lien  on  its  property,  6o4,  6o8 
injunction  against,  when  suing  a  shareholder  at  the  instigation  of  directors, 
875,  1001 

See,  also,  In.tuxcttox 
■   inspection  of  list  of  shareholders  by,  522.     See,  also.  Inspection 
mandamus  for  payment  of,  C28 
rights  of 

against  partners, 

dormant  partners,  237,  3^6  note  (d),  405.  See  Dormant  Partners 
the  estate  of  a  deceased  partner,  1051  et  fieq. 

loss  of,  by  dealings  with  the  surviving  partners,  422.  423 
conflict  of  rights  of  difil-rent  classes  of  creditors,  1054 
See,  also,  Deceased  Pahtxer;  P^xecutoks;  LiAuiLixr 
of  a  bankrupt  partner.    See  Bankruptcy 
rights  of 

against  partners, 

incoming  piu-tners,  389  et  seq. 

quasi  partners.     See  Quasi  i'artnership;  Holding  out 

retired  partners.  417  et  seq. 

lots  of,  Ijy  dealings  with  the  continm'ng  partners,  438,  449 
Sl'O  Retihi:!)  Paktnek;  LiAiiiLiTr 
sniTiving  partners,  104-t,  1052,  1058.     See  Surviving  Partner.s 
elf.^ct  of  dissolution  of  partnership  on.  275,  10:59 
not  aftV'cled  by  agreements  between  partners,  435.     See  Notice 
against  promoters  of  companies,  ol 

See  Promoters  of  Companies 
against  companies, 

when  limited  to  funds  of  company,  376 
for  the  acts  of  their  promoters,  363,  395 
for  the  acts  of  their  din'ctors,  244 
where  companies  amalgamate,  464 
injunction  to  restram  conveyance  in  trust  for.  1004 
See,  also.  Companies:  Directors 
See  Scr.  Fa. 
in  companies  governed  by  7  Geo.  4,  c.  46,  p.  531 
«  7  Wm.  4  &  1  Vict.  c.  73,  p.  535 

8<fc  9  Vict.  c.  16,  p.  536 
Companies  act  1802,  383 
in  other  companies,  539 

See  Companies;  Execution;  Liability 
loss  of  rights  of, 

by  payment.  418  et  seq.     See  Appropriation  o"  Paymexts 
by  merger  of  debt,  450  et  seq. 

by  lapse  of  time,  453  et  seq.    See  Limitations,  Statute  of 
by  release,  433 

1471 


1134  GENEKAL    INDEX. 

CREDITORS'  DEED, 

trustees  of,  not  partners,  38 
assent  of  one  partner  to,  277 

CRIME, 

partnership  for  shaiing  profits  of,  182 

CRIMINAL  LAW.    See  Burglary;  Larceny. 
remedy  of  one  partner  against  another,  873 

CRIMINAL  PROSECUTION 

of  partner,  ground  for  dissolution,  229 
of  directors,  etc.,  814 

CROSS-BILL, 

when  unnecessary  in  a  suit  between  partners,  961 

CROWN, 

prerogative  of,  as  regards  shares,  661 
power  to  grant  charters,  150 
applications  to,  for  new  charter,  606 
See  Companies 

CUSTODY  OF  FIRM, 

misapplication  of  money  in,  consequence  of,  302,   313 
CUSTOMERS, 

allowance  for  treating,  779 

See  Dissolution  and  Notice 

CUSTOMS, 

mining,  not  judicially  noticed,  148 
scrip  may  be  transferable  by  delivery  by,  124 
See  Excise  Laws 


DAMAGE, 

to  tirm,  when  necessary  to  support  action  by  it,  480 

D.\MAGES, 

as  to  actions  between  partners  for,  1023 

company  liable  for,  if  they  issue  an  untrue  certificate,  301 

recoverable  on  contract  for  sale  of  shares,  714 

what  fraud  sufficient  to  support  an  action  for,  923,  924 

for  exclusion  from  register,  174 

action  for  account  not  dismissed  because  plaintiff  entitled  to  damages,  876 

DATE 

of  dissolution  in  cases  of  lunacy,  226 
See  Commencement 

DEALINGS, 

with  one  partner  only,  339 

by  creditors  -svith  continuing  partners,  effect  of,  on   rights   against  retired 
partners,  438  et  sea. 

DEATH  OF  PARTNER,  • 

dissolution  of  partnership  by  231,  1044.    See  the  Analysis  of  Contents,  Bk. 
IV.  c.  1.  and  infra,  Deceased  Partner,  Executors,  Surviving  Part- 
ners, Dissolution 
on  right  to  sue,  490 
1.  As  between  partners,  1044 
works  dissolution,  231,  1044 

business  continued  by  survivors  and  representatives,  86 
ietum  of  premium  incase  of,  71  et  seq. 

1472 


GENERAL    INDEX.  1135 

DEATH  OF  FARTHER— cn„f!,mefJ. 

position  of  executors  of  deceased  partner,  1044,  1046 

surviving  partners,  104") 
account  of  subsequent  profits,  1046 
making  co-partner  executor,  1047 
succession,  duty  on,  1048 

2.  As  regards  joint  creditors.  404 

position  of  executors  of  deceased  as  regards  creditors  of  firm.  404,  1050 
tabular  view  of  cases  showing  where  estate  of  decetused  partner  discharged, 

and  where  not  1051-1053 
administration  of  deceased  partner's  estate  by  creditor,  1053 
rights  of  joint  and  separate  creditors  contrasted,  1054 
form  of  decree  for  administration  by  creditor,  1056 
personal  liaV)ility  of  executors,  lOGO 
liability  of  assets  by  acts  of  testator,  1060 
direction  by  will  to  carry  on  trade,  106o 

3.  As  regards  separate  creditors,  legatees,  &c. 

separate  creditors,  legatees,  &c.,  must  look  to  executors,  1066 
surviving  partners  not  necessary  parties,  1066  et  seq. 
account  between  executor  and  surviving  partner,  1969 
arbitration  between  executor  and  surviving  partner,  1069,  1070 
■   rights  when  share  of  deceased  not  got  in,  1070 
interest  and  profits,  1071 
profits  made  since  death,  1072 

accounts  of  when  decreed,  1072 
executors  continuing  business,  1070 
specific  bequests  of  shares,  1075 

tenant  for  life  under,  1077,  1081 
duty  of  executors  to  sell  shares,  1081 

DEATH  OF  SHAREHOLDER, 
effect  of,  1048,  1065 
liability  of  executors  to  calls,  1048 

as  contributories,  1065,  1066,  1364 
to  creditors,  1064 
DEBENTURES, 

as  to  implied  powers  of  directors  to  issue,  270 
as  to  validity  of,  when  given  in  renewal  of  others,  271 
effect  of,  when  they  charge  the  undertaking',  270  note  {>•) 
may  be  issued  at  a  discount,  271,  619  note  (r) 

to  directors  when,  591 
bind  property  of  the  company 

improperly  issued,  liability  of  company  on,  254,  272 
of  a  railway,  not  within  the  ]\Iortinain  acts,  when 

DEBTOR, 

partner  in  what  sense  debtor  to  firm,  206,  805 

DEBTS, 

of  partnership,  effect  of,  on  its  duration,  218 
payment  of,  to  one  partner,  275 

after  dissolution,  275 

of  debt  not  due  to  firm,  276 

taking  bill  in  payment,  277 
release  of,  by  one  partner,  •>76,  277 
receipt  for,  by  one  partner,  276,  277 

by  surviving  partner,  486 
transfer  of,  assent  of  one  partn(>r  to,  277 
one  partner  taking  bill  for,  277 
one  partner  taking  shares  as  security  for,  287 
one  partner  settling,  277 
promise  by  one  partner  to  pay,  278 
tender  of,  to  one  partner,  278 

''  1473 


1136  GENERAL    INDEX. 

DEJiT^—ennf!>!ued. 

liability  of  pa'iners  for.    See  Creditor;  Ltaett,itt 

liability  of  siiareholders  for.    See  Companies;  Liability;  Shareholders. 

extinction  of.  by  doctrine  of  merger,  450  ef  seq. 

by  payment,  418  et  seq.     See  AprnopRiATiON  OF  Payments 

by  release,  433  et  seq.     See  Release 

by  substitution  of  debtors,  435  ct  seq. 

by  lapse  of  time,  453.     See  Limitation,  Statutes  op 

by  arrest,  434 
of  partnership  when  joint  and  several,  369 
set-off  of,  502.     See  Set-Off 
paid  by  company  in  paid-up  shares,  278 
assignment  of,  effect  of,  as  regards  set-off,  505 
to  contmuing  partners,  866 
may  now  be  made,  487 
right  of  partner  to  insist  on  payment  of,  679,  680,  and  note  (o) 
agreement  by  partner  to  bring  in  good  debts,  835 
guarantee  against,  given  to  incoming  partner,  836 
agreements  as  to  getting  in,  865 
in  what  cases  new  partner  may  join  in  action  for,  487 
assignee  of,  may  tue,  when.  487 
company  may  mortgage  future,  271 

DECEASED  PARTNER, 

administration  of  estate  of 

by  the  sui-vivmg  partners,  1045 
by  creditors  of  the  firm;  1053 

by  the  separate  creditors,  legatees,  or  next-of  kin,  1066 
adjustment  of  the  conllicting  righis  of  creditors  in  action  for,  1054 

joint  and  separate  creditors,  1054 
secured  creditors,  1057 
form  of  decree  for,  1056 

effect  of  decree  for,  on  i-ight  to  sue  surviving  partners,  1050,  1068 
set-oft'  in,  503,  et  seq. 
account  of  'assets  of, 

where  they  have  been  improperly  employed  in  trade,  1062 
right  to,  by  separate  creditors  and  legatees,  946 
where  share  of  deceased  not  got  in,  1070 
appointment  of  a  representative  of,  1045 
liability  of  estate  of, 

to  crecUtors  of  the  firm,  371,  1050 

in  respect  of  what  occuiTcd  before  dfath,  1050 
in  respect  of  what  occurred  after  death,  1059 
may  be  enforced  by  action,  371 
table  of  cases,  1051-1053 
where  assets  have  been  continued  in  the  partnersh'p  l»usiness,  1061, 

1070,  1073  ;  . 

after  judgment  against  the  surviving  partners,  453 
notwithstanding  the  Statute  of  Limitations,  457 
for  torts,  1051 
discharge  of  estate  of,  from  debts  of  firm 

by   appropriation  of  payments,  422.     See  Appropriation  op  Pay- 
ments 
discharge  of  estate  of,  from  debts  of  firm — continued. 
by  Statute  of  Limitations,  1053 
by  dealings  with  the  surviving  partners,  445,  1052 
none  where  dealings  induced  by  fraud,  446 
specific  performance  of  agreements  relative  to  share  of.  850 
executors  of,  may  be  joined  as  defendants  with  survivors,  when,  490,    878, 

1054,  1059 
rescission  of  contracts  relating  to  his  share,  932,  933,  and  note  {b) 
See  Death;  Executors;  Surviving  Partners 

1474 


GENERAL   INDEX.  1137 

DECEASED  SHAREHOLDER, 

position  of  executors  of,  1048,  10G5 
liability  of  estate  of 

to  calls,  1048 

to  creditors  of  company,  1064 

on  winding  up  of  company,  1065 
See  ExECUTOus;  Death 

DECLARATION, 

in  actions  for  calls,  1033,  note  {t) 

DECLARATIONS 

of  partners,  effect  of,  as  evidence,  264 

DECREE 

for  dissolution  of  partnership,    See  Account;  Dissotxtion;  Judgment 

in  case  of  lunacy,  224 
for  the  administration  of  the  estate  of  a  deceased  partner,  1056 
for  partnership  account,  972 
enforcing  without  a  SCI.  fa.,  521,  note  [l)  538,  note  {p) 

DEEDS, 

one  partner  has  no  authority  to  bind  firm  by,  278 

nec-?ssity  of  a  deed  to  dissolve  a  partnership  created  by  deed,  221,  222 

not  necessary  to  prove  partnership,  94 

how  to  be  executed  by  companies,  3-")2 

governed  by  7  &  8  Vict.  c.  110,  p.  356 

7  <t  8  Vict.  c.  113,  p.  356 

8  (t  9  Vict.  c.  Ifi,  p.  357 
19  &  20  Vict.  c.  47,  p.  259 
23  &  24  Vict.  c.  125.  p.  357 
under  companies  act,  1862,  359 

how  to  be  executed  abroad,  360 

effect  of  removing  seal  frcm,  434 

blanks  in.  705 

when  binding  on  companies,  though  improper,  279 

execution  of,  when  it  estops,  135 

transfer  of  shares  must  be  made  by,  when,  703,  not^  (/);  704,  note  (i) 

executed  by  agent  or  partner  in  his  own  name,  liability  on,  337 

DEEDS  OF  SETTLEMENT  (Companies) 

general  rules  for  construing,  817,  et  seq. 

power  to  vary,  821 

directory  and  imperative  clauses  in,  824 

public  bound  to  notice,  252 

eticct  of  not  executing,  131,  132 
•  as  between  company  and  shareholder,  126,  131 

proof  of,  not  necessary  to  show  that  a  person  is  a  member,  94,  and  note  (/) 
See  Companies 

DEFENSE 

to  actions  for  calls,  1034 

to  actions  by  partners,  founded  on  conduct  of  one  partner,  212 

alteration  in  the  law  as  to,  by  the  Judicature  acts,  469,  et  seq. 
to  actions  for  an  account  and  discovery,  961 

accord  and  satisfaction,  971 

account  stated,  967 

award,  970 

denial  of  partnership,  961 

payment.  971 

release,  971 

Statute  of  Limitations,  9G3 

illegality,  200,  2.»1 
■where  timi  is  sued  jointlv  upon  a  contract.  482 

1475 


1133  GENERAL   INDEX. 

DEFINITIONS 

of  partnership,  2 

DELAY 

of  plaintiff,  when  a  bar  to  relief,  902 
in  completing'  transfer  of  shares 
in  repudiating'  shares 

effect  on  shareholder,  112,  et  seq. 

effect  on  liability  as  contributory,  113 

DELEGATION  OF  AUTHORITY 

by  directors,  245,  542,  note  {h)  738 
under  8  &  9  Vict.  c.  16,  555 

Companies  act,  1862,  562 
of  powers  by  company,  606 

DELIVERY, 

to  one  partner,  a  delivery  to  the  firm,  279 

DENIAL  OF  PARTNERSHIP 

effect  of,  in  action  for  account  and  discovery,  961 
effect  of,  as  regards  the  appointment  of  a  receiver,  1012 

DEPOSIT,  PARLIAMENTARY,  154,  155 

DEPOSITS  ON  SHARES, 

payment  of,  not  necessary  to  constitute  a  subscriber,  117 
actions  to  compel  payment  of,  1019 
actions  to  recover  back,  117 — 123,  1019 

evidence  in,  117,  note  (e),  122  _ 
payment  of,  when  not  conclusive  evidence  of  partnership,  98 
when  applicable  to  defray  expenses  of  forming  company,  120 
returnable,  though  deed  has  been  signed,  121 
actions,  for  return  of,  where  there  has  been  fraud,  953 

no  fraud,  954 
injunction  to  restrain  return  of,  1003 

DESTRUCTIOIT  OF  ACCOUNTS, 

penalties  against  fraudulent,  814,  et  seq. 
consequence  of,  in  taking  accounts,  808 

DEVISEES, 

of  land  and  trade  can-ied  on  on  it,  how  far  partners,  652,  653 

DIRECTORS. 
1.  Generally 

appointment  of,  561 

irregular,  543 

consequences  of,  244 
number  of,  542 

varying-,  542 
qualifications  of,  543 

loss  of,  by  holding  other  office,  543,  note  («) 
who  are,  542 

de  facto  et  dejure,  245,  253,  555 
remuneration  of,  544 

not  agents  of  each  other,  246,  597,  note  (x) 
control  of  by  shareholders,  544,  895,  et  seq. 
board  of,  validity  of  acts  not  done  at,  245,  246 
removal  of,  544 

disqualification  of,  by  holding  other  offices,  543,  note  (n) 
examination  of,  522,  note  (s) 
authority  of,  244,  et  seq. 

effect  of  irregular  appointment  on,  244 

1476 


GENERAL    INDEX.  1139 

DmF.CTORS—coiitinnecJ. 

authority  of— continued. 

etft'ct  of  iiTegular  exorcise  of,  367 
liability  for  excess  of,  o67 
notice  of  excess  of  authority,  334 
not  liable  for  honest  mistakes,  as  to,  367 
commencement  of,  257,  403 
delegation  of,  245,  5G2,  738 
less  than  a  quorum,  244,  542,  829 
as  regards  each  other,  246 
duration  of,  459 

to  refuse  assent  to  transfers,  701,  et  seq. 
to  forfeit  shares,  745,  ef  seq. 
to  accept  sun-ender  of  shares,  741 
to  rftake  calls.     See  Calls 
to  consent  to  transfer  of  his  own  share,  703 

ratification  by,  258  I 

See  Implied  Powers,  264,  et  seq. 
duties  of,  571 

under  Companies  act,  1862,  562 
are  trustees,  571,  587,  et  seq.,  785 

of  their  powers,  588,  596 
must  account  for 

monies  unfairly  obtained  at  the  expense  of  the  company,  587, 

et  seq. 
profits  made  by  employment  of  company's  assets,  588 

issuing  shares,  588,  589 
bonuses  or  commission  on  sales,  589,  590 
share  qualifications,  590 
to  observe  companies'  regulations,  571 
to  keep  books,  555 
to  take  security,  555 
to  register  transfer  of  shares,  702 
liable  for  assets  lost,  592,  785 

not  if  company  have  acquiesced,  596 
where  acquiescence  immaterial,  596,  597 
for  frauds,  324 
for  negligence  and  willful  default,  592,  785 
for  not  stopping  unsuccessful  company,  594 
not  for  errors  of  judgment,  594 
in  making  compromise,  594 
not  for  overdrawing  banking  account,  275 
not  for  honest  mistakes,  as  to  their  authority,  367 
as  to  liability  of,  for  the  acts  of  each  other,  595 

as  regards  misrepresentations  in  prospectus, 
frauds  of. 

when  imputable  to  company,  317,  et  seq. 
liability  for,  324 
statements  of,  when  binding  on  company,  317,  et  seq. 
notice  to,  when  it  affects  company,  290 

through  the  books  of  the  company  not  suflBcient,  739,  note  {q) 
«) advances  by,  to  company,  777 
presents  to,_589,  note  (//),  G05 

contracts  with,  must  be  referred  to  in  prospectus,  115 
tranfer  of  shares  to,  distinguished  from  a  surrender  of  shares,  742 
right  of,  to  see  accounts  of  the  company,  809 
to  indemnity  from  shareholders,  759 

wlien  they  have  exceeded  their  authority,  760 
to  allowance  for  trouble,  776 
selling  shares  for  their  own  benefit,  588 
taking  up  shares  issued  to  some  one  else,  589 
may  issue  debentures  to  themselves  at  a  discount,  when,  591 

1477 


1140  GENERAL    INDEX. 

DIRECTOUS— continued. 

paying  dividends  out  of  capital,  794 

cannot  buy  shares  out  of  funds  of  the  company,  260,  261 

contribution  inter  se,  597,  760,  773 

injunction  against,  1000,  et  seq.    See  Injunction. 

actions  against, 

on  bills  of  exchange,  347,  et  seq. 

on  promissory  notes,  350 

for  misrepresentation,  324,  926 

for  not  indemnifying  person  against  calls,  1025,  note  (h) 
contracts  between  them  and  their  companies,  validity  of,  553,  590 
of  illegal  companies,  actions  against,  203 
actions  against,  who  ought  to  be  parties  to,  882.     See  Parties 
when  not  necessary  parties  to  actions  against  companies,  885 

2.  of  companies  governed  by  8  &  9  Vict.  c.  16,  552 

contracts  between  them  and  their  companies,  553 
powers  of,  554 

3.  of  companies  governed  by  Companies  act,  1862 

not  using  word  "  limited,"  384 
appointment,  561 
disqualifications,  562 
removal  of,  562 
pay  of,  552 
meeting  of,  562 

delegation  of  power  by,  245,  562 
duties  of,  562 

liability  of,  in  limited  company  may  be  unlimited,  167 
See  Companies 

DIRECTORY  CLAUSES, 
what  are,  824—830 

DISCOUNT, 

when  shares  maybe  issued  at  617,  619 
debentures  may  beissusd  at,  271,619,  note  (r) 

DISCOVERT,  .        ,   ^^^ 

of  partners  where  name  of  firm  is  used,  468 
of  shareholders  by  creditors,  522 
in  actions  for  account,  808,  955 
defenses  to  actions  for,  961 

accord  and  satisfaction,  971 

account  stated,  967 

award,  970 
defenses  to  actions  for, 

denial  of  partnership,  961 

release,  971 

Statute  of  Limitations,  963 

legality.  202  . 

where  right  to  depends  upon  a  preliminary  question,  962,  96d 
by  unlicensed  brokers,  187 

DISCRETION, 

power  of  partner  to  act  on  his  own,  239 

of  directors,  as  to  allowing  transfers,  702,  703 

of  court 

as  to  granting  mandamus,  1037 

as  to  interfering  between  partners  and  shareholders,  895,  et  seq. 
See,  also.  Injunction;  Specific  Performance 

DISPUTES  .       ^^„     ^     ,^ 

between  partners,  etc.,  mode  of  settling,  598.    See  Majority 
where  they  relate  to  ordinary  business,  598 

1478 


GENEliAL    INDEX.  ll-il 

DISPUTES— co«^/n/f(7. 

where  they  relate  to  a  change  in  tlie  nature  of  the  business,  600 
all  partners  entitled  to  be  heard,  600 

DISQUALIFICATION 

of  directors,  543  note  {»)  56^.     See  Directors 
of  shareholders.    See  Shakeuoldeks. 

DISSENTIENTS. 

powers  of,  600.    See  Majority 

retirement  of.  G02 

oflFer  of  indemnity  to,  003 

DISSOLUTION, 

1 .  of  companies 

causes  of  232 — 235 
actions  for,  947,  1039 

sustainable  notwithstanding  the  winding  up  acts,  1039,  note 

2.  of  partnershi)>s 

causes  of,  220  et  seq. 

notice  by  any  partner,  220 
imiDOssibility  of  going  on,  owing  to 

the  liopeless  state  of  the  partnership  business,  222 
the  lunacy  of  one  of  the  partners,  220,  224 
misconduct,  &c.,  220,  227 
death,  231,  1044,     See  Deceased  Partner 
transfer  of  interest,  229,  viz. 

by  the  assignment  by  one  partner  of  his  share  in  the  partnership, 

698 
by  the  taking  of  a  share  in  execution  under  a  Ji.  fa.,  230,  691 
by  bankruptcy,  224,  230.     See  Bankruptcy 
by  marriage,  230 
the  occurrence  of  some  event  which  renders  the  continuance  of  the  partner- 
ship illegal,  232 
war,  232 

deed  not  necessary  on,  221,  222 
may  be  by  parol,  222 

award  on  submission  of  all  matters  in  difference,  222,  844 
agreements  as  to,  843.     See  Articles  of  Partnership 
construction  of  such  agreements,  220 
driving  a  partner  to,  744,  950 
provision  for  in  case  of  insolvency,  843 
notice  of 

impoi+ance  of  giving,  406,  407,  408 
each  partner  has  a  right  to  give,  408 
how  to  be  giv(ni,  415 
what  amounts  to,  407,  408,  414  ef  seq. 

insufficient  notice  of,  844 
effect  of,  408  et  seq. 

as  regards  futiire  acts.  408 
injunction  against  circulating,  995 
consequence  of,  1039 

as  regards  return  of  premium,  72 

apportionment  of  premium.  71  et  seq. 

on  actions  by  and  agaimst  the  firm,  486 

as  regards  getting  in  debts,  865 

convei-sion  of  joint  into  separate  property,  656 

as  regards  creditoi"s,  417.  1039 

when  they  agivc  to  look  for  payment  to  continuing  part- 
ners only,  4:57 
as  regards  p.trtners,  1040 
as  regards  right  to  carry  on  business,  854 

1479 


1142  GENERAL   INDEX. 

DISSOLUTION— ro»f/«»efZ. 

consequence  of — continued. 

as  regards  bills  endorsed  after,  407 

as  regards  property  of  the  partners,  646  ..  ,'• 

as  regards  articles,  823  ,.  ^ 

as  regai'ds  pending  contracts,  1018 
how  far  a  partnership  continues  after  its  dissolution,  411 
actions  for,  943,  et  seq. 

should  be  brought  in  Chancery  Division,  945 

how  statement  of  claims  should  be  framed,  945,  946 

where  partnership  is  at  will,  946 

which  may  be  wound  up  under  the  company's  act,  946 
injunctions  in  actions  for,  944,  994.    See  Injunction 
accounts  on,  888,  973  et  seq. 
account  without,  947.     See  Account 

of  profits  since,  646 
sale  of  partnership  property  on,  1015 
action  for,  220,  880 

parties  to,  878-880 
next  friend  of  lunatic  may  bi-ing,  for  dissolution,  226 
actions  not  seeking,  rule  as  to  granting  relief  in,  894 
action  for  share  of  assets  after  a,  1032 
valuation  of  share  on,  846,  847 _ 
stamp  on  assignment  by  outgoing  partner,  866 
clauses  in  deeds  as  to  dissolution,  843 

DISTANCES, 

measurement  of,  857  note  {g) 

DISTRESS 

in  name  of  firm,  279 

on  partnership  goods  for  rent  due  from  partners  separately;  see  ex 
parte  Parke,  18  Eq.  381 

DIVIDENDS, 

payment  of,  791  et  seq. 

out  of  capital,  605,  793 

provisions  of  companies  act,  1862,  793 

apportionment  of,  1081 

as  distinguished  from  bonuses,  1080 

when  creditors  are  unpaid,  792 

payable  rateably  according  to  number  of  shares,  795 

on  shares  of  unequal  amount,  797 

to  preference  shareholders,  796 

where  share  is  subject  to  a  charging  order.  797,  798 

where  transfer  of  share  has  been  forged,  798 

to  married  women,  798 

in  particular  companies,  798.     See  Companies 

provisions  of  table  A.,  799 
right  of  legatee  of  shares  to,  1081 
shareholders  not  liable  to  refund,  although  based  on  erroneous  valuation, 

794 
actions  for,  1035 
must  be  paid  in  money,  797,  901 
mandamus  to  compel  payment  of,  1036 
injunction  to  restrain  payment  of,  901,  887,  1001 
on  several  debts,  how  appropriated,  422,  430,  431 

guarantee  fund  to  provide  belongs  to  the  company  and  not  to  the  share- 
holders, 797 

DIXON, 

his  definition  of  partnership,  2 

1480 


GKNKUAL    INDEX.  114'{ 

DOCK  COMPANIKS, 

see  Companies  governed  by  8  &  9  Vict.  c.  16 
shares  in,  not  within  Mortmain  acts,  673 

DOCUMENTS, 

proof  of  partnership  by  informal,  92 

luoihiction  and  inspection  of,  in   actions,  955.     See  PliODUCTiOX  OF   Po(  r- 

MENT8 

DOMAT, 

his  definition  of  partnership,  2 

DOMICILE 

of  partners,  78 
of  companies,  79 

DOORS, 

niunes  on,  evidence  of  partnership,  97 

DORMANT  PARTNER, 

who  is  a,  2?.,  405 

liabilities  of,  23,  49,  237,  366,  note  {d) 

on  written  contract,  338 

on  contracts  in  which  he  is  not  named,  405,  406,  477,  note  (o) 

authority  of,  237 
position  of,  and  that  of  mere  lender  compai-ed,  23 
who  is  not,  405,  note  («) 
effect  of  retirement  of,  405 
notice  of  retirement  of,  when  necessar}%  406,  408 
discharge  of.  by  doctrine  of  appropriation  of  payments,  423 
when  to  sue  with  others,  478 
actions  against,  483 
set-off  in  actions  by  and  against,  508 

DRAFT 

of  agreement  evidence  of  partnership,  97 

DUE, 

meaning  of  the  word,  686,  note  («) 

DURATION 

of  liability,  385 

commencement  of  liability,  885 
in  ordinary  partnerships,  385 
firm  not  lial>le  for  what  a  partner  do3s  before  he  joins  it,  386,  387 
liability  of  incoming  partner,  3S9,  391 
in  companies,  394 

liabilities  of  companies  for  acts  of  their  promoters,  390,  895 
of  shareholders,  394 
as  regards  future  acts,  460 
past  acts,  461 
termination  of  liability,  403 

in  ordinaiy  partnerships,  403 

termination  of  liability  as  to  future  acts,  403 
by  death,  404 
by  bankruptcy,  405 
of  dormant  partner,  405 

by  dissolution  of  partnership,  406.     See  LiABiiiiTY 
termination  of  liability  as  to  past  acts,  417 
by  payment,  418 
release,  433 

substitution  of  debtors  and  securities,  435 
merger,  450 
lapse  of  time,  453 
in  companies,  459,  et  sea. 

1481 


114:4  GENERAL    INDEX. 

DURATION— co»f/»»efZ. 

of  partnership,  218,  et  seq.    See  Dissolution 
agreements  as  to,  882 
after  dissolution,  407 

effect  of,  on  partnership  articles,  822,  823 
effect  of  takmg  lease,  218 

outstanding  debts,  218 
after  term  has  expired,  219 
of  companies.    See  Dissolution;  Winding  up 

DUTIES 

of  partners  and  directors  generally.     See  Analysis  of  Contents,  Bk.  III. 
of  partners  not  all  to  be  found  in  partnership  articles,  817 
See  also  Directoks;  Partners 

EAST  INDIA  COMPANY 

i  liable  on  its  bills  though  not  under  seal,  354 

EJECTMENT, 

by  partners,  481 

by  one  partner  against  another,  648,  note  (r),  1023,  1024 

by  one  co-owner  against  another,  65 

ELEGIT.    See  Execution 
sctVe/aci«s  after,  525 

EMBEZZLEMENT 

by  servants  sharing  profits,  20,  note  {!) 

partner  employed  as  collector  after  dissolution,  219 

EQUALITY 

of  shares  in  partnership,  676, 677 

EQUITABLE  MORTGAGES 

for  advances,  effect  of  change  of  firm  on,  215 
given  by  one  partner  on  behalf  of  firm.  284 
may  be  created  or  extended  by  parol,  215 

EQUITY, 

differences  between  rules  of  law  and  equity  as  regards  contribution  and  in- 
demnity, 768 
difference  between  rules  of  equity  and  bankruptcy  as  regards  secured  cred- 
itors, 1057 

ESTATE 

of  deceased  partner.     See  Death;  Deceased  Partner;  Executors 
of  bankrupts. 

ESTOPPEL 

by  holding  oneself  out  as  partner,  47 
shareholders,by,  128 

effect  of  executing  company's  deed,  135 
being  on  register,  142,  159 
calls  on,  635,  636 
company,  when  affected  by,  133,  250 

in  cases  ultra  vires,  250 
application  of  doctrine  of,  to  illegal  issue  of  shares,  134 

See  Formalities;  Register;  Shareholdeus 
of  persons  dealing  with  a  corporation  as  such  to  deny  its  incorporation,  4, 
note  (;i) 

IDENCE, 

that  a  person  is  a  partner  or  quasi  partner,  87,  et  seq.     Book  I.,  cap.  4 
what  has  to  be  proved,  90 
usual  means  of  proof,  91,  97,  98 

1482 


GENERAL    INDEX.  1145 

EVIDENCE— continued. 

that  a  person  is  a  partner  or  quasi  partner — continued, 
effect  of  the  Statute  of  Frauds.  87 
where  there  is  no  writin<,',  H7,  92 
acts  of  alleged  co-partner,  93 
admissions,  94 

articles  of  partnership  need  not  be  proved,  94 
of  future  partnership,  87,  88 
retrospective  articles,  96 
that  a  person  is  a  shareholder,  99,  et  seq.     Book  I.,  cap.  5 
in  a  cost  book  mining  company,  148 
in  companies  governed  by  7  Geo.  4,  c.  46,  pp.  161,  534 
8  &  9  Vict.  c.  16,  p.  156 
the  Companies  act,  1862,  170 
by  registers  generally,  138 
by  rough  sharebook,  1".'8 
official  returns,  139 
of  incorporation,  163 

in  criminal  cases,  164  note  (») 
that  a  company  is  registered,  163 

copies  of  certificates  of  registration,  when  evidence,  163 
to  correct  register,  143 
of  lunacy,  225 
in  actions  for 
calls,  1034 
deposits,  117  note  {e) 
recovery  back  of  deposits,  122 
upon  which  partnership  accounts  are  taken,  991 
parlnership  books,  550 
minutes  of  meetings,  550,  551 

See,   also,  Companies  ;  Liability  ;  Proof  of  Debts  ;  Notice  ; 
Registek  ;  Stamp 

EXAMINATION. 

of  directors,  522  note  (s) 

EXCISE  LAWS, 

illegality  of  partnerships  infringing,  184,  189,  note  {t) 
effect  of  breach  of,  by  one  partner,  299 
contribution  in  case  of  breach  of,  771 

EXCLUSION 

of  partnei 

from  management  of  partnership  business,  540,  745 
injunction  in  case  of,  998 
receiver  in  case  of,  1012 
account  in  case  of,  949 
from  share  of  profits,  794 
of  shareholder  from  register,  damages  for  how  recoverable,  174 

EXECUTED 

and  executory  contracts  of  corporations,  353 

EXECUTION 

against  partners  generally,  515 

against  a  partner  for  a  separate  debt,  687 

duty  of  the  sheriff,  688 

eheriti  seizes  the  partnership  property,  688 

sale  of  execution  debtor's  share,  689 
"        may  be  by  private  contract.  689  note  (c) 

rights  of  the  other  partners,  690 

interpleader  by  sherift',  689  note  (i),  693 

since  the  Judicature  acts,  692 

1483 


114:6  GENERAL    INDEX. 

EXECUTION— coH/;;i  lied. 

against  a  partner  for  a  separate  debt — continued. 
action  against  sheriff  by  solvent  partner,  1031 
position  of  the  purchaser  from  the  sheriff,  690 
position  of  the  execution  debtor,  691 

creditor,  692 
purchase  of  interest  by  his  co-partners,  691 
dissolution  of  partnership  by,  230,  691 
injunction  in  cases  of,  690,  691 
receiver  in  cases  of,  691 
against  partner,  515 
against  partners  for  their  joint  debt,  515 

how  it  issues  where  judgment  against  the  firm,  516 
effect  of  arresting  debtor,  695 

against  companies  and  their  shareholders,  517,  694,   et    seq 
where  funds  only  are  liable,  619 
mandamus  in  such  case,  519 
injunction  to  restrain,  523 

against  the  company  or  person  named  in  the  judgment,  518 
against  corporations,  518 

against  public  officers  under  7  Geo.  4,  c.  46,  p.  521 
against  shareholders  upon  a  judgment  obtained  against  a  company 

or  its  public  officer,  517 
scire  facias  against  shareholders,  520,  523.     See  Sci.  Fa. 
shareholder  can  only  be  proceeded  against  after  judgment  obtained 

against  the  company,  521 
registry  of  judgments  against  companies,  522 
discovery  of  shareholders,  522 

right  of  creditor  to  proceed  against  individual  shareholders,  522,  623 
in  cases  of  fra,ud,  527 
agamst  shareholders  in  companies  governed  by 

7  Geo.  4,  c.  46,  pp.  521,  531 
the  Letters  patent  act,  521,  535 
7&8Vict.  c.  110,  p.  521 

7  &  8  Vict.  c.  113,  p.  521 

8  &  9  Vict.  c.  16,  pp.  521,536 
other  companies,  539,  394 

against  executors  of  a  deceased  shareholder,  1065 

charging  shares,  694 

attaching  shares,  697 

for  separate  debt  of  shareholder,  14  note  (c),  694,  et  seq. 

against  rolling  stock  of  railway  companies,  518  note  (2) 

EXECUTORS, 

1.  of  a  deceased  partner 

do  not  become  partners,  1044 
liabilities  of,  1044 

to  sui-viving  partners,  1045 
to  creditors  of  the  firm,  1050 

as  regards  what  occurred  in  the  lifetime  of  the  testator,   1050, 
1051,  1059 
administration,  actions  by  joint  creditors,  1068 
form  of  decree  in  such  actions,  1056 
as  regards  what  has  occurred  since  the  testator's  death,  1059 
liabiUty  of  assets  for  acts  of  the  executors,  1061 
by  sharing  profits  with  surviving  partners,  1060,  note  (t) 
liability  of  executora  who  carry  on  business  with  the  assets  of 
their  testator,  1059,  et  seq. 
effect  of  direction  to  carry  on  trade,  1063 
liability  to  be  made  bankrupt,  1047 
to  the  separate  creditors,    legatees,  and  next  of  kin  of  the  deceased, 
1066 
where  partnership  was  illegal,  203 

1484 


GENERAL    INDEX.  11    7 

EXECUTORS— coH<;«»^(7. 

liabilities  of — continued. 

where  the  assets  of  the  deceased  are  not  got  in,  1070 
where  the  executors  are  the  surviving  partners,  983,  et  seq.,  1070 
where  they  enter  the  firm,  1074 
willful  default,  1067 
_  position  of,  when  thty  are  the  surviving  partners,  1047,  1070 
actions  for  indemnifying',  1048 
liability  of  testator's  estate  for  acts  of,  1061 
duty  of,  to  convert  share  into  money,  1081 

rescission  of  contracts  between  executors  and  surviving  partners,  932,  etseq. 
effect  of  part-payment  by,  as  regards  the  Statute  of  Limitations,  457 
injunction  against,  997 
account  stated  with,  1069 
parties  to  actions  against,  880 
allowances  to.  in  India,  775 
illegality  set  up  by,  203 
actions  by  and  against,  490 
loans  by,  to  surviving  partners,  1071,  1074 
receiver  appointed  against,  1009 
rights  of 

to  become  partners,  1044 

to  interfere  with  sui-\'iving  partners,  1044 

to  account,  1044 

to  compel  proper  appropriation  of  payments,  1045 

to  have  the  assets  sold,  10-16,  1081 

as  regards  good-will,  ^60.  1046 

to  account  of  profits  made  since  their  testator's  death,  976,  et  seq.,  1046, 
1072^  et  seq. 

to  compensation  for  trouble,  1046 

to  indemnity,  1048 

to  retain  balance  due  on  the  partnership  account,  935 
2.  of  deceased  shareholder 
rights  of,  1048 

to  indenmify  against  calls,  1048,  1049 

to  petition  to  wind  up  company,  1049,  1236 
liabilities  of 

to  calls,  640,  1048 

to  be  made  contributories,  1049,  1065 

when  they  allow  shares  to  be  transferred  into  their  own  name,  1049 

to  creditors  of  the  comjiauy,  640,  1048 

for  not  selling  shares,  1081 

sci.fa.  did  not  lie  against,  521 
transfer  of  shares  by,  1050 
actions  against,  for  calls,  640,  1033,  note  (//) 
agreement  with,  is  with  those  who  prove,  26,  note  (s) 

See  Deceased  Paktneu;  Death 

EXISTING  COMPANIES 

registration  of,  mider  act  of  1862.    See  Registration 

EXPENSES 

of  forming  company, 

liability  of  company  for,  1021,  1022 

liability  of  subscribers  for,  118 

hability  of  promoters  for.  1021 
to  be  charged  to  the  finn,  agreements  as  to,  837 
action  between  partners  for  not  contributing  to,  1026 

See,  also.  Contribution 

EXPULSION 

of  partner,  744 

exercise  of  powers  of,  820,  844 


1148  GENERAL   INDEX. 

EKFJJLBJO'^—confimied. 

provisions  in  articles  as  to,  844 
See  Forfeiture 
EXTENT, 

sale  of  share  under,  661 

EXTRAORDINARY  NECESSITY, 

power  of  one  partner  to  bind  firm  in  cases  of,  238 

EXTRAORDINARY  MEETING,  546.    See  Meeting 


FACTORS'  ACTS,  285 

FALSE  PRETENSES, 

indictment  for  obtaining  money  under,  816,  note  (y) 

FALSE  STATEMENTS, 

ensnaring  public  by,  194 

rescission  of  contract  for,  &c.,  923,  927.    See  Fraud 
by  one  partner,  liability  of  firm  for,  314,  et  seq. 
by  directors,  liability  of  company  for,  317,  et  seq. 
actions  for,  926 

FARMERS 

accounts  between,  66  .       «        .     „v     «.„ 

when  not  partners  in  land  though  they  share  profits  derived  from  it,  6ol,  6o2 
one  of  a  firm  of,  has  no  power  to  bind  others  by  bills,  267 

FELONS, 

partners  who  are,  80 

FI.  FA. 

sale  of  partner's  share  under,  661,  689 
See  Execution 

FIRM, 

mercantile  and  legal  view  of,  206  et  seq. 

consequence  of  difference,  208 
ir  "■■'■'at  sense  a  debtor  to  or  creditor  of  its  own  members,  206,  805 
mm- of,  208 

..  .tion  may  be  brought  in,  207,  468.     See  Action 
partners  may  be  registered  as  shareholders  in,  208 

as  owners  of  copyright,  208 
a  trade  mark,  210 
mistakes  in,  211 

how  described  in  legal  instrnraents,  208 
each  partner  the  agent  of,  236     See  iMriiiED  Powers 
actions  by  and  agamst 

general  remarks  on,  211,  475 
formerly  could  not  sue  or  be  sued  by  one  of  its  own  members,  211 

at  law  by  another  finu,  if  one  partner  was  com- 
mon to  both,  212 
conduct  of  one  partner  when  a  defense  to  an  action  by  him  and  his  co- 
partners, 212 
legacy  to,  209 

advances  to,  by  trustees.  209 
changes  in,  effect  of,  208,  212.     See  Changes 
as  regards  set  off,  510  _ 

sureties  and  securities,  213,  214 
equitable  mortgages,  215 
solicitors'  lien,  215 
actions,  486 

1486 


GENERAL   INDEX.  114'J 

FIRM — coniinued. 
two  firms 

with  common  partners.    See  Connected  Firm;  Common  Partner 

actions  Vjetween,  212 
with  same  name,  liabilities  of  on  each  other's  bills,  343 
See  Partnership 

FOLLOWING 

trust  money,  313,  976,  et  seq. 

FOREIGN  COMPANY, 

may  be  registered,  167 

FOREIGN  CONTRACTS, 

remedy  on,  barred  by  the  Statute  of  Limitations,  454,  455 

FOREIGN  PARTNERS,  78 

payment  of  income  tax  by,  see  A.-G.  v.  SnJlei/,  5  H.  &  N.  711 

FOREIGN  PRINCIPALS, 

ajrent  for  contract  as  principals,  477,  note  (o) 

FOREIGNERS 

•  may  register  company  although  the  business  is  abroad,  167 

FORFEITURE  OP  SHARES,  744  et  scq.    See  Joint  Stock  Companies  in  thf 
U.S. 

right  to  forfeit  shares,  745 

where  subscriber  has  not  executed  company's  deed,  746,  note  (p) 
for  non-payment  of  calls,  746 
in  cost-book  mining  companies,  746 
in  companies  governed  by  8  &  9  Vict.  c.  16,  p.  746 

Companies  act,  1862,  p.  747 
statutes  authorizing,  746 

when  right  to  forfeit  co-exists  with  light  to  sue  for  calls,  747 
cancellation  of  forfeited  shares,  747 
what  amounts  to,  750 

power  to  forfeit  must  be  exercised  bona  fide,  749 
to  enable  shareholder  to  retire,  749 
effect  of,  750 

injunction  to  restrain,  751,  752,  885,  1001 
relief  from,  751 
action  for,  145 

shareholder  may  be  contributory  notwithstanding,  751 
to  crown,  661 
clause  in  articles  exercisable  if  shareholder  sued  company,  illegal,  745 

FORGERY 

of  scrip,  123,  note  (h) 

by  one  partner,  liability  of  firm  in  ca^e  of.  306 
of  power  of  attorney  to  transfer  shares,  301 
of  transfer  of  shares,  effect  of,  oOl,  707 

FORM  OF  CONTRACT, 
effect  of,  on  liability 

of  partners,  ;jo6.  et  seq. 
of  companies,  356,  et  seq. 
FORMS 

of  decrees  for  account,  972 

FORMALITIES, 

effect  of  not  observing,  125 
a.s  regards  creditors,  136 
as  regards  shareholders,  124-130 
in  dealings  between  directors  and  third  pai-ties.  247.  ef  seq. 

14S7 


1  1  50  GENERAL   INDEX. 

FORMALITIES— continued. 

waiver  of  observance  of,  128,  136 

in  transfemng'  shares,  703 
clauses  as  to,  when  directory  only,  824,  et  seg. 
See,  also,  Irregularities 

FORMATION  OF  COMPANIES,  99,  et  seq.    See  Contents,  Bk.  T.  cap.  5 
liability  of  company  for  expenses  of  its  formation,  395 
action  for  expenses  of,  1021,  1022 
of  chartered  companies,  150 
by  special  act  of  Parliament,  154 
of  companies  governed  by  Letters  Patent  act  152 
See  Companies;  Promoters 

FORMER  MEMBERS.    See  Past  Members;  Retired  Shareholders 
sci.  fa.  against,  under  7  Geo.  4,  c.  46,  532 

FRAUDS,  STATUTE  OF, 

effect  of,  on  contracts  of  partnership,  87 

excluded  by  part  performance,  88 
shares  of  companies  not  within,  674 
how  affected  by  Companies  clauses  act,  358 

FRAUD.    See  Good  Faith 

right  to  rescind  contracts  on  the  ground  of,  923  et  seq. 
where  a  third  party  intervenes,  925 

where  fraud  did  not  induce  the  contract,  924,  936  • 

how  lost,  924  -  _      _ 

principal  not  bound  by  contract  which  is  kn  own  to  be  a  fraud,  298 
concealment  when  a,  321,  324,  924 
a  defense  to  action  for  calls,  636 
effect  of,  if  sanctioned  by  majority  of  company,  901 
effect  of,  on  contract  to  take  shares,  935 
bad  bargains  upheld,  there  being  no  fraud,  930 
effect  of  mis-statements  in  company's  prospectus,  939  et  seq. 
repeal  of  charters  obtained  by,  943 
re-opening  accounts  for,  968 
release  set  aside  for,  2S3,  294 

rescission  of  contracts  of  partnership  on  the  ground  of,  927 
as  to  right  to  rescind  severable  contract,  942 
recovery  of  money  paid  for  shares  on  the  ground  of,  71,  121 
bargains  between  outgoing  and  continuing  partners  set  aside  for,  932 
bargains  with  the  executors  of  a  deceased  partner  set  aside  for,  932 
bargains  on  faith  of  fraudulent  accounts  set  aside,  931 
effect  of,  on  right  to  contribution,  754 

on  person  holding  himself  out  as  partner,  effect  of,  on  his  liability  to  cred- 
itors, 49 
on  shareholder,  effect  of 

as  regards  liability  to  creditors,  528 

as  regards  lialiihty  to  be  made  a  contributory,  925 

See  Contributories 
as  regards  liability  to  calls,  936 
by  mis-statements  in  prospectus,  935,  936 
director  who  sells  his  own  shares  as  unallotted  shares  commits  a  fraud,  942 
in  sale  of  shares,  716,  717,  942 
on  creditors,  by  retiring  from  insolvent  firm,  735,  736 

by  converting  joint  into  separate  property,  658 
appointment  of  receiver  in  cases  of,  1011  j    r  ioi    Qt;Q 

actions  for  return  of  subscriptions  to  companies,  on  the  ground  of,  121,  953 
recovery  of  premiums  in  cases  of,  71 
Statute  of  Limitations  in  cases  of,  455 

concealed,  455,  964 
on  part  of  creditor  deprives  him  of  his  rights  against  retked  partner,  44o 

1488 


GENERAL    INDEX.  1 1 .' 1 

FRAUD — continued. 

estate   of  deceased  partner  not   releas'^d  by  dealings  with  sun-ivors  where 

there  has  l)cen,  448 
of  directors,  lialiility  of  company  for,  244,  et  seq.,  317,  et  seq. 

ratification  of,  by  company,  25S 
company  not  liable  for  prospectus  fraudulent  under  §  38  of  Companies  act 

18G7,  823 
of  one  partner,  liability  of  firm  for,  298,  301,  311 
of  agent,  liability  of  principal  for,  297 
of  mfant,  81 
of  promoter,  937 

prosjjectus  when  deemed  to  be,  115 
liability  of  estate  of  deceased  partner  for,  10o2 
eticct  of,  on  agreements  bet\veen  partners  changing  joint  into  sepnriitc  i-s- 

tiite  and  vice  versa,  008 
by  directors,  no  answer  to  demand  l>y  creditors,  528 

by  company  on  shareholder,  does  not  protect  him  from  scire  facias,  'yl6 
of  firm,  liability  of  firm  in  case  of,  301,  302 
on  incoming  jiarfners,  3:U 

by  creditor,  when  a  defense  to  a  scire  facias,  527 — 529 
effect  of,  on  doctrim^  of  iippropnation  of  payments,  431,  432 

dischartre  of  the  estate  of  a  deceased  partner,  446 
partnership  formed  by,  no  defense  to  creditors,  199 
on  company  Ijy  all  members,  591  ' 
on  Stock  Exchange,  323 
in  obtaining  settling  day  indictable,  710,  711 
raising  or  lowering  the  price  of  shares,  711 
parties  to  actions  relating  to,  486,  879 

FRAUDULENT  ACCOUNTS,  814 
penalties  for  making,  814 

Act  24  iV:  25  Vict.  c.  96,  imposing,  applies  only  to  public  companies, 
14,  note  (c) 
re-opening,  933 
bargains  on  the  faith  of,  set  aside,  931 

FRAUDULENT  CONVEYANCES, 
by  partners,  655 

FRAUDULENT  PREFERENCE, 

trustee  in  bankruptcy  may  disaffirm,  471 

FRAUDULENT  STATEMENTS 

of  one  partner,  liability  of  firm  for,  314 

by  directors,  liability  of  company  for,  244,  et  seq,  317,  et  seq,  936 
actions  for,  926 

as  to  solvency  of  another  do  not  bind  partner  unless  written,  282,  315 
See  FuAUD 

FREIGHT,  lien  on.  084 

FRIENDLY  SOCIETIES 

not  partnerships,  57,  note  (o) 

criminal  prosecution  of  members,  873,  note  («) 

FUNDS  OF  COMFANY. 

injunction  to  restrain  misapplication  of,  1001 
contracts  to  pay  out  of,  3)77,  378 

efi'ect  of,  as  reganls  execution,  519 

sci.fa.  against  shareholder,  530 
liability  of  shareholdera  to  make  good,  when  they  are  pledged  to  creditors, 
381 
where  company  is  incorporated,  381 
governed  by  act  of  1862,  382 
not  incoi-porated,  382 

"'  1489 


1152  GENERAL   INDEX. 

FURNITURE, 

office,  may  belong'  to  one  partner  only,  649 

FUTURE  ADVANCES, 

securities  for,  effect  of  doctrines  of  merger  on,  452 
See  Capital. 


GAIN, 

partnerships  not  having  gain  for  their  object,  2,  3,  note  (o),  56 

mutual  marine  insurance  companies  are  not,  166,  note  (x) 

GAMING 

and  wagering  in  shares,  710 

GARNISHEE  ORDER, 

GAS  COMPANY.     See  Companies  governed  by  8  &  9  Vict.  c.  16 
not  bound  by  bills,  &c.,  of  its  directors,  357 

GAZETTE,  .  ,  .      .     .n 

partner  ordered  to  sign  advertisement  of  dissolutin  for  insertion  m,  408j 

notice  of  dissolution  in,  eifect  of,  415 
See  Advertisements 

GENERAL 

and  particular  partnerships,  55 
and  special  meetings,  546 
powers  restricted  by  object,  819 

GIFTS. 

by  one  partner  of  partnership  property,  281 

GOODS, 

actions  between  partners  relating  to,  1023 

liability  of  partners  for  goods  supplied  before  commencement  of  partnership, 

388 
pledge  of,  by  one  partner,  when  binding  on  firm,  284 
purchases  of,  by  one  partner  on  credit  of  firm,  290 
return  of,  by  one  partner  when  binding  on  firm,  291 
sale  of.  by  one  partner  when  binding  on  firai,  295 

by  solvent  partner  when  binding  on  trustee  of  bankrupt  partner,  1031 

GOODS  AND  CHATTELS, 
how  far  shares  are,  674 

GOOD  DEBTS 

agreement  as  to  bringing  in,  835 

GOOD  FAITH 

required  from  partners,  569,  et  seq. 
promoters,  580,  ef  seq. 

directors  and  members  of  companies,  570,  d  seq. 
agreement  to  observe,  837 

See  Directors  ;  Fraud  ;  Honor 

GOOD-WILL 

nature  of,  859 

sale  of,  effect  of  on  right  of  vendor  to  carry  on  the  business  sold,  859,  1018 
valuation  of,  863 
assets  of  the  firm,  860 
in  case  of  death,  860 
sale  of,  on  on  death  of  partner,  1017 
in  case  of  retirement  of  one  partner,  861 
m  connection  with  use  of  name,  861 
trade-mark,  863 

1490 


GENERAL    INDEX.  11 5  o 

GOOB-WlLL—confimied. 

agfreeraonts  as  to  paj'ing^  for,  864 

share  of  profits,  as  cons;ideration  for,  44 

property  within  meaning  of  Stamp  acts,  859,  note  (r) 

legatee  of,  1075 

duty  to  preserve,  860  note  {x) 

GROSS  PROFITS 

and  net  profits,  distinction  between  sharing,  15 

GROSS  RETURNS 

distinction  between  sharing  profits  and  gross  returns,  16 
sharing  does  not  constitute  partnership,  16,  17,  24 
persons  who  share,  not  5H«&'t-pai'tners,  37 

GROWING  CROPS, 

partnership  in,  how  formed  and  proved,  88 

GUARANTEED  SHARES,  662 

GUARANTEE 

against  debts  given  to  incoming  partner,  836 

power  of  one  partner  to  bind  firm  by,  281 

company  limited  by.     See  Companies. 

as  to  solvency  when  required  to  be  written,  282,  315 
only  binds  partners  who  sign,  339 
GUARDIANS, 

poor-law,  not  bound  by  unsealed  agreement  when,  354 

HIGHER  NATURE, 

extinction  of  debts  by  taking  securities  of,  450 

HIGHWAYMEN. 

partnerships  between,  183,  note 

HISTORY 

of  statute  law  relating  to  companies,  5 

HOLDING  OUT 

as  partner,  47,  et  seq.    See  Quasi-Partnership 
what  constitutes,  49 
but  not  to  plaintiff,  51 
sufficient  proof  of  quasi-partnership,  91 
by  not  preventing  use  of  name,  52 
as  partner,  injunction  to  restrain,  999 

aft6r  retirement  or  dissolution,  410,  note  (x) 
one  partner  holding  himself  out  as  solely  concerned  m  a  contract,  efiFect  of, 
479 

liability  incurred  by,  when  true  state  of  facts  is  known,  48 
doctrine  of,  does  not  render  the  estate  of  deceased  partner  liable  to  thii-d  par- 
ties, 1060 
by  infant,  81 

after  coming  of  age,  83 
by  surviving  partner,  52 
by  promoters  of  company,  54 
by  married  women,  84 
by  being  on  register  of  shareholders,  50 

HONOR 

high  standard  of,  requisite  among  partners,  569 
and  among  those  about  to  become  partners,  569 
and  among  those  who  have  ceased  to  be  partners,  569 
and  among  directors  and  members  of  companies,  570,  580,  et  seq. 
and  between  promoters  of  companies  and  tliose  companies,  580,  et  seq. 
See  Fraud;  Good  Faith 

1491  . 


1154  GENERAL   INDEX. 

HUSBAND 

of  partner,  liability  of,  84 

of  shareholder,  liability  of,  85,  136,  535 

when  not  liable  to  creditors  of  company,  136,  535 
as  to  right  of,  of  shareholder  to  vote,  549 

See  Makried  Woman 


IDIOCY, 

dissolution  on,  224 

IDIOTS, 

partners  who  are,  83 

IGNORANCE 

of  one  partner,  effect  of,  on  rights  of  firm,  288.     See  Notice 

ILLEGAL  ACTS. 

injunction  to  restrain.     See  Injunction 
contribution  in  respect  of,  770 

ILLEGAL  AGREEMENTS, 

clause  of  forfeiture  in  articles  to  prevent  shareholder  suing  the  company  ille- 
gal, 745 

ILLEGAL  SALES 

of  shares,  710,  735 

ILLEGAL  TRUSTS,  204 

actions  for  execution  of,  204 

ILLEGAL  PARTNERSHIPS  AND  COMPANIES,  Book  I.,  cap.  6 
what  partnerships  are  illegal,  180,  et  seq.,  819 

on  general  grounds,  180 — 183 

by  particular  statutes,  183 — 191 

attorneys  and  solicitors,  184, 190 

bankers,  184,  186 

brokers,  187 

insurers,  187 

medical  practitioners,  188 

patentees,  189 

pawnbrokers,  189 

theatre  managers,  191 

unincorporated  companies  with  transferable  shares,  191 

assuming  to  act  as  a  corporation,  192 

scrip  companies,  194 

by  reason  of  non-registration,  196 

by  non-compliance  with  Companies  act,  1862,  196 
consequences  of  illegality,  197 

as  regards  the  right  to  recover  back  subscriptions,  197 
actions  for  account,  198 
sales  of  shares,  198 
actions  by  and  against,  199,  et  seq» 
contribution.  200,  770 
waiver  of  illegality,  200 
illegality  a  defense,  200,  201 
illegality,  when  not  a  defense,  202 
illegality  set  up  by  executors,  203 
concealed  illegality,  202 
action  against  directors  of,  203 
members  of,  have  no  lien,  683 

illegahty  of  partnership  business,  a  cause  of  dissolution  of  partnership,  232 
appointment  of  receiver  in  case  of,  1012 

1492 


GENERAL  INDEX.  115; 

ILLNESS 

of  partner,  not  a  ground  for  dissolution,  225 

IMPERATIVE  AND  DIRECTORY  CLAUSES, 
distinction  between,  824 

IMPLIED  POWERS.     Book  II.,  cap.  1,  sec.  3 
of  partners.  2.36—240 
as  regards 

accounts,  264 

actions,  473,  474 

admissions,  264 

agents.  265 

amalgamation,  265 

arbitration,  265,  473,  474 

bills  and  notes,  266,  et  sea, 

bonds,  269,  278 

borrowing  money,  269 

capital,  increasing,  273 

cheques,  274 

post-dated,  274 

compromise,  277 

contracts,  275 

creditors'  deeds,  277 

debentures,  270,  275 

debts  275,  287 

deeds,  278 

distress,  279 

extension  of  business,  279 

Factors'  acts,  285 

guarantees,  <fec.,  281 

insurances,  283 

interest,  283 

judicial  proceedings,  283 

leases,  283 

mortgages,  284 

payment,  275 

pledges  of  chattels,  284,  285 

notices,  287 

penalties,  290 

pm-chases,  290 

purchase  of  business,  292 

receipts,  293 

releases  and  covenants  not  to  sue,  293 

representations  and  admissions,  294 

sales,  295 

taking  security,  287 

servants,  296 

eet-ofi;  277 

shares,  296 

ships,  296 

tenders,  278 

varying  contracts,  275 

winding  up,  411 
of  promoters  of  companies,  240,  et  sen. 
of  directoi-s,  244,  249—258,  264,  et  sen.,  741 

in  particular  cases.    Sec  above  (Implied  Powers  of  Partners) 
termination  of 
by  notice,  403 
by  death,  403 
by  bankruptcy,  405 

See  liANKRurTCY;  Dissolution 

1493 


1156  GENERAL   INDEX. 

IMPLIED  TERM 

for  duration  of  partnership,  219 

IMPOSSIBILITY 

of  continuing  partnership  business  cause  of  dissolution,  222 

IMPUTATION  OF  PAYMENTS,  419,  et  seq.  See  Appiiopkiation  of  Payments 

INCAPACITATED  PAETNER,  77 

INCHOATE  COMPANIES, 

subscribers  to,  not  partners,  31 
application  of  doctrines  as  to  holding  out  to,  52 
See  Abortive  Companies:  Promoters 

INCOME-TAX,  ,       ^       ^    ^       ^  , 

pajTuent  of,  by  firm,  where  some  of  its  members  are  abroad.    A.-G.  v.  oul- 
leij,  5  H.  &  N.  711 

INCOMING  PARTNER, 

actions  by  and  against,  435,  et  seq.,  486,  et  seq. 
agreements  for  benefit  of,  851 
liability  of,  389 

under  old  articles,  852 

for  bills  accepted  for  precontracted  debt,  393 

for  acts  done  before  they  join  firm,  392 
frauds  on,  331 
eifect  of  appropriation  of  payments  on,  426 

INCORPORATED  COMPANIES, 
are  public  companies,  696 
causes  of  dissolution  of,  234 
actions  by  and  against,  492 
formation  of 

chartered  companies,  150.    See  Chartered  Companies 
companies  incorporated  by  special  Act  of  Parliament,  154 
registered  companies,  163 
See  Companies;  Corporation 

INCORPORATION 

effect  of,  on  sureties,  214 

effect  of  as  regards  capacity  to  sue  and  be  sued,  873 

proof  of,  164 

in  criminal  cases,  164,  note  (i) 

INCREASING  CAPITAL, 

difference  between  that  and  borrowing,  273,  274 
See  Capital 

INDEBTED, 

meaning  of  the  word,  686  note  (n) 

INDEMNITY, 

against  losses,  22 
agent's  right  to,  755  _ 

when  he  obeys  his  instructions,  755 

when  he  disobeys  his  instructions,  755 

when  he  acts  after  his  authority  is  revoked,  756 

when  he  acts  without  instructions,  756 
right  of  partners  and  directors  to,  759  et  seq. 

du-ectors  acting  bond  fide,  but  beyond  their  authority,  760 
right  to  indemnity  \v  here  powers  expressly  restricted,  766,  767 
right  of  broker  to,  731 

right  of  seller  of  shares  to,  from  purchaser,  713,  730 
from  beneficial  owner,  730 

1494 


GENERAL   INDEX.  1157 

INDEMNITY— fo«fj«j(erf. 

rijrht  of  public  officer  to,  782 

rifjht  of  shareholdei-s  to,  782 

ri^'ht  of  tnistoos  to,  758 

ri^lit  to.  whi'i-e  a  person  has  been  induced  to  become  a  partner,  or  to  take 

shares  1)V  fraud,  92:^ 
ri<,'ht  of  ov'it-^'-oing  partner  to,  from  continuing  partners,  867 
ufTually  g-iven  by  continuing  partners,  867 
at  law  and  in  equity,  ditft'rence  between,  768 
action  for,  by  one  partner  against  another,  1028 
given  by  one  partner,  how  far  iinn  is  liound  by,  281 
given  by  directors,  company  not  bound  by,  282 
directors  entitled  to,  55.") 

inter  se,  5G0,  597,  773 
dissentient  need  not  accept,  608 
effect  of  taking  joint  covenant  for,  373 
effect  of,  on  lien,  867 
agreement  to  indemnify  shareholders,  no  answer  to  action  agamst  company, 

433 

See,  also.  Contribution 

INDIA, 

allowances  to  partnei-s  in,  775 

INDICTMENT  ,  .  ,     ^^^       ^    ^  ^ 

by  surviving  partners  for  stealing  partnership  goods,  490,  note  [o] 
for  fraudulenty  inducing  a  person  to  take  shares,  815,  816 
for  obtaining  money  under  false  pretenses,  816,  note  {y) 
for  conspiracy,  710.  711,  815,  816 
for  illegal  partnership,  204 

INFANT 

partners,  80 

liability  of  infant  for  holding  himself  out  as  partner,  81,  83 
to  be  made  bankrupt,  81 

sued  with  other  partners,  483 
shareholders 

liabilities  of,  81 
to  calls,  81 

to  be  made  contributories,  82,  note  {g),  1356,  1406 
transfer  of  shares  to,  723,  729 
avoidance  of  contracts  by,  82 
ratification  of  contract  by,  82 
liability  of  joljber  who  passes  name  of,  723 

purchaser  who  passes  name  of,  728,729 
company  may  reject  mf'ant  as  shareholder,  82 
liabilitv  of,  for  fraud,  81  •    •        on 

effect  of  infant's  signature  of  memorandum  of  association,  82 
Infant's  Relief  act,  1874,  p.  82 

effect  of  on  infant  partners,  83 

shareholders,  83 

INFORMALITY.    See  Irregularity 

in  consenting  to  transfer  of  shares,  703. 

INFORMATION.    See  Action 

INJUNCTION 

generallv  993  et  seq.  , 

to  restrain  directors  and  companies  generally,  S9o,  1000  et  seq. 
in  particular  cases, 

injunction  granted,  1000 
refused,  1002 
before  hearing  of  cause,  1000 

necessity  of,  993  -  .  r. ,. 

141)5 


1158  GENERAL    INDEX. 

mjVi^CTIO^— continued. 

granted  where  a  receiver  would  be  refused,  1007 
between  co-owners,  66 
aga  nst  partners,  994 

where  no  dissolution  is  sought,  994 
where  pax'tnership  is  a.t  will,  995 
in  actions  for  dissolution,  996 
against  persons  claiming  under  a  late  partner,  997 
against  directors,  &c.,  898,  1000 
to  restrain 

actions,  998 

for  balance  of  settled  account  because  others  are  unsettled,  998 
brought  against  shareholders  at  instigation  of  directors,  875,  1001 
ejectment,  996 
executions 

against  iirm  for  separate  debt  of  one  partner,  690,  691 
against  one  shareholder  at  the  suit  of  another,  523 
advertising  dissolution,  994 
holding  out,  999 
opening  letters,  994 
usmg  names,  994 

by  continuing  partners,  210,  410,  note  (x),  1060 
misapplying  moneys  of  firm,  995 
obstructing  plaintitF  in  the  exercise  of  his  rights,  995 
driving  plaintiff  to  a  dissolution  by  misconduct,  995 
publishing  news  in  a  rival  paper,  995,  996 
writing  plays  for  rival  theatre,  996 
getting  in  partnership  assets,  996,  997 
negotiating  bills,  &c.,  997 
withholding  partnership  books,  997 
breaches  of  express  agreements,  997 
carrying  on  business,  996 
save  for  windmg  up.  996 
after  a  dissolution,  996 
after  sale  of  business,  862 

by  surviving  partners  in  old  name,  210,  410,  note  (x)  1060 
interfering  with  j^roper  winding  up  of  partnership,  1041 
disclosure  of  information  obtained  under  order  to  pi'oduce,  1002 
against  dissolution  of  partnership  when  granted,  221 
divulging  trade  secrets,  997 
publishing  accounts,  1002 
excluding  co-partner,  995 

though  lately  insane,  994 
advertising  plaintitf  as  a  promoter,  &c.,  of  a  company,  999 
keeping  plaintiffs  name  on  register  of  shareholders,  142,  1000 
managing  partners,  895 
majority,  900,  902 

minority,  902  • 

conveyance  of  property  of  company  to  trustees  for  sale,  900,  1004 
illegal  acts,  900,  994,  1000  et  seq. 
the  application  of  a  company's  funds  to  unauthorized  purposes,  901, 

1001 
an  application  to  Parliament  to  change  constitution  of  company,  606, 
607,  1002 
foreign  government,  607,  note  {x) 
suiTender  of  charter,  1002 
acceptance  of  charter,  150,  note  («) 
the  sailing  of  a  ship,  902,  note  {q) 
forfeiture  of  shares,  1001 
making  or  enforcing  calls,  898,  1000 
renewal  of  lease,  574,  note 
payment  of  dividend  in  shares,  1001 

1496 


GENERAL    INDEX.  1150 

INJUNCTION— co«/j»Hef7. 
to  restrain — continued. 

presentation  of  winding'-up  petition,  1245,  note  {g) 

prosecuting-  suit  Vjy  stranger,  1002 

proceedings  for  a  libel  on  the  directors,  1002 

purchase  by  a  company  of  its  own  shares,  1002 
to  correct  register  of  shareholders,  142,  1000 
sought  by  a  nominee  of  a  rival  company,  888 

against  suing  plaintiffs,  etfectof,  where  suit  is  by  some  on  behalf,  502,  note  (m) 
parties  to  actions  for,  881 

INJUIRIES 

directed  in  decree  for  administration  of  estate  of  deceased  partner,  1056 

INSANITY, 

a  ground  for  dissolution,  224  et  seq.    See  Lunacy  and  Lun/tio 

INSOLVENCY 

of  partner,  power  to  dissolve  in  case  of,  843 

test  of,  843 
of  finn,  meaning  of,  736,  note  (6) 
See  Bankkuptcy. 

INSI'ECTION.    See  Books 

of  accounts,  &c.,  of  firm.  545,  809 

agreement  precluding,  959 

by  accountants,  &c.,  959 

books  in  use,  959 

of  accounts,  &c.,  of  companies,  809,  959 

governed  by  8  &  9  Vict.  c.  16,  p.  558 
governed  by  Companies  act,  1862,  p.  175 

of  accounts  of  corporations,  959 

of  register  under  Companies  act,  1862,  p.  175 

by  Board  of  Trade,  813 

of  names  of  shareholders,  right  of  creditors  to,  522 

rules  as  to  inspection  of  documents  by  shareholders,  545 

in  actions  for  account,  959 

INSPECTORSHIP  DEED, 

trustees  of,  not  paiiners,  29 

INSTALLMENTS, 

calls  payable  by,  631 

INSURANCE, 

power  of  one  partner  to  bind  firm  by,  283 

INSURANCE  COMPANIES.    See  Life  Insurance  Companies 
maritime,  formerly  illegal,  187 
shares  in  not  within  Mortmain  acts,  674 

Eolicies  under  seal  of,  binding  on.  though  issued  irregularly,  255  ^ 
re  and  life  not  to  be  turned  into  a  nianne  insurance  company,  605 
power  to  transfer  assets,  although  policies  payable  out  of  them,  380,  381 

INTEREST 

admission  by  one  partner,  that  interest  is  payable,  283 
in  accounts  between  partners,  786 
on  capital,  786 
on  undrawn  profits,  787 
on  advances,  787 
on  overdrawings,  787,  788 
where  accounts  confused,  789 

charged  against  partner  who  will  not  produce  books,  993 
charged  against  directors,  7.~^9 

on  money  wrongfully  employed  in  partnei-ship  business,  976,  et  seq. 
when  compound  interest  allowed,  986 

1497 


1160  '  GENERAL    INDEX. 

INTEREST— roH//«i<fi(7. 

charging  executors  \^th,  for  not  converting  testator's  share  into  money,  1071 
on  calls,  629,  748  note,  751,  note  (0  . 

paid  by  continuing:  partners  after  dissolution  does  not  discharge  retired  part- 
ner, 439,  442,  446,  447 

INTERNAL  REGULATION, 

interference  with  respect  to  matters  of,  895,  et  seq. 
See  Majority 

INTERPLEADER, 

sheriff 's  right  to,  689,  note  (5) 

INTERPRETATION 

of  partnership  articles,  817 
See  Articles  of  Partnership 

INTERROGATORIES,  t 
oppressive,  955 
public  officers  may  be  examined  on,  500 

INTRODUCTION 

of  new  partner,  provision  as  to,  851 

INVESTING 

in  shares,  6G2 

INVOICE 

evidencing  partnership,  97 

I  U  U, 

action  by  one  partner  against  another  on,  1028 

IRREGULARITIES, 

effect  of,  on  validity  of  acts  of  directors,  253  et  seq. 

iiTegular  acts  distinguished  from  unauthorized  acts,  253 

liability  of  company  for,  253  et  seq. 

effect  of  non-observance  of  formalities,  125 

waiver  of,  128  et  seq. 

as  between  company  and  shareholder,  130 
as  between  creditor  and  shareholder,  136 
in  appointment  of  directors,  253,  543 
in  making  calls,  624,  627,  629 
See,  also.  Formalities 

ISSUE 

to  try  partnership,  formerly  directed,  90,  note  (w) 

ISSUE  OF  SHARES, 

illegal  effect  ot,  134 

condition  precedent  to  directors'  powers,  257 


JOBBERS, 

who  are,  721,  note  (r) 
See  Sale  op  Shares 

JOINDER  OF  PARTIES.    See  Abatement;  Actions;  Parties 

JOINT  BOND, 

held  joint  and  several,  when,  369,  et  seq. 

JOINT  COVENANTS, 

when  not  held  joint  and  several,  371 

1498 


GENERAL   INDEX.  IIGI 

JOINT  CREDITORS, 

rights  of  joint  and  several  creditors  compared,  655,  1053,  1054 
when  treated  as  joint  and  several,  !)69,  et  seq. 
rights  of,  against  estate  of  deceased  partner,  1054 
See  Bankuui'tcy;  Deceased  Paktnek;  Joikt  Debts 

JOINT  DAMAGE, 

when  necessary  to  support  joint  action,  480 

JOINT  DEBTS.     See  Bankruptcy 

cannot  be  set  off  against  separate,  504,  et  sea. 

composition  for,  docs  not  release  separate  liability  vrlien,  435 

JOINT  ESTATE, 
what  is,  643 

JOINT  OBLIGATION, 

peri'ormance  of,  417 
extinction  of,  417 

by  merger  in  security  of  higher  nature,  450 
effect  of  release  on,  433     . 
efi'ect  of  covenant  not  to  sue  on,  433 
JOINT  PURCHASES,  58 

JOINT  AND  SEVERAL 

partnership  debts  are,  when,  369 

rule  applies  between  creditors,  371 
contracts,  who  to  be  sued  on,  483,  490 

persons  liable  on,  may  be  sued  jointly,  severally,  or  in  the  alternative, 
467.  468,  4S4 

executors  of  deconscd  partners  may  be  joined,  490 
debts,  merger  of,  in  higher  secui'ities,  450 
liability 

on  contracts,  369 

for  torts,  373 

for  breaches  of  trust,  374 

extinction  of,  by  merger,  451 
promissory  notes,  liability  on,  362 

power  of  one  partner  to  bind  firm  by,  266 
receipt  of  composition  on  joint  debt,  effect  of  on  separate  liability,  435 

JOINT  SHAREHOLDERS, 

survivor  a  contributory,  375 

JOINT  STOCK 

not  essential  to  partnership,  19,  20 

JOINT  STOCK  COMPANY.    See  Companies 

history  of  law  relating  to,  5 

JOINT  STOCK  COMPANIES  IN  THE  UNITED  STATES, 

as  existing  independent  of  statutory  regulation,  5.  1083-1087 

as  organized  under,  or  regulated  by,  statutes,  1087-1099 

as  existing  independent  of  statutory  regulation,  are  partnerships,  5,  10S3 

members  personally  liable,  1083 

partii^s  to  actions  by  and  against,  1084 

directors  of,  are  trustees,  10S5 

effect  of  death  or  transfer  of  interest,  1085 

No  delectus  persona',  1085 

forfeiture  of  interest,  1086 
as  regulated  by  statute,  New  York  statutes  concerning,  1087 

nature  of  associations  under  N.  Y.  statutes,  1088 

status  of  in  other  States,  1(191 

method  of  organization,  1092 

1499 


1162  GENERAL    INDEX. 

JOINT  STOCK  COMPANIES  IN  THE  UNITED  STATES— continued. 
associations  coming  within  the  statute,  1092 
parties  to  actions  by  and  against,  1093 
complaint  in  action  by,  109;i 
judgment  and  execution  against,  1095 
actions  against  individual  members,  1095 
actions  between  the  company  and  its  members,  1096 

members,  1096 
right  to  hold  real  estate,  1097 
consolidation  of  different  companies,  1097 
misconduct  of  managers,  1098 
distribution  of  assets,  upon  dissolution,  1099 

JOINT  TENANCY 

or  tenancy  in  common,  what  creates,  58,  note  (s) 

JOINT  TENANTS 

partners  in  profits  only,  60 
remedies  between,  63,  et  seq. 

JUDGE 

interested  in  company  as  to  which  he  adjudicates,  Re  Hopkins,  1  E.  B.  & 
E.,  100 

JUDGMENT.     See  Merger 

extinguishes  debt  for  which  it  is  obtained,  451 

not  if  it  is  a  colonial  judgment,  451,  note  {d) 
action  on  colonial  judgment,  521,  note  (i) 
against  one  partner,  when  no  discharge  of  others,  451,  452 
against  surviving  partners,  does  not  preclude  creditor  from  having  recoui-se 

to  estate  of  deceased  partner,  446 
in  action  for  call,  not  set  aside  for  irregularity  in  making  it,  630 
cannot  be  impeached  on  scire  facias,  526 

except  for  fi-aud,  526 
of  county  court  against  company,  execution  of,  521,  522 
against  company,  registry  of,  522 
may  be  entered  up  against  partners  in  name  of  firm,  515 

how  execution  issues  where,  516 
on  scire  facias  against  one  shareholder  does  not  prevent  creditor  from  suing 

another,  524 
action  by  one  partner  who  has  been  compelled  to  pay,  agaiast  co-partner  for 

contribution,  1029 
power  of  one  partner  to  consent  to,  474 
effect  of  judgment  confessed  by  one  partner,  474 
execution  of.     See  Execution;  and  Scire  Facias 

JUDICIAL  PROCEEDINGS, 

power  of  one  partner  to  act  for  firm  in,  473,  475 

JURY, 

to  try  partnership,  90 

JUST  ALLOWANCES,  974 


KENT, 

his  definition  of  partnersliip,  2 


LACHES 

of  plaintiff  when  a  bar  to  relief,  902 

barring  right  to  account,  903 

in  setting  aside  agreements,  903,  905 

1500 


GENERAL    INDEX.  1103 

LkCEF.S—confhwec7. 

in  winding  up  companies,  905 
effect  of  recognition  of  title  on,  913 

LAND, 

there  may  be  a  partnership  in  buying  and  selling,  88 

proof  of  a  partnership  in,  88  _ 

shares  in  companies,  how  far  interest  in,  667,  673 

belonging  to  tinn  treated  as  personal  estate,  667,  et  seq. 

when  partnership  property,  G44,  651,  652 

when  not,  068 

LAND  COMPANIES, 

where  shares  within  the  Mortmain  acts,  673 

LANDS  CLAUSES  CONSOLIDATION  ACT, 
appointment  of  arbitrator  under,  359 

LAPSE  OF  TIME.     SeeDELA"s;  Limitations,  Statute  op ;  Time 

LARCENY, 

one  partner  cannot  commit  as  to  the  property  of  the  firm,  643 

LAW  AND  EQUITY, 
differ^  nee  between 

as  regards  contribution  and  indemnity,  768.     See  Contribution 
as  regards  joint  and  several  liabilities,  369 

LAW  PARTNERSHIP.    See  Attouneys 

LEASE,  .         .     ,   ^,r 

specific  performance  of  agreement  for,  after  term  is  expn-ed,  91o 
injunction  against  grant  of  renewed,  to  one  partner,  949,  note  (q) 
power  of  one  ]iartner  to  take  a  lease  for  a  firm,  283 
liability  of  retired  partners  on  covenants  in,  436,  note  (o) 
of  partnership  property,  effect  of,  on  duration  of  partnership,  218 
of  partnership  property,  may  belong  to  one  partner  only,  646,  648 
renewal  of,  by  one  partner  enures  to  benefit  of  firm,  574 
notice  to  quit  by  partners,  481  .,,... 

forfeiture  of,  by  assignment  by  one  partner  to  another  without  license,  }  ar- 
leij  V.  Co2)purd,  L.  R.  7  C.  P.  505 

LEDGER 

not  a  sufficient  register,  140 

LEGACY 

of  share  in  partnership 
rights  of  legatee,  1075 
ademption  of,  1075 
what  passes  under,  661,  1075 
duty  of  executors  to  realize,  1071 
•  of  shares  in  company,  1076 

duty  of  executors  to  sell,  when,  1077 

if  given  to  persons  successively,  1077 
no  prol)ate  duty  payaljle  on  death  of  tenant  for  life,  1078 
liability  of  executors  for  not  selling  when  bequeathed  upon  trust  for 

sale.  1081 
income  of,  before  sale,  as  between  tenant  for  life  and  remainderman. 

1078 
bequest  of,  will  pass  stock,  617,  note  (0.  1076 
rights  of  specific  legatee  of,  1079 
as  to  calls,  1078 
as  to  profits,  1079 
as  to  dividends  and  bonuses,  1080 
to  a  finn,  209 
of  good  will,  859,  note  (s),  1075 

1501 


llCi  GENERAL   INDEX. 

LEGACY  DUTY, 

payable  on  partner's  share  of  assets,  672 

LEGALITY, 

See   iLIiEGALITY 

LEGAL  PROCEEDINGS, 

firm,  how  described  in,  211  et  seq.,  468,  476 
by  and  against  firm,  211  et  seq.,  466  et  seq. 
power  of  one  partner  to  act  for  firm  in,  473 
See  Actions;  Bankruptcy;  Winding  up 

LEGATEE 

of  a  deceased  partner, 

what  passes  to,  661,  1075 

rights  of,  against  his  executors,  1068,  1072,  1075 
the  surviving  partners,  1066 
where  the  assets  of  the  deceased  are  not  got  in,  1070  et  seq. 
where  the  surviving  partners  are  the  executors  of  the  deceased,  1070 
of  good  will,  1075 
of  shares,  rights  and  liabilities  of,  1076  et  seq. 

for  life,  1077 

pa.Aanent  of  calls  by,  1078 

right  to  bonuses,  1080 

LENDER. 

distinction  between  and  dormant  partner,  23,  45 

if  with  rights  other  than  those  of  a  creditor,  may  be  a  partner,  45 

LETTERS, 

injunction  to  restrain  opening,  994 
evidence  of  partnership,  97 

LETTERS  OF  ALLOTMENT,  102.    See  Allotment 

LETTERS  PATENT  ACT 

See  Companies  governed  by  7  Wm.  4  V  1  Vict.  c.  73,  p.  152 

LIABILITY 
1.  of  partners 

to  be  determined  by  law  of  place  where  partnership  is  carried  on,  369 
inter  se.     See  Account;  Action;  Contribution 
for  the  acts  of  each  other,  264  et  seq.     See  Implied  Powers 
of  individual  partners  on  contract  in  excess  of  their  powers,  366 
of  partners 
by  holding  out,  47  et  seq.     See  Holding  Out 
by  sharing  profits,  33-47.     See  Profits 
statute  as  to,  43 
none  till  partnership  is  concluded,  26  et  seq. 
in  respect  of 

unauthorized  transactions,  249,  325 

with  notice,  325 
torts  and  frauds,  298  et  seq. 
misapplication  of  money,  302-313 
misrepresentations,  314 
bills  of  exchange  in  various  forms,  340  et  seq. 

See  Bills  of  Exchange 
promissory  notes,  348 

See  Promissory  Notes 
contracts  under  seal,  337 

not  under  seal,  337 

not  binding  on  them,  but  of  which  they  have  had  the   benefit, 

361 
in  which  all  the  partners  are  not  named,  406,  477 
1502 


GENERAL    INDKX.  1105 

UABlUTY—contlii  ue<h 

when  joint  and  when  several, 
as  regards  contracts,  369 
torts,  373 

breaches  of  trust,  374 
commencement  of.  3"^"),  et  seq. 
termination  of,  403,  417 

as  to  future  acts,  403 
as  to  past  acts,  417 
by  notice  of  dissolution,  408 
by  dissohition  without  notice.  406 
eHect  of  notice,  403,  et  seq. 
what  amounts  to  notice,  414,  et  seq.,  846 
by  payment,  418 

See  Appkopkiation  of  Payments 
by  release,  433 

by  dissolution  or  retirement,  422 
by  dealinj^s  with  continu  ng  partners,  422,  423,  446 
by  the  merger  of  securities,  440 

by  lapse  of  time,  453.     See  Limitations;  Statute  op 
by  death,  404 
by  bankruptcy,  405 
by  lunacy,  406 
attempts  to  limit,  376 

effect  of  notice  of  agreement  limiting,  375,  377 
partners  may  stipulate  as  between  themselves  that  one    shall  not  be 

liable  for  losses  or  firm  debts,  22 
creditors  not  affected  by  agreements  between  the  partners,  435,  et  seq. 
of  dormant  partner,  237,  405.     See  Dormant  Pautneu 
of  incoming  partner,  389.     See  Incoming  Paktneu 
of  nominal  partner.    See  Holding  out;  Nominal  Partner;  Quasi 

Pautneuship 
of  retired  partner, 

dormant,  405,  407,  423 
not  dormant,  40Q 
as  regards  future  acts,  403 
as  regards  past  acts,  417,  et  seq. 
of  estate  of  deceased  partner,   1050.    See  Deceased  Partner;  Exic- 

CUTOliS 

of  membei"s  of  unincoq:)orated  associations,  4 

2.  of  companies 

summary  of  law  as  to,  264,  352 
for  the  acts  of  their  promoters,  395 
for  the  acts  of  their  directors,  244 

unauthorized  acts,  'Mb 

ultra  vires,  249,  401 

intra  ri/T.s,  but  irregular,  253 

frauds,  317 

when  irregularly  appointed,  247 
of  companies 
lor  negligence  of  servants,  299 
for  torts  and  frauds,  299  et  seq. 

on  contracts  not  entered  into  on  their  behalf,  336  et  seq. ,  352,  361 
on  ground  of  ratification,  258,  355 

part  performance,  354 
by  estoppel,  355 
on  judgment,  355 

under  particular  statutes,  356.     See  Contract  ;  Companies 
on  promissory  notes,  .")60 
on  amalgamation,  402,  463 

on  contracts  of  which  company  has  had  benefit,  361 
on  contracts  not  under  seal,  352,  ooii 

3.  of  shareholders,  375 

1502 


IIGG  GENERAL    INDEX. 

LIABILITY— co?;f/»(/Pf7. 
to  calli?.     See  Calls 
to  creditors 

in  cost-book  mines,  147.    See  Cost-book  Mining  Companies 
in  companies  governed  by 
7  Geo.  4,  c.  46,  p.  531 

7  Wm.  4  &  1  Vict.  c.  73,  p.  535 

8  &  9  Vict.  c.  16,  p.  536 

by  Companies  act,  1862,  p.  382 
of  pa=^t  members,  460,  461 
where  limited  to  the  funds  of  the  company,  377 
commencement  of  hability,  365.  394 
duration  of  liabihty,  459 
after  the  company  is  dissolved 
where  company  is  not  incorporated,  3S2 
after  surrender  of  shares,  738,  et  seq. 

where  shareholders  have  been  deceived  by  directors,  528.     See  Fraud 
where  shareholder  has  been  induced  to  become  such  by  the  creditor  su- 
ing him,  529 
attempts  to  limit  liability  of,  376 
limited  by  statute,  382 
4.  miscellaneous 

ex  contractu,  365 

ex  delicto,  373 

of  directors.     See  Directors 

on  prommissory  notes  in  various  forms,  348,  et  seq. 
in  limited  company  may  be  imliniited,  167 

of  promoters  of  companies,  390,  395,  580  et  seq.     See  Promoters 
liability  to  contribute,  not  to  b9  confounded  with  liability  to  creditors,  462 
liability  of  agent  who  exceeds  his  authority,  366 
liability  of  principal  for  torts  and  frauds  of  his  agent,  297 
liability  of  subscribers  to  companies,  240  et  seq. 

retired  shareholders,  460,  461 
liability  of  shipownt'rs 

in  respect  of  each  other's  acts,  296,  note  [d) 
liability  for  breach  of  trust  in  employing  assets  in  the  business  of  a  partner- 
ship', 1060,  1062 
liability  of  members  of  a  corporation  for  debts  contracted  before  incorpora- 
tion, 4  n. 

continuing  business  after  dissolution,  4  n. 
See,  also.  Limited  Liability 

LIBEL 

on  company  by  member,  action  lies  for,  892 

action  by  public  officer  for,  497 

actions  by  partners  tor,  480 

on  directors  proceedings  by  company  for,  restrained,  1002 

reports  of  directors  to  shareholders  when  privileged,  300,  note  (/) 

LICENSES, 

form  of,  when  no  evidence  of  partnership,  93 
not  taking  out.     See  Excise  Laws 

LIEN, 

of  partners 

nature  of,  679  et  seq. 

consequences  of,  680 

to  what  property  it  attaches,  680 

exists  only  on  partnership  assets,  681 

exists  as  against  all  persons  claiming  a  share  in  the  assets,  681,  698,  699 

prevails  as  against  assignee  or  mortgag-ee,  698,  699 

no  hen  on  a  partner's  share  for  ordinary  debts  due  from  him  to  firm,  632 

application  of  this  last  rule  to  companies,  682,  683 
loss  of  lien,  683 

1504 


GENERAL    INDEX.  1167 

LIEN — conixuued. 

of  partners — conCiuned. 

no  lien  of  partnership  is  illegal,  683 

of  a  firm,  <'tlcct  on,  where  a  change  occurs  in  the  finn,  215 
of  co-owners,  (')><'■'>,  (;8i 

of  company  on  share  of  member,   084 

under  particular  statutes,  086 
of  banking  finn  on  share  of  partner,  686,  note  [p) 
of  one  shareholder  as  against  another,  684 
for  unpaid  purchase-money,  on  sale  of  shares,  716 
on  freight,  0^4,  note  (h) 

creditors  of  a  firm  or  company  have  no  lien  on  its  property,  654,  658 
agreements  for  lien,  080 

LIFE  ASSURANCE  COMPANIES, 

accounts  to  be  laid  before  the  Board  of  Trade,  813 

LIMITATIONS,  STATUTE  OF, 
between  partners,  963 
as  regards  creditoi-s,  965 

estate  of  deceased  partner,  when  discharged  by,  1053 
when  a  bar  to  an  action  for  acx;ount  between  partners,  kc,  963 
•     tune  within  which  actions  must  be  brought,  453 
summary  of  rules  relating  to,  454 
provisions  of  Mercantile  law,  amendment  act  as  to,  4-38 
merchants'  accounts,  965 
current  accounts,  966 
acknowledgment,  967 
payment  by  receiver  in  an  action,  967 
cases  of  fraud,  455,  964 
trust,  455,  904 
act  of  one  partner,  effect  of,  456 

LIMITED  COMPANIES, 
sorts  of,  12,  382 
security  for  costs  by,  493 
eifect  of  omitting  the  word  "limited, "  884 
See  Companies 

LIMITED  LIABILITY 
by  statute,  382 

introduction  of,  8 
unknown  at  common  law,  376 
attempts  to  introduce,  376 

by  stipulating  that  funds  only  shall  be  liable,  376 
alluring  statements  as  to,  194 
exceptional  liability,  384 
right  against  funds,  380 

members,  381 
registering  existing  companies  with,  165  et  seq.,  177 

LIMITED  PARTNEPtSHIPS,  4,  383  etseq. 

LIQUIDATED  DAMAGES, 

agreements  for  payment  of,  871 

LIS  PENDENS, 

pleaof,  451,  note  (^r) 

LIST  OF  SHAREHOLDERS 
See  Register 

LLOYD'S  BONDS, 

power  of  directoi-s  to  issue,  271 

"  lo05 


1168  GENERAL   INDEX. 

LOANS 

by  directors  to  companies,  777,  779,  780 

by  companies  to  directors,  553,  590 

to  one  partner,  of  which  firm  has  had  the  benefit,  361 

to  one  partner,  firm  is  bound,  when,  269 

by  partner  to  firm,    779 

contracts  of  loan  compared  with  contracts   of  partnership,  22,  23,  45  et  s  q. 

at  interest  vai-j^ing  with  profits,  37,  43 

for  share  of  profits,  if  fraudulent  may  constitute  a  partnership,  45 

or  if  lender  is  not  merely  a  creditor,  45 
by  executors  of  deceased  partner  to  firm,  gives  the  estate  no  right  to  profits, 
1071 

And  see  Advances 

LOAN  NOTES,  270,  note  {I) 

LOOKING  ON, 

effect  of,  as  a  bar  to  relief,  902  et  seq. 

LOSS  OF  CAPITAL, 

effect  of,  223,  615,  807 
a  cause  of  dissolution,  223 
how  shared,  677,  807 

LOSSES, 

stipulation  against.  22 

effect  of  notice  of,  by  creditors,  376,377,  781 
as  to  payment  of,  33 — 54 
attributable  to  one  partner,  785,  784 
adopted  by  firm,  784 
how  to  be  borne,  806.  807 
See  Contribution;  PAKTNERsnip;  Profits 

LUNACY 

of  partner,  effect  of,  as  regards  liability  of  himself  and  co-partners,  406 

a  cause  of  dissolution,  224 

does  not  prevent  a  dissolution  by  notice,  226,  843 

evidence  of,  225 
partner  recovering  from,  entitled  to  take  part  in  business  of  the  firm,  994 

LUNACY  REGULATION  ACT,  226 

LUNATIC 

may  be  a  partner,  83 

service  of  notice  of  dissolution  on,  226,  843 

shares  of,  663,  note  (s) 

transfer  of  shares  of,  704,  note  (h),  705 

entitled  to  sue  for  dissolution,  226 

MAJORITY, 

powers  of,  598  et  seq. 

matters  of  ordinary  business,  598 

instances  of  what  it  cannot  lawfully  do,  604,  605 

of  members  of  coi-porate  bodies.  608 

as  regards  directory  clauses,  827 

agreements  as  to,  598,  838 

to  bind  minority,  603 

duty  of,  to  hear  minority,  600 
to  depart  from  regulations  of  a  company,  600,  604 
to  accept  a  suiTonder  of  share,  738,  739 
to  divide  the  company's  assets  among  themselves,  885 
to  exclude  minority  from  share  of  profits,  794 
to  adopt  a  fraud,  901,  902 

1506 


GENERAL    INDEX.  1169 

MAJOmTY—conthiued. 
powers  of 

to  transfer  business,  606 

to  apply  for  power  to  alter  nature  of  company,  606,  607 

to  borrow  money,  599 

to  take  bill  off  file  when  filed  by  minority  in  name  of  company,  899, 
note  (fj) 

to  sell  shares  of  minority,  818 

to  forfeit  shares,  745.    See  Forfeiture 

after  a  flissolntion,  412 
resolution  of  the  majority  present  at  a  meeting  is  a  resolution  of  the  meet- 
ing, 548.     See  Meetings 
control  of,  895  et  seq. 

not  intori'cred  with  if  they  are  not  doing  what  is  illegal,  900 
actions  to  control.  900 

parties  to,  883  et  seq. 
actions  by,  to  control  minority,  902 

parties  to,  883  et  seq. 

MALA  PROHIBIT  A 

and  viald  in  se,  183 

MALICE 

imputable  to  companies,  300 

MALICIOUS  INJURY, 
liability  for,  300 

MANAGEMENT, 

interference  as  regards  matters  of  internal,  895  et  seq. 

•^■companies  generally,  541  et  seq.     See,  also,  Companies  ;  Directors  ; 
Injunction  ;  Ma.tority  ;  Meetings  ;  Shareholders 

of  affairs  of  partnership,  right  to  take  part  in,  540 
companies,  541 
MANAGER 

of  company,  effect  of  informal  appointment  of,  255 

and  receiver,  appointment  of,  1005,  1017.    See  Receiver 

contract  with,  when  binding,  248 

MANAGING  COMMITTEE, 

liability  of  members  of  for  each  other's  acts,  56 
See,  Directors  ;  Promoters 

MANAGING  PARTNER, 

interference  with,  by  the  court,  895  et  seq.,  998 

MANDAMUS 

generally,  1036 

to  fill  up  an  otfice,  1037 

to  pay  share  of  dividends,  1036 

to  register  a  transfer  of  shares,  1036,  1037 

to  produce  books,  &c.,  1036 

to  make  a  call,  628,  1036,  1037 

to  produce  register,  1037 

to  appoint  a  public  officer,  1037 

to  pay  a  debt,  1037 

out  of  the  funds  of  the  company,  519,  520 

MANDAMUS 

to  affix  corporate  seal.  1038 

to  remove  corporate  seal,  1038 

to  allow  inspection  of  accounts,  1037 

to  compel  production  of  list  of  shareholders  to  creditor,  522,  note  (s) 

to  correct  register  of  sharcliolilers,  142 

1507 


1170  GENERAL    INDEX. 

M  AND  AM  US— f  o«  tin  ued. 

to  inspect  register  of  shareholders,  522  note  (s) 
court  has  a  discretion  to  grant  or  refuse,  1037 
against  Registrar  of  Joint  Stock  Companies,  163 
may  be  granted  by  the  Ciiancery  Division. 

MANIFEST  ERRORS, 
clause  as  to,  839 

MARINE  INSURANCE, 

partnerships  and  companies  for,  formerly  illegal,  187,  188 
agreements  for,  must  be  in  writing,  87,  note  (a),  188 

may  be  stamped  after  execution,  87,  note  (a)  188,  and  (w) 

MARRIAGE 

of  female  partner,  dissolution  of  partnership  by,  230 

MARRIED  WOMAN, 

capacity  of,  to  be  a  partner,  84 

may  by  a  shareholder,  85 

entitled  to  paid  up  shares  may  compel  registration,  85 

payment  of  dividends  to,  798 

action  by,  for  dividends,  1035 

under  7  Geo.  4,  c.  46,  p.  534,  535 
as  to  right  of,  to  vote,  549 
man-ied  woman's  property  act,  85 
when  a  partner  under  articles,  signed  by  her  and  her  husband,  34 

See,  also,  Husband 

MAXIMS, 

Accessorium  sequitiir  suiim  principale,  977 

Actio  personalis  montur,  cum  persona,  1051  • 

Culpa  est  immiscere  se,  rei  ad  se  non pertinenti,  151 
Ex  turpi  causa,  non  oritur  actio,  203 
Expressiim  facit  cessare  taciturn,  817 
Fieri  non  dehuitsed  fact  am  valet,  825 
Jn  pari  delicto  melior  est  positio  defendentis,  755 
In  re  communi  potior  est  conditio  prohihentis,  598 
In  Societatis  cotitractihus ;  Jidus  exuberet,  569 
Jus  accrescendi  inter  mercatores  locum  non  habet,  664 
Nemo  dibet  bis  texari  j)ro  eadem  causa,  451 
Nemo  p)otest  mutare  consilium  suum  in  aiteriiis  injur iam,  756 
Modus  et  conventio  vincunt  legem,  820 
Omnia  prcesunnintur  rife  esse  acta,  254,  551 
Protestatio  facto  contraria  non  valet,  49 
Qui  sentit  commodum  sefire  debet  et  onus,  82 
liespondeat  superior,  298 
Semper  enimnon  id  quod  prirntim  interest  unius  ex  sociis  servarl  solet,  sed 

quod  societati  expedit,  572 
Si  quid  universitati  debetur  singulis  non  debetur,  nee  quod  debet    universi- 

tas  singuli  debent,  4 
Socius  mei  socii,  socius  meus  non  est,  54 
Vigilantibusnon  dormientibus  subveniunt  leges,  902 

MEDICAL  PRACTITIONERS, 

partnership  between,  unqualified,  188 

MEETINGS, 

attendance  at,  evidence  of  partnership,  97 
of  directors  and  shareholders,  545 

under  Companies  clauses  act,  556 

under  Companies  act,  1862,  p.  564 
resolution  of,  545 

stamp  on,  552 

making  calls,  630 

1508 


GENEEAL   INDEX.  1171 

^SlEETmGS— continued. 
notices  of,  545 

ordinaiy  and  extraordinaiy,  546 
voting  at,  54S 

by  proxies,  549 
minutes  of,  550.    See  Minutes 
g'eneral  and  special,  546 
irregularly  convened  may  be  valid,  829    ' 
adjourned,  546 

majorities  at,  548.    See  Majority 
absentees  from,  550 

first  general,  w^hen  to  be  held,  560,  564 
See,  also,  Companies;  Directors;  Shareholders 

MEMBERS 

of  companies.    See  Contributories;  Shareholders 

not  its  agents,  243 

definition  of,  170 

';  for  time  being,"  531,  532 

list  of,  see  Register  of  Shareholders 
of  partnerships.    See  Firm;  Partners 

MEMORANDA 

evidence  of  partnership,  97 

MEMORANDUM 

of  association,  168 

effect  of  signature  of  by  an  infant,  82 
when  not  members,  170 
allottee  of  shares  should  ascertain  contents  of,  112 
governs  the  articles  if  inconsistent  with  it,  169 

MERCANTILE  LAW  AMENDMENT  ACT, 
as  to  sureties,  214j 
as  regards  Statutes  of  Limitation,  458,  459 

MERCHANTS'    ACCOUNTS, 

provisions  of  Statutes  of  Limitation  as  to,  454,  et  seq. 
See  also.  Accounts 

MERGER 

of  legal  and  equitable  estates,  450 

of  debts  and  securities,  450,  et  seq. 

by  judgment,  451,  452 

bills  of  exchange  create  no,  450 

of  joint  and  several  obligations,  451 

effect  of.  on  securities  for  further  advances,  452 

as  to  joint  bonds  given  for  joint  and  several  debts,  452 

effect  of,  on  creditor  petitioning  for  an  adjudication  of  bankruptcy,  452 

MILITARY  OFFICERS, 
hability  of,  57 

MINES, 

partnership  in  mining  adventure,  88 

mining  partnerships  in  California,  1086 

verbal  agreements  as  to,  89 

devisees  of,  how  far  partners,  652,  653 

appointment  of  receiver  and  manager  of,  62,  1013 

as  against  mortgagee,  1013 
account  of  profits  of,  951 

by  assignee  or  mortgagee  of  share,  946 

without  dissolution,  951 
laches  a  bar  to  relief  concerning,  906 

1509 


1172  GENERAL   INDEX. 

MINES — continued. 

part  owners  of,  not  partners,  61 
transfer  of  shares  in,  62 
actions  for  supplies  to,  147,  note  (/) 
shares  in,  when  real  estate,  674 
sale  of,  on  dissolution,  1015,  1017 
cost-book,  146 
See  Cost-Book  Mining  Company 

MINING  COMPANY, 

not  bound  by  biUs  of  its  directors,  267 
shares  in,  not  within  Mortmain  acts,  674 
not  within  Statute  of  Frauds,  674 
See  Mines;  Cost-Book  Mining  Company;  Joint  Stock  Companies  in 
THE  U.  S. 

MINING  CUSTOMS 

not  judicially  noticed,  148 
See  Cost-Book  Mining  Company 

MINORITY, 

effect  on,  by  majority  adopting  a  fraud,  901,  902 
always  entitled  to  be  heard,  600 
action  in  name  of  company  by,  899 
when  bound  by  majority,  603,  895  et  seq. 
when  not,  600 

actions  by,  and  against,  895,  et  seq. 
See,  also.  Majority 

MINUTES 

of  meetings,  effect  of,'  as  evidence,  550 

under  companies  act,  1862  p.  567  y 

proper  mode  of  signing,  551 
right  to  inspect  books  does  not  extend  to  directors'  minutes,  809 

MISAPPLICATION  OF  MONEY, 

injunction  to  restrain,  901,  1001.     See  Injunction 
by  one  partner,  liability  of  firm  for,  302,  et  seq. 

MISCHIEF 

iUegaUty  of  companies  tending  to,  193 

MISCONDUCT, 

loss  of  right  to  contribution  by,  755,  756,  770 

a  bar  to  mj  unction  at  the  instance  of  the  guilty  party,  998 

of  partner,  a  ground  for  dissolution,  227 

not  at  has  instance,  229 

degree  of,  228 

with  a  view  to  compel  co-partners  to  dissolve,  229,  744,  950 

injunction  in  cases  of,  998 

receiver  in  cases  of,  1010 

apportionment  of  premium  in  cases  of,  74,  75 

See,  also,  Directors;  Injunction;  Receiver 

MISJOINDER  OF  PARTIES.    See  Action;  Parties 

MISNOMER.    See  Mistake 

MISREPRESENTATIONS, 

actions  for,  923  et  seq.,  926 
what  wiU  support,  924 
must  be  material,  924 

have  been  relied  on,  924 
known  to  party  making  it,  924 
liability  of  company  for,  317  et  seq. 
partners  for,  314 

1510 


GENERAL    INDEX.  1173 

MISREPRESENTATIONS— co«//»;^?fZ. 
actions  against  directors  for,  324 
rescission  of  contract  for,  02.'3,  927 
as  to  nature  of  business,  316 

See,  also,  Fkaud  ;  Liability;  Rescission  of  Contract 
MISTAKE, 

re-opening  accounts  for,  968 

in  registers.     See  Registers 

in  name  of  firm,  consequences  of,  as  regards  bills  of  exchange,  &c.,  345 

of  directors  as  to  their  authority,  367 

See,  also,  Foumalities  ;  Irregulakities 
MONEY, 

had  and  received,  action  for,  would  not  lie  by  one  co-owner  against  anoth- 
er, 65,  note  (k) 

against  corporation  for,  352.  note  (/) 
lent,  action  by  one  partner  against  another  for,  1030.     See  Action 
power  to  borrow,  2(59 

effect  of  having  had  the  benefit  of,  272,  329,  note  (2),  361  et  sea. 
naisapplication  of, 

by  one  partner,  liability  of  finn  for,  302 

injunction  to  restrain,  901,  1001.    See  Injunction 
trust,  following,  313 
employment  of,  in  partnership  business.   See  Breach  of  Trust;  Liability 

MONSTER, 

partnership  for  exhibiting,  181 

MORTGAGE, 

by  one  partner  of  his  interest  not  2^^  se  a  dissolution,  230 

equitable,  may  be  created  or  extended  by  pai'ol,  215 

by  one  partner  on  behalf  of  firm,  284 

effect  of  change  of  firm,  214 

by  companies,  286.    See  Debentures 

of  future  debts,  271 

uncalled  capital,  271 
of  share,  effect  of,  on  qualification  of  mortgagor,  544 

MORTGAGEE, 

of  partner,  right  of  to  account,  946 

partner's  lien  prevails  against,  698,  699 
of  mine,  appointment  of  receiver  against  partner  who  is,  1013 
of  company  governed  by  7  Geo.  4,  c.  64,  rights  of,  against  shareholdei-s,  533 
of  share,  position  of,  664 

liability  of,  to  be  made  a  contributory,  287 

right  to  accomit,  946 

MORTMAIN  ACTS. 

shares  not  within,  673 
railway  debenture  not  within 

MULTIFARIOUS, 

one  action  for  the  administration  of  the  estates  of  several  partners,   not 
necessarily,  1059 

MUTUAL  CREDIT,  503 
See  Set-ofp 

MUTUAL  INSURANCE  COMPANIES 
when  not  partnerships,  57 

not  associations  for  purpose  of  gain,  166,  note  (.r) 
manager  of,  cannot  sue  on  b  ■iialfof,  500,  note  (i),  875,  note  (j) 
policies  must  be  in  writing,  87,  note  (n),  1S8 
may  be  stamped  after  execution,  87,  note  (a),  188 

1511 


1174  GENERAL   INDEX. 

NAME 

on  doors,  bills,  &c.,  evidence  of  partnership,  97 

of  registered  company,  changing,  164,  177 

incoi-porated  company  must  sue  and  be  sued  in  its,  492 

of  corporation,  assuming,  192,  note  {1} 

"  limited,"  when  to  be  added  to,  384 

carrying  on  busmess  under  name  not  one's  own  not  illegal,  181 

eftect  of  not  preventing  use  of,  410 

of  firm,  208 

adoption  of  an  express  firm  name,  unnecessary,  208 

use  of  an  assumed  corporate  name,  208 

may  be  used  in  actions,  207,  468,  876.     See  Actions 
against  companies  where  no  public  ofticer,  498 
judgment  may  be  entered  up  in,  515 

how  execution  issues,  where,  516 
a  trade-mark,  210,  and  note  («) 
part  of  good-will,  861 
right  to  use  after  sale  of  business,  &c.,  862 
right  to  use  after  dissolution,  859 
agreements  as  to,  832 

contracts  in,  who  should  sue  on,  475  et  seq. 

what  names  may  be  used  prior  to  the  adoption  of  a  firm  name,  266 
several  finns  with  same,  341 
bills  of  exchange  in, 

liability  of  firm  on,  340  et  seq, 
effect  of  mistake  in,  345 

when  unimportant,  346 
of  changing,  345 
effect  of  use  of  wrong  name,  345 
liability  of  person  using  wrong  name,  345 
same  as  that  of  individual,  consequence  of,  342,  855 
partner  has  no  authority  to  bind  the  firm  by  a  name  not  its  own,  344 
injunction  to  restrain  use  of,  granted,  410,  note  (x) 
refused,  210 
NAMES 

Copyright  acts  do  not  apply  to,  211,  note  [a) 

NAVIGATION  LAWS, 

breach  of,  when  no  defense  to  action  for  account,  203 

NECESSITY, 

the  limit  of  each  partner's  implied  authority  to  act  for  firm,  238 
extraordinary,  power  of  partner  in  case  of,  238 
tested  by  nature  of  partnership  business,  239 

NEGLIGENCE, 

loss  of  right  to  contribution  by,  783 
of  servants,  liability  for,  299 

NEGOTIABLE  INSTRUMENTS, 

See  Bills  op  Exchange;  Pkomissory  Notes 

NEGOTIORUM  GESTOR,  757,  note  (r) 

NET  PROFITS 

and  gross  profits,  distinction  between,  16 
See  Profits 

NEW  PARTNER, 

agreement  as  to  introduction  of,  851 
efi'ect  of  introduction  of,  on  retired  paiiner's  liability,  444 
See  Incoming  Partner 

NEW  RIVER  SHARES 

are  real  estate,  673  note  (h) 

1512 


GENERAL    INDEX.  1175 

NEW  SECURITY 

tuken  by  crolitor  from  continnin<?  partners,  when  it  affects  his  rights 
against  retired  partner,  44U,  442,  449 

NEWSPAPERS.    See  Advertisement 

assignment  of  share  by  co-owner  of,  699,  note  (it) 
injunction  against  pnblisliing  news  in,  99">,  99G 
etiect  of  advertisements  of  dissolution  in,  415 

NEW  YORK, 

civil  code  of  definition  of  partnership  in,  2 

NEXT  OF  KIN.    Sec  Death;  Deceased  Partner;  E.xecutors;  Legatee 

NOMINAL  CAPITAL 
of  companies.  613 
See,  also.  Capital 

NOMINAL  PARTNER 

not  liable  to  creditors  to  whom  he  has  not  held  himself  out,  51 
when  to  sue  with  others,  478 

See,  also,  Holdikg-out;  Ostensible  Pautn  er;  Quasi-Paktnersiiip 

NOMINEE 

of  rival  company,  actions  by,  888 

NON-JOINDER, 

of  parties.    See  Action;  Parties 

NOTES, 

issue  of,  by  bankers,  185,  note 

loan,  270,  note  (/) 

promissory.     See  Pkomissory  Notes 

NOTICE 

of  assignment  of  debts,  shares,  etc.,  necessary  to  take  them  out  of  the  order 

and  disposition  of  their  assignor,  289 
to  one  partner,  when  notice  to  the  finn,  287 
to  companies,  what  is.  290 
to  director,  when  not  notice  to  company,  290 

when  implied  through  the  company's  books,  739,  note  {q) 
to  shareholders,  290 
to  solicitor,  290 

to  clerks  of  fraud  of  partner,  not  notice  to  the  firm,  289 
of  meetings,  545 

under  8  &  9  Vict.  c.  16,  p.  556.     See  Meetings 

under  Companies  act,  1862,  p.  565 
that  a  pei-son  who  holds  himself  out  as  a  partner  is  not  a  partner,  effect  of, 

48 
of  calls,  how  to  be  given,  632 

to  quit,  may  be  given  by  one  partner  on  behalf  of  firm,  481 
of  breach  of  trust,  effect  of,  312 
of  want  of  authority,  effect  of,  325,  327,  334 

of  partners,  325,  327,  376 

of  directors,  334 
of  fraud  on  firm,  effect  of,  327 
that  one  partner  will  not  be  bound  by  acts  of  co-partner,  effect  of,  325,  334, 

376 
of  provisions  of  companies'  deed,  &c.,  public  held  to  have,  252,  253 
by  applicants  for  shares  of  memorandum  of  association,  &c.,  112 
of  private  stipulations  of  partners,  fffeet  of  having,  ."^l,  376 
of  stipulations  of  partners  limiting  their  liability,  376 
determining  partner's  agency  by,  403 
to  dissolve  partnership,  220,  842,  843 

pai'tnersnip  at  will,  220 

1513 


1176  GENERAL    INDEX. 

'i^iOTlCE— continued. 

to  dissolve — continuea. 

under  articles,  842_,  843 
•when  one  partner  is  lunatic,  225,  843 
withdrawal  of,  222,  844 
of  dissolution  or  retirement 
necessity  of,  406,  408,  415 
when  not  necessary.  408 
in  case  of  death,  404 
in  case  of  bankruptcy,  405 

in  case  of  the  retirement  of  a  dormant  partner,  405 
stipulations  as  to.  844 
right  to  give,  408 
effect  of,  408 

where  there  is  a  continued  holding  out,  409 
as  regards  acts  necessary  to  wind  up  the  partnership,  411  et  seg. 
what  amounts  to,  220,  414  et  seq.,  844 
how  to  be  given,  414,  415 
of  forfeiture  of  share,  749,  note  (i) 

NOVATION,  485,  463  et  seq.    See  Substitution  of  Debtors 

NUDUM  PACTUM, 

sharing  profits,  not  losses,  not,  70 

abandoning  right  to  look  to  outgoing  partner  for  payment  of  a  debt  of  the 
firm,  438 

NUISANCES, 

companies  regarded  as,  6 

NULLA  BONA, 

retum  of,  to  writ  against  company,  where  not  sufficient  to  enable  creditor 
to  proceed  against  shareholder,  537 

NUMBER 

of  directors,  invalidity  of  acts  of  an  insufficient,  244 

rules  relating  to,  542 
of  persons  who  may  be  in  partnership,  76 

NURSERY  GROUNDS, 

conversion  of,  by  being  used  as  partnership  property,  653,  670 


OFFICIAL  APPOINTMENTS 

held  byafirn],  209 

held  by  one  partner,  when  partnership  assets,  651 
agreements  as  to,  833 

OFFICIAL  RETURNS, 

evidence  of  membership,  140 

OLD  CUSTOMERS, 

notice  of  dissolution,  how  to  be  given  to,  415 

OPPOSITION 

to  bill  in  Parliament,  agreements  to  withdraw,  398    et  seq. 

OPTION 

to  become  a  partner,  27 

position  of  person  who  has,  851 
as  regards  creditors,  27 
to  purchase  share  of  partner,  841 
when  to  be  declared,  842 
in  case  of  lunacy,  225  note  (./) 
provision  in  articles  as  to,  842 

1514 


GENERAL    INDEX.  1177 

OITIONAL  CLAUSES 

distinguished  from  imperative  and  directory  clauses,  824  et  seq. 

ORDER.    See  Charging  Order. 

ORDER  OF  DISCHARGE 
bars  all  calls,  641 

ORDINARY  AND  EXTRAORDINARY  MEETINGS,  546.    See  Meetings 

OSTENSIBLE  PARTNER, 

notice  of  retirement  of,  how  to  be  given,  415 

liability  of,  to  person  who  knows  he  has  no  interest  in  firm,  331,  333 
See  Holding  out  ;  Nominal  Partner  ;  Quasi-Partnepsuip 

OUTGOING  PARTNER, 

agreements  as  to  purchase  of  his  share,  &c.,  841,  842 
right  of  partner  to  retire  from  firm,  735 
See,  also.  Retired  Partner 

OUTLAWRY 

of  partner,  eiFect  of,  80,  230 

OUTLAYS  AND  ADVANCES, 

allowances  for,  777.    See,  also.  Advances  ;  Allowances  ;  Contribution 

useless,  765,  778 

useful  but  unauthorized,  778 

by  partner  on  account  of  debts  not  due,  778,  note  (t) 

on  separate  property  of  one  partner,  780 

no  allowance  for  expenses  unless  proved  to  have  been  incurred,  779 

loans  by  directors,  777,  779,  780 
lien  for.    See  Lien 

of  part  owners  for,  63,  67,  683 — 684  . 

PAID-UP 

capital  of  companies,  614.    See  Capital 

conversion  of  into  stock,  621 
shares, 

what  are,  614 

when  unpaid  have  been  issued  for  paid,  register  corrected,  173 

can  be  paid  up  not  in  cash  when,  614 

man-ied  woman  entitled  to  registration,  85 

issue  of,  when  a  breach  of  trust,  614 

companies  may  agree  to  pay  their  debts  in,  278, 

PARLIAMENT, 

injunctions  to  restrain  applications  to,  606,  607,  884,  1002 
application  to,  for  extended  powers,  280 

to  alter  constitution  of  company,  606,  607 
voting  for  members  of,  in  respect  of  shai'es,  673 
standing  orders  of,  154 
opposition  to  bill  in,  398  et  seq. 

PARLIAMENTARY  CONTRACT,  155 
effect  of  imdertaking  to  sign,  119 

PARLIAMENTARY  DEPOSIT, 
when  necessary,  155 

PARSONS, 

his  definition  of  partnership,  2. 

PARTICULAR  PARTNERSHIPS  ^ 
distingui.shed  from  general,  55 
shares  in,  presumptively  equal,  675  et  seq. 
See  Partnership 

1515 


1178  GENERAL    INDEX. 

PARTIES 

to  actions.    See  Abatejfent;  Actions 
between  partners,  877,    et  seq. 
for  an  account,  878 
plaintiff  in  actions  by  partners,  467 
defendant  in  actions  against  partners,  482,  483 

to  actions  by  and  agrainst  the  executors  of  a  deceased  partner,  878,  880 
in  chancery  division,  485 

necessity  of  making'  surviving  partners  parties,  878,  1068 
by  sub-partner,  878 
for  a  dissolution,  878,  et  seq. 

actions  by  some  on  behalf,  &c.,  468,  880 
^  representation  by  public  officer,  881,  891 

actions  not  seeking  dissolution,  882 
nor  division  of  assets,  883 
for  an  injunction,  880 

to  restrain  payment  of  dividends,  887 
of  calls,  887 
between  partners  and  thu-d  persons,  466,  et  seq. 
to  actions  against  partners  for  fraud,  486 
between  directors  and  shareholders,  882,  et  seq. 

to  rescind  contracts  tainted  with  fraud,  879,  927,  935 
any  shareholder  may  sue  to  restrain  an  illegal  act,  887 
to  restrain  directors,  &c.,  from  improper  acts,  883,  et  seq, 
by  some  on  behalf  of  themselves  and  others 
when  allowable,  468,  877,  880,  885,  889 
to  control  majorities  or  factious  minorities,  886,  901,  902 
identity  of  interest  requisite  in,  887 
plaintiffs  on  the  record  only  regarded,  890 
misjoinder  of  plaintiffs  in,  890 

company  to  be^a  defendant  in,  885  , 

frame  of  bills  by,  887 
where  plaintiff  has  bought  a  share  on  purpose  to  bring  an  action,  889 
between  public  officers  and  shareholders,  881,  891 
to  action  to  rescind  contracts  for  the  sale  and  purchase  of  shares,  879, 

927  et  seq. 
plaintiff  nommee  of  rival  company,  888 

when  trustee  in  bankruptcy  of  one  partner  a  necessary  party,  491 
no  action  defeated  for  misjoinder  or  non-joinder,  467 

PARTITION, 

not  decreed  instead  of  sale,  1015 

agreement  for,  on  dissolution,  meaning  of,  847 

PARTNERS, 

who  may  be.     See  Capacity  op.  Partners 

by  holding  out,  47  et  seq. 

promoters  of  companies  not,  31 

who  are  and  who  are  not.     See  Analysis  of  Contents,  Bk.  I.,  and  infra, 

Partnership 
liabilities  of,  to  creditors.     See  Analysis  of  Contents,  Bk.  II.  and  Bk. 

Bk.  IV.,  c.  1,  and  Liabilities 
mutual  rights  and  duties  of.     See  Analysis  of  Contents,  Bk.  III.   and 

IV.,  c.  1 
rights  and  liabilities  of,  in  the  event  of  a  dissolution.     See  Analysis  of 

Contents,  Bk.  IV.,  c.  1,  and  Bk.  II.,  c.  2,  §  3 
bankruptcy  of.     See  Bankruptcy 
deceased.    See  Deceased  Partners 
dormant.     See  Dormant  Partners 
incoming.     See  Incoming  Partners 
infant.    See  Infant  Partner 
lunatic.     See  Lunatic  and  Lunacy 
nommal.    See  Nominal  Partners 

1516 


GENERAL    INDEX.  1179 

FAUT'^ERS— continued. 

ostensible.     See  OsTEXstnLE  Partners 

outgoing.    See  Outgoing  and  Ketiued  Partner 

retired.     See  Retired  Partner 

special  agreements  between.     See  Articles  of  PARTNERsniP;  Implied 

Powers 
duties  of,  towards  each  other,  not  to  be  all  found  in  partnership  articlf^s,  817 
high  standard  of  honor  to  be  observed  by,  569.    See  Fraud;  Good  Faith; 

Honor 
actions  between,  1024.    See  Actions 
execution  against 

for  debt  of  fiiin,  515 
for  separate  debts,  687 
See  Execution 
property  of,  642,  et  seq.    See  Bk.  ITT,  c.  4,  and  Property 
right  of,  to  dissolve  partnership.    See  Bk.  I.  c.  8;  and  see  Dissolution 
lien  of,  680.    See  Lien 
shares  of.     See  Bk.  111.  c.  5,  and  Shares 
option  to  become,  29.     See  Option 
power  to  nominate,  28 
number  of,  limits  to,  76 
may  be  registered  as  shareholders  in  the  name  of,  208 

See,  also.  Partnership. 

PARTNERSHIP.    See  Quasi  Partnerships;   Suc-Partnerships;  General 
Partnerships;  Co-owners;  Illegal  Partnerships. 
meaning  of  the  term,  1 
definitions  of,  2 

distingaislied  from  corporations  and  companies,  4 
distinguished  from  contracts  of  loan,  22,  23,  45  et  seq. 
different  sorts  of,  12  et  seq. 
what  constitutes,  1.5,  17  et  .teq. 
not  having  gain  for  their  object,  2,  3,  note  (o),  56 
contemplated  partnerships,  27 
history  of  law  of.  ct  .seq. 
contemplated,  26  et  seq. 
as  regards  third  persons,  33  et  seq.     See  Bk.  I.  c.  1,  §  2,  and  Quasi-Part- 

nehship 
in  profits  not  necessarily  a  partnership  in  the  assets  by  which  they  are  made, 

20,  notes 
what  constitutes  a,  15  et  seq.,  45  et  seq.     See  Bk.  I.  c.  1 

in  profits  only,  19-24 

evidence  of.     See  Bk.  T.  c.  4,  87  et  seq. 
who  may  enter  into,  76.     See  Capacity 
consideration  for,  70.     See  Consideration 
general  nature  of,  206  et  seq.     See  Bk.  I.  c.  7 
prospective,  26  et  seq. 

principles  of  agency  as  applied  to,  236.    See  Implied  Powers 
capitals  of,  610.     See  Capital  i 

commencement  of,  29 

duration  of,  218.    See  Bk.  I.  c.  8.     Sec  Duartion  of  Partnership 
dissolution  of.     See  Bk.  I.  c.  8,  and  Dissolution 
transfer  of  share  in,  697.     See  Transfer  op  Shares 
retirement  of  partnei-s  from.  736 
expulsion  of  partner  from,  744 
at  will  and  for  a  term,  218  • 

articles,  817  et  seq.    See  Articles  op  Partnership 
property  of,  642  et  seq.     See  Bk.  III.  c.  4,  and  Property 

nature  of  partners'  interest  in,  660.     See  Share 
general  and  particular.  55 

in  particular  transactions,  presumption  of  equality  of  shares  in,  675  et  seq. 
management  of  affairs  of,  540. 
accounts,  800  et  seq.    See  Accounts. 

ir.iT 


1180  GENERAL   INDEX. 

PARTNERSHIP -coMfn?He(Z. 

conta-acts  of.     See  Contracts 

rescission  of,  879,  927  et  seq. 

specific  performance  of,  914.     See  Specific  Perpormancb 
actions  on.    See  Actions 
agreements  for  deed  of,  830.    See  Agreement 
illegal,  180—205.     See  Bk.  T.  c.  6 

partnerships  with  common  partners.    See  Connected  Firms 
sub-partnership,  54 
compared  with  co-ownership,  58 
premiums  paid  for,  71.    See  Premiums 
books  of.     See  Books 
induced  by  fraud,  927.    See  Fraud 

PART  OWNERS, 

not  partners,  58  et  seq. 

lien  of,  63,  66,  683 

not  each  other's  agents,  236,  note  (a) 

PART  PAYMENT, 

effect  of,  as  regards  Statute  of  Limitations,  456 

PART  PERFORMANCE 

of  contracts  not  under  seal,  354 

excludes  operation  of  the  Statute  of  Frauds  on  partnership  contract,  87, 

PAST  MEMBERS.    See  Retired  Shareholdes 
liability  of,  to  creditors,  461 

on  winding  up  of  cost-book  mine,  147 
persons  whose  shares  have  been  forfeited  liable  as,  751   note  {ti) 

PATENT, 

agreements  as  to,  833 

liability  of  company  for  infringement  of,  by  its  servants,  300 

illegal  partnerships  in,  189 

co-owners  of,  68 

PAUPER, 

transfer  to,  when  valid,  701 

PAWNBROKERS, 

illegal  partnerships  between,  189 

PAYMENT    See  Appropriation  of  Payments 

into  Court,  when  ordered,  960 

into  Court,  evidence  of  partnership,  98 

when  a  defense  to  an  action  for  an  account,  971 

mandamus  to  compel,  1037 

by  one  partner 

when  not  allowed  as  against  the  finn,  783 

effect  of,  as  regards  the  Statute  of  Limitations,  456,  457 

of  his  private  debt  with  partnership  funds,  277,  295 

to  one  partner,  275 

of  debt  not  due  to  firm,  276 

to  surviving  partner  discharges  payer,  665  note  [e) 

receipt  for,  not  conclusive  evidence  of,  276 

by  taking  bill,  277 

to  agent  by  bill  dra%vn  in  his  name,  277 

termination  of  liability  by,  418 

imputation  of,  418  et  seq.    See  Appropriation  of  Payments 

of  dividends,  790  et  seq.     See  Dividends 

by  Paymaster-General  to  one  partner,  276.  note  [g) 

in  paid-up  shares  by  company,  278 

to  one  of  several  trustees  no  discharge,  411  note  (c) 

by  receiver,  967 

1518 


GENERAL   INDEX.  1181 

PENALTIES. 

reservation  of,  in  pai-tncrship  articles,  871 
action  between  partners  for  recovery  of,  1026 
power  of  one  partner  to  bind  firm  in,  290 
prohibitions  under,  184 

PERSONAL  ESTATE, 

partnership  realty  when  treated  as  personalty,  667 

when  not,  672 
shares  are,  667,  673 

PERSONAL  SERVICES, 

partner  cannot  charge  for,  774 

PERSONS 

capable  of,  being  partners,  76 
their  number,  76 
their  capacity,  77 

PETITION 

to  reduce  capital,  619 

PHYSICIANS, 

partnership  between  unqualified,  188 

PLEADINGS.    See  Actions;  Parties 
in  actions  for  calls,  10;i3 
how  partnership  should  be  alleged,  26 

PLEDGE 

of  partnership  goods  for  private  debt,  330 
power  of  one  partner  to  bind  firm  by,  284 

after  dissolution,  412,  413 

redemption  of,  285 

POLICIES  OF  INSURANCE, 

payable  out  of  funds  of  company,  381 

issued  irregularly,  company  when  bound  by,  255 

in  mutual  societies,  188,  note  (>«) 
married  woman  may  effect,  for  her  separate  use,  84 
action  on  policy  payable  out  of  funds  of  unincorporated  company,  382 
See,  also,  Marine  Insurance 

POLICY-HOLDER,  . 

position  of,  where  companies  amalgamate,  o81,  463 
cases  where  the  company  was  discharged  by,  463 

where  not,  464 
not  a  creditor,  463 

action  on  policy  payable  out  of  funds  of  company,  382 
lights  of,  gone  after  valid  transfer,  465 
power  of,  to  prevent  transfer  of  company's  assets,  380,  381 

POLL, 

right  of  shareholder  to  demand,  549 

POOR  LAW  GUARDIANS 

not  bound  by  unsealed  agreement,  354 

POTHIER,  .     „ 

his  definitions  of  partnership,  3 

POWERS  .        .      .,       r  X       ^ 

conferred  by  ai-ticles  of  partnei-ship,  must  be  construed  with  reference  to  ob- 
ject of  firm,  818 
of  directors,  244.    See  Directors 

1519 


1182 


GENERAL    INDEX. 


POWEFiS— continued. 

of  majorities,  598.     See  Majorities 
of  partners,  236.     See  Implied  Powers 
of  expulsion,  744 

exercise  of,  820,  846 
to  nominate  partner,  28,  852 
to  forfeit  shares,  745.     See  Forfeiture 
of  attorney 

construction  of,  266,  and  see  Harper  v.  Godsell,  L.  R.  5  Q.  B.  422 

to  tranfer  shai'es,  effect  of  forgery  of,  801 
directors  are  trustees  of  their,  587  et  seq. 

PRACTICE.     See  Judicial  Proceedings 
of  partners,  importance  of,  822 1 
of  company,  importance  of,  822 

PRECEDENTS 

of  decrees  for  account,  972 

PRE-EMPTION, 

clauses  giving  rights  of,  842 

when  the  partnership  is  continued  after  expiration  of  the  term,  823 
note  [h) 

PREFERENCE  SHARES, 
nature  of,  662,  796 
injunction  to  restrain  issue  of,  1001 
rights  of  holders  of,  796 

entitled  to  priority  in  payment  of  capital  when,  797  note  {g) 
injunction  for  protection  of  holders  of,  901 
in  companies  governed  by  8  &  9  Vict.  c.  16,  p.  618 
when  companies  can  issue,  621 

PRELIMINARY  EXPENSES 
offorming  companies,  118 

liability  of  companies  for,  395 
where  company  abortive,  118 
return  of  deposits  paid  for,  120 

PREMIUMS 

payment  of  bonus  not  a  bar  to  a  dissoluticn,  221 
apportionment  of,  71,  75 

obtained  by  directors  at  the  expense  of  companies,  587  et  seq. 
recovery  back  of,  71  et  seq.,  221 
in  cases  of  fraud,  71 
where  consideration  has  failed,  72 
where  partnership  ceases  sooner  than  was  expected,  72 
in  event  of  banki-uptcy,  74 
lunacy,  74 
disagreements,  74 
misconduct,  75 

what  sufficient,  75 
where  neither  partner  is  to  blame,  72 
where  no  time  for  continuance  of  partnership  was  fixed,  73 
where  for  a  term,  73 
amount  to  be  returned,  75 

PREROGATIVE 

of  crown  as  regards  forfeited  shares,  661 

PRESENTS 

to  directors,  588 

PRESUMPTION 

of  equality  of  shares,  781,  794 

that  formalities  have  beonobserv"'^!.  ^'^.  '^'^.  r>^1 


GENERAL   INDEX.  11  S3 

PRICE 

to  be  charged  by  one  partner  in  account  with  firm,  576 

PRINCIPAL, 

one  partner  holding  himself  out  as,  479,  483 
not  bound  by  a  contract  known  to  be  fraudulent,  298 
See  Agency  and  Agent 

PRIVATE  STIPULATIONS 

of  partners,  effect  of  having  notice  of,  331,  332,  333 

PRIVITY  OF  CONTRACT 

between  vendor  and  purchaser  of  shares  on  the  Stock  Exchange,  726 
See  Sale  of  Shakes 

PROBATE  DUTY 

payable  in  respect  of  sh;  ra^,  1077 

when  bequeathed  for  Hie,  lo77,  1078 

PROCESS, 

service  of,  upon  partners,  473 

PRODUCTION  OF  BOOKS  AND  DOCUMENTS.    See  Books;  Inspection 
rules  as  to,  958 
mandamus  to  compel,  1037 
of  books  of  account,  809,  810 
directors  denying  possession.  958 
to  professional  accountants,  959 
in  constant  use,  959 
of  rival  company,  959  note  («) 
of  corporations,  959 

PROFITS,  . 

agreement  to  share,  see  Book  I.,  c.  1 
the  basis  of  a  partnership,  18 
without  sharing  losses,  19  ef  seq. 
in  lieu  of  salary,  19,  20,  787 
specific  performance  of,  916 
annuities  payable  out  of,  853 

when  no  profits  are  made,  853 
annuities  in  lieu  ol',  -Mi 
salaiy  varj-ing  with,  19,  29.  89,  787 
community  of,  a  test  of  partnership,  19  et  seq. 
liability  incurred  by  sharing.  3:5  ct  ftcq.,  1060  note  (f) 

origin  of  rule  that  those  who  share  profits  are  liable  to  losses,  34 
modern  alterations  in  the  above  rule, 

by  the  judgment  in  Cox  v.  Hickman,  38 
more  recent  decisions,  39  et  seq. 
act  of  28  and  29  Vict.  c.  86,  p.  43 
distinction  between  sharing, 
net  and  gross  profits,  15 
profits  and  gross  returns,  16,  36,  37 
profits  and  payments  varying  with  them,  37 
partnerships  in  profits,  19,  20,  21 

not  necessarily  a  partnership  in  the  assets  by  which  they  are  made, 
20  note  (//) 
division  of,  790 

whilst  debts  are  unpaid,  598,  599 
payment  of,  out  of  capital,  792 
what  divisiblt^  as,  791 
altering  principles  of  division  of,  604 
exclusion  of  partner  from  shares  of,  794 

derived  by  use  of  partn(n-ship  property  belonging  to  firm,  must  be  accounted 
for  to  the  firm,  571  ct  acq. 

»  1521 


1184:  GENERAL   INDEX. 

TROYYTS— continued. 

derived  by  directors  %  upp  of  companies'  assets  must  be  accounted    for,  538 
of  sale  or  issue  of  shares  when,  588,  589 
of  bonuses  and  commissions  on  sales,  589,  590 
by  transacting  business,    591 
directors'  liability  for,  when  joint  and  several,  and  when  several,  595 
partner  not  entitled  to  derive  profit  at  expense  of  firm,  571  et  seq. 
account  of,  805.     See  Account 

since  dissolution,  85?.,  976,  1070  et  seq. 
where  the  capital  is  lent  at  interest,  976 
where  the  traders  are  not  trustees,  977 
where  they  are  trustees,  978 
where  some  of  the  traders  are  trustees,  978 
liability  of   trustee  sharing^  profits,  978 

not  sharing  profits,  979 
liability  of  partners,  not  trustees,  979 
rights  of  legatee  against  executors  who  are  surviving  partners,  983, 

985,  989 _ 
may  take  interest  at  5  per  cent  or  profits,  986 
when  share  of  deceased  partner  is  not  got  in,  976 
co-owners  sharing.  24.  25 
servant  paid  by  share  of  rights  of,  787 
if  not  drawn  do  not  necessarily  bear  interest,  787 
See  also,  Dividends;  Losses 

PROHIBITORY  CLAUSES 

in  articles  of  partnership,  837,  838 

PROJECTORS 

of  company  making  profit  out  of  it,  580  et  seq. 
See  Pkomoteks 

PROMISE 

by  one  partner  to  pay  debt,  278,  456 

effect  of,  as  regards  the  Statute  of  Limitations,  456,  457 
to  one  partner  to  pay  debt,  278  note  (x) 
by  creditor  to  discharge  retired  partner,  438 
to  pay  out  of  certain  funds  only,  effect  of,  377 
by  one  partner  to  provide  for  bill  of  exchange,  282 

PROMISSORY  NOTES, 

liability  of  partners  on,  340,  348 

when  given  after  dissolution,  408,  440,  441 
effect  of  form  of,  331,  336  et  scq.,'d\8. 

power  of  one  partner  to  bind  firm  by,  266.     See  Implied  Powers 
power  of  directors  to  bind  company  by,  350 
authority  to  transfer,  268 
joint  and  several  liability,  on,  348 
action  on 

by  one  partner  against  another,  1027 

by  partners,  476 
injunction  to  restrain  negotiation  of,  997  note  {g) 
issue  of,  by  bankers,  186 
instruments  held  to  be,  348  et  seq. 
how  to  be  made  by  companies,  360 

given  by  continuing  partner,  when  binding  on  retired  partner,  407 
do  not  merge  debt,  450 
See  Bills  of  Exchange 

PROMOTERS  OF  COMPANY 

actions  between,  1021 

against  for  recovery  of  deposits,  120,  953,  1019 

1522 


GENERAL   INDEX.  1185 

PROMOTERS  OF  COMPANY 
not  partners,  31 

not  impliedly  liable  to  each  other  for  services,  32  note  (k) 
observations  on  liabilities  of,  54 

liability  of,  for  acts  done  before  they  become  promoters,  390 
personally  bable  on  contracts  entered  into  for  companies  not  formed,  3G8 
liability  of  companies  for  acts  of,  3G8,  394,  895 

subscribers  for  iR-ts  of,  241 
specific  performance  of  afrreeraents  between  them  and  companies  not  de- 

creed  if  tainted  with  want  of  good  faith,  586 
liability  of,  for  each  others'  acts,  54 
not  each  other's  agents,  241 

effect  of  admission  by  one  as  against  the  others,  96  note  (m) 
not  entitled  to  profit  at  the  expense  of  the  company,  580  et  sea. 
sales  by,  to  companies,  when  not  valid,  581  et  sea. 
contribution  between,  1022 

contracts  with,  must  be  referred  to  in  prospectus,  115 
who  are,  withm  §  38  of  the  Companies'  Act,  1867,  p.  116  ' 

PROOF.    See  Evidence 

of  partnership,  87  et  seq. 

PROOF  OF  DEBTS 

agamst  bankrupt  partner,  does  not  preclude  creditor  from  having  recourse 

to  the  estate  of  deceased  partner,  446,  1058 
on  administration  of  estate  of  deceased  pai-tner,  1053,  1055 
by  secured  creditors,  1057 

PROPERTY 

of  partners,  642 
joint  estate,  643 

property  paid  for  by  the  firm,  643 

where  not,  645 
secret  benefits  obtained  by  one  partner,  645 
ships,  644 
good  will,  647 

money  paid  to  one  partner  for  his  exclusive  benefit,  645 
property  acquired  after  dissolution,  646 
nature  of  partners'  interest  in,  660.     See  Sh.\ke3 
devolution  of,  in  case  of  death  of  partner,  664.    See  Death 
to  what  extent  personal  estate,  667 
separate  estate,  648 

that  which  produces  partnership  profits  may  belong  to  one  partner 

only,  648 
property  used  for  partnership  purposes  not  necessarily  partnerehip 

property,  648 
property  bought  with  the  money  of  the  firm,  643,  649 
agreement  of  partnere  the  true  test,  649 
appointments,  651 
stock  in  trade,  649 
furniture,  649 
lease,  650 

houses  built  on  partnership  property,  650 
lands  farmed  in  common.  6o2 

joint-tenants  partners  in  profits,  652 
devisees  of  a  trade  and  of  hmd  for  the  purpose  of  canying  it  on. 

653 
devisees  of  mines,  653 
land  acquired  for  the  purposes  of  trade.  653 
conversion  of  joint  estate  into  separate  estate,  and  vice  versiS,  654  d 
seq. 

agreement  of  partners  sufficient,  654 
dealings  between  one  partner  and  the  firm,  655 

1523 


1186  GENERAL   INDEX. 

VROVEHTY— continued. 

of  partners — continued. 

change  of  property  on  change  in  firm,  656 
agreement  for,  must  be  executed,  657 
effect  of  fraud,  658 
belonging  to  firm,  profits  derived  by  use  of,  must  be  accounted  for  to 

the  firm,  576 
sharing  produce  of,  36,  37 
sale  of,  on  dissolution,  847 

actions  between  partners  relative  to.     See  Actions 
of  the  firm,'  agreements  as  to.  832 
lien  on.     See  Lien 
use  of,  evidence  of  partnership,  98 
of  company, 

what  is,  643,  647 

fund  to  guarantee  dividends  is,  797 

PROSPECTIVE 
calls,  680 
partnerships,  831 

PROSPECTUS 

of  companies,  nature  and  effect  of,  100 

basis  of  agreement  to  take  shares,  100, 106  et  seq.,  938  et  seq. 
mis-statements  in,  effect  of,  935  et  seq.     See  Fkaud 
exaggerated  statements  in,  939,  940 
fraud  must  be  clearly  proved,  940 
■waiver  of  right  to  rescind,  924 
Avhere  plaintiff*  might  have  learned  truth,  929 
fraudulent,  115,  935 

when  to  be  deemed  to  be  under  Companies'  Act,  1867,  p.  115 
company  not  liable  for,  323 
■what  contracts  must  be  noticed  in,  115 
not  adhered  to,  106 
notice  of  departure  from,  112 
effect  of  changing  scheme  as  set  out  in,  106  et  seq, 
departure  from,  sanctioned,  109 
PROTEST, 

effect  of,  as  regards  laches,  907 

PROVIDENT  SOCIETY,  1489 
how  sued,  495  note  (fe) 

PROVISIONAL  COMMITTEE  MEN,    See  Promoters 

liability  of,  for  each  other's  acts,  241 

for  acts  done  before  they  became  such,  890 

PROVISIONAL  REGISTRATION,  178 

PROXY, 

voting  by,  549 

under  Companies  act,  1862,  566 
an  act  of  membership,  131 

PRUSSIAN  CODE, 

definition  of  partnership  in,  3 

PUBLIC, 

mode  of  giving  notice  of  dissolution  to,  408,  414,  415  , 

bound  to  take  notice  of  the  powers  of  directors,  252 

memorandum  of  articles  of  association,  112 
See  Notice 
PUBLIC  COMPANIES, 
what  are,  14,  695 

1524 


GENERAL   INDEX.  1187 

PUBLIC  OFFICERS.  495  et  seq. 
Jtppointment  of, 

under  7  Geo.  4,  c.  46,  pp.  499,  874,  891 

under  7  Will.  4  &  1  Vict.  c.  73,  p.  500 
actions  by  and  a^'^ainst,  495  et  seq.,  891 

when  they  must  sue  and  be  sued,  495  et  seq. 

on  bills  and  notes,  496 

foi^libel,  497 

by  person  assuming  to  be,  498 

when  empowered  to  sue  by  colonial  legislature,   154  note  (o),  495, 
note  (c) 

cannot  petition  for  bankruptcy,  496 

actions  bv,  against  shareholders,  873,  874 

for  calls,  892  note  (e) 
affidavits  by  form  of,  499 
actions  by  and  against,  495  et  fieq.,  881,  891 

against  by  shareholders,  891 

fordissolution.881,  891 
of  banking  companies, 

actions  by  and  against,  495  et  seq.,  873 

powers  of,  497 
of  industrial  and  provident  societies,  495  note  (6) 
execution  against,  531 

entitled  to  indemnity  from  shareholders,  782 
mandamus  to  compel  appointment  of,  1037 
change  of,  effect  of  on  pending  action,  498 
bankruptcy  of,  effect  of,  499 
may  be  interrogated,  500 
where  none,  company  may  be  sued  by  its  name,  498 

PUBLIC  POLICY, 

partnerships  opposed  to,  181 

PUBLISHER  AND  AUTHOR,  21.    See  Author  and  Publisher 

PUFFENDORF, 

his  definition  of  partnership,  3 

PURCASER 

of  shares  in  companies, 

when  a  shareliolder,  126 

must  indemnify  seller,  713,  725  et  seq 

action  by,  against  seller,  718 
seller  against,  719 

damages  recoverable  against,  719 

in  company  being  wound  up,  709 

eifect  of  fraud  on,  716 

position  of,  when  transfer  is  in  blank,  705,  706,  719 

when  transfer  is  forged,  707 

when  transfer  is  comjilete,  708 

through  broker,  bound  to  indemnify  him,  731 

duty  of,  to  seller,  713 

rights  of,  against  company,  708 
against  seller,  726,  727 

liability  of,  to  be  made  a  contributory,  709 
of  share  of  partner  sold  under  a  ft.  fa.,  661,  690.     See  Execution 
of  business  of  companies,  295 
See,  also.  Sale  of  Suaijes 

PURCHASES  OF  GOODS 

by  one  partner  for  finn,  290 

for  re-sale  and  division  of  produce,  60 

1525 


1188  GENERAL   INDEX. 

PURSER 

in  cost-book  companies,  147 
can  sue  for  calls,  148  note  (g) 
actions  by  and  against,  495 
See  Cost- Book  Mining  Companies 


QUALIFICATIONS 
of  directors,  543 

liability  to  account  for,  590 

QUARRELS, 

dissolution  in  case  of,  228 

inferred  from,  222 
injunction  in  cases  of,  998 

QUARRIES, 

who  are  partners  in,  61 

QUARRY  WORKERS, 

one  of  a  firm  of,  has  no  power  to  bind  others  by  bills,  267 

QUASI-PARTNERSHIPS,  33,  54 
meaning  of,  17 
evidence  of,  91  et  seq. 
by  sharing  profits,  33 

distinction  between  sharing  profits  and  gross  returns,  36, 37 
distinction  between  sharing  profits  and  payments  varying  vrfth   them, 

37 
recent  alterations  in  law  as  to,  38    et  seq. 
by  holding  oneself  out  as  a  partner,  47  et  seq. 
eftect  of  doctrine  on  deceased  partners,  1060 
effect  of  knowledge  that  a  person  who  holds  himself  out  as  a  partner  is 

not  a  partner,  48 
effect  of  fraud,  49 
what  constitutes  a  holding  out,  49 
where  name  is  concealed,  49 
holding  out  must  be  to  the  plaintiff,  50,  51 
authority  to  hold  out,  50,  52 
holding  out  by  sumvmg  partner,  52 
application  of  doctrine  to  inchoate  partnerships,  52 
holding-out,  a  question  of  fact,  52 
See,  also,  Holding-out 

QUIT, 

notice  to.  given  by  one  partner,  1024 
on  behalf  of  firm,  481 

QUORUM, 

vahdity  of  acts  not  done  by  a,  246,  829 
of  directors,  542 


RACE-HORSE, 

co-owners  of,  not  partners,  25 

RAILWAY, 

injunction  to  restrain  making  part  of,  1001 

injunction  to  restrain  making  of  unauthorized,  604,  605,  1001 

RAILWAY  COMPANIES, 

habilities  of,  for  acts  of  promoters,  390,  395 

rolling  stock  of,  protected  from  execution,  518,  note  {q) 

embarking  in  coal  trade,  605 

1526 


GENERAL   INDEX-  1189 

RAILWAY  COMPANIES— fon<in«erf. 

shares  in,  not  within  Mortmain  acts,  674 

Statute  of  Frauds,  674 
See  Companies  Governed  by  8  &  9  Vict.  c.  16 

RATIFICATION, 

by  a  firm  of  the  act  of  a  partner,  what  amounts  to,  259,  262 

knowledge  essential  to,  2(50,  289 

of  cliange  of  scheme  of  company,  109,  et  seq. 

by  companies  of  acts  of  directors,  258 

when  valid,  though  not  under  seal,  262,  263 

of  contract  not  under  seal,  355 
by  directors,  261 

when  a  ratification  by  company,  259,  260 

when  not,  261 
in  cases  of  fraud,  261 
by  firm,  of  guarantee,  281 
by  partners,  effect  of  in  settling  accounts,  784 
by  infant,  82,  1356,  et  seq. 
of  past  acts  not  equivalent  to  authority  for  future,  261 

READINESS  AND  WILLINGNESS 
to  transfer  shares  sold,  718 

REAL  ESTATE, 

actions  between  partners  relating  to,  1023 

of  ^rm,  devolution  of,  in  case  of  death  of  partner,  664 

treated  as  personalty,  667 

shares  not,  673,  674 

when  partnership  property,  644,  651,  652 

RECEIPTS 

of  one  partner,  when  binding  on  finn.  276,  303,  472 

not  conclusive  evidence  of  payment,  276 

by  surviving  partner  dischaiges  debtor  to  firm,  665,  note  («) 

RECEIVER, 

object  of  having  a,  1005 

cannot  carry  on  business  unless  appointed  manager,  1005 

when  appointed,  1005 

in  actions  not  seeking  a  dissolution,  1005 
receiver  and  manager,  1005,  1006,  note  (?) 
defendant  entitled  to,  before  decree,  1010 
not  refused  because  no  dissolution  is  prayed,  1006 

difference  between  granting  an  injunction  and  appointing  a  receiver,  1007 
appointment  of,  operates  as  an  injmiction,  'J94 
ettV'ct  of  payment  by,  on  Statute  of  Limitations,  967 
delivery  of  partnership  books  to,  1014 
refused,  though  an  injunction  is  granted,  1007,  note  (o),  1010 

on  ground  of  laches,  907 
against  creditor  of  solvent  partner  at  suit  of  trustee  in  bankruptcy,  1009 
executors,  1009 
partners,  1008 
non-partners,  1008 

surviving  partner,  1009  note  {t),  1010 
a  mortgagee,  1013 
influence  of  the  number  of  partners  on  the  appointment  of,  1009 
grounds  for  the  appointment  of,  against  a  partner,  1010 
agreemont,  lolO 
misconduct,  1010 
fraud.  1011 
exclusion  of  co-partner.  1012 

where  partner  excluded  is  also  a  mortgagee,  101  3 

1527 


1190  GENERAL    INDEX. 

RECElYETi— continued. 

grounds  for  the  appointinevt  of,  against  a  partner — continued.  • 

denial  of  partnership,   1012 

relying  on  illegality  of  partnership,  1012 

compensation  of,  1013 
of  mines,  62,  1013 
in  case  of  lunacy,  1013 
appointment  of  partner  to  be  receiver,  1013 
order  appointing  receiver,  1014 
interfering  with,  994,  1014 
right  of  arbitrator  to  appoint,  870 

appointment  of,  on  breach  of  agreement  as  to  getting  in  debts,  865 
action  by,  for  recovery  of  money  to  be  distributed  by  him,  1032,  note  (tw 

RECITALS 

in  releases,  importance  of,  434 
evidence  of  partnership,  98 

RECORD, 

suggestion  on.    See  Scire  Facias 

RECTIFYING 

register  of  shareholders.    See  Register  op  Shareholders 

REDEMPTION, 

implied  power  of  partner  to  redeem,  285 

REDUCTION  OF  CAPITAL,  558,  note  (o),  567,  619 

cannot  be  made  except  under  the  acts  1867  and  1877,  pp.  559,  619 

REFERENCE 

to  arbitration,  agreements  for,  868.     See  Arbitration 
action  on,  868,  note  {p) 

REGISTER  OF  SHAREHOLDERS, 

general  remarks  on,  138,  et  seq. 
evidence  of  clamis  to  be  on,  139 
correction  of,  142,  171.  1038 

in  case  of  cost-book  companies,  174,  175 
damages  for  exclusion  from,  174 
mandamus  to  compel  company  to 

remove  seal  from,  143 
produce,  522  note  {s),  1036,  1037 
correct,  142,  1037 
injunction  against  continuing  names  in,  142 
action  for  improper  exclusion  from,  or  insertion  in,  144, 145 
effect  of  sealing,  158 
effect  of  having  name  in 

estoppel  by,  141 

as  evidence  of  membership,  139 — 142 

as  regards  liability  to  creditors,  50 
share  ledger  is  not,  140 
right  of  company 

to  put  person  on,  127,  131,  145 

to  alter,  144 
right  of  married  woman  to  be  on,  85 
in  several  volumes,  158 
of  companies  governed  by  8  «fe  9  Vict.  c.  16,  pp.  155,  156 

effect  of,  156,  160 

mistakes  in,  157 

irregularities  in,  157 

not  conclusive;  158 

improper  entries  in,  159 

coiTecting,  160 

does  not  estop  company,  160 

1528 


GENEEAL    INDEX.  1191 

REGISTER  OF  SHAREHOLDERS— co«/i»!<ff?. 

of  companies  governed  by  Companies  act,  1862 
form  of,  171 
correction  of,  171  et  seq, 

without  an  order  173,  not«  (?i),  175 
inspection  of,  175 
of  cost-book  mines,  148 

REGISTERS, 

if  used  as  evidence  by  a  company  mnst  be  properly  kept,  140 
what  inaccuracies  in,  unimportant,  140,  157,  158 
entries  in,  when  evidence  of  partnership,  9:>,  98 
of  transfer  of  shares.     See  Ticanskkh  of  Sharks 
efiect  of  omitting  numbers  of  shares  from,  140,  158 
share  ledger  is  not,  140 

REGISTERED  COMPANIES, 
formation  of,  163 
change  of  name  of,  164 

See  Companies  Governed  by  the  Companies  Act,  1862 


REGISTRAR 

of  joint  stock  companies,  163 
certificate  of,  163 
mandamus  to,  163 


REGISTRATION 

of  companies  generally,  163  et  seq. 
etiect  of,  163,  164 
certificate  of,  163,  164,169 
under  same  names,  164 

when  necessary  with  reference  to  number  of  members,  166 
cancellation  of,  163,  164 
under  7  &  8  Vict.  c.  110,  p.  178 
under  19  &  20  Vict.  c.  47,  p.  179 
under  Companies  act,  1862,  p.  163  et  seq. 
when  compulsory,  165 
impossible,  166 
optional,  167 
with  limited  liability,  167,  169 
of  companies  formed  under  the  act,  167 
of  memorandum  and  articles  of  association,  168 
company  may  be  registered  although  members  are  foreigners  and 

the  business  abroad,  167 
of  companies  not  formed  under  act,  177 
of  existing  companies  as  "  limited,''  384 
consequence  of  non-registration,  196 
of  cost-book  companies,  149,  150 

of  shares,  138,  et  seq.     See  Rkg[ster  op  Shareholders 
of  mortgages  by  companies,  286,  note  (k) 
of  firm  as  shareholders,  208 

as  owners  of  company  right,  208 
guaranteed  etiect  of,  on  jobbers'  and  brokers'  liability,  725.    See  Sale  op 

Shares 
of  judgment  against  companies,  522 

REGULATIONS  OF  COMPANY, 

departure  from,  extent  to  which  creditors  are  affected  by,  136 

eftect  of  not  complying  with,  124  ef  seq. 

waiver  of  compliance  with,  136  et  seq. 

public  bound  to  notice,  252 

distinction  between  imperative  and  directory,  824-830 

1529 


^\g2  GENERAL   INDEX. 

RELEASE, 

setting  aside,  293  .,,■,■  i   oco  am 

must  be  set  aside  before  account  stated  is  re-opened,  959,  y7U 

a  defense  to  action  for  account,  971 

by  one  partner,  293 

of  one  partner,  effect  of,  438,  437 

effect  of  recitals  in,  434 

by  removing  seal,  434 

by  arrest,  434 

by  merger  of  securities,  450 

by  substitution  of  debtors,  435 

of  drawer  of  bill,  does  not  discharge  the  acceptor,  4d4 

in  form,  held  to  be  only  a  covenant  not  to  sue,  433 

evidence  of  partnership  by  a,  98 

RELIGIOUS  SOCIETIES,  .  .       ^  ^^ 
unincorporated,  liability  of,  57 

REMOVAL 

of  directors,  544 

of  seal,  release  by,  434 

REMUNERATION, 

for  services,  774 

alter  dissolution,  775 

RENEWAL  OF  LEASE  „ 

by  one  partner,  mures  to  benefat  ot  farm,  o  ii 

RENT 

action  for,  by  one  partner  against  another,  1028 
power  of  one  partner  to  distrain  for,  279 

REPORTS 

liability  of  company  for  fraudulent,  317  et  seq. 

when  not  imputable  to  company,  319  et  seq.    See  Fraud  ;  Prospectus 

when  not  libelous,  300 

REPRESENTATIONS  r      ^n,   o-,n     a     -c 

of  directors,  Uability  of  company  for,  294,  317.     bee  b  raud 

of  one  partner,  when  binding  On  firm,  314  et  seq. 

by  partner  that  debt  is  due,  effect  of.  on  liability  of  firm,  456 

by  one  partner  that  he  is  acting  for  himselt  alone,  effect  ot,  4bd 

by  one  partner  as  to  the  extent  of  his  authonty,  315,  o2b 

by  creditor  to  shareholder  that  he  would  incur  no  responsibility,  effect  Ot,  MU 

as  to  nature  of  business,  316 

REPUDIATION  ^   ^^^ 

of  partnership  induced  by  fraud,  92o  et  seq.  "> 

of  slicirGs 

where  scheme  has  been  changed.  111  et  seq.  > 

when  in  time,  113  ,,.   «ni     ^  ^ 

when  too  late,  104,  note  (e),  111  et  seq.,  114,  924  et  seq. 

by  infant,  81  ^ 

REPUTED  OWNERSHIP,  289 

RESCISSION  OF  CONTRACT 

of  ao-reement  for  a  partnership,  how  proved,  yj 
on  the  ground  of  fraud,  generally.  923  e^seg. 

ill  toto  or  not  at  all,  when,  587,  note  (r),  925,  942 
where  a  third  party  intervenes,  925 
not  for  every  fraud,  923,  924 

exaggerated  description,  939,  940    _ 

fraud  must  be  on  some  material  point,  yZ4,  \)6{ 

1530 


GENERAL   INDEX.  1193 

RESCISSION  OF  CO'STRXCT— continued 
not  for  every  fraud — continued. 

and  be  clearly  proved,  9-40 

and  have  been  relied  on  by  the  plaintiff,  924,  938  ef  seq. 

not  because  prospectus  fraudulent  within  §  38  of  Companiee  act, 

1S67,  p.  116 
prospectus  departed  from,  106  etseq. 

f)rospectus  not  relied  on,  9:59 
OSS  of  right  to  rescind.  111,  905,  924 
bad  bargains  not  set  aside  except  for  fraud,  930 
of  contracts  of  partnership  on  the  ground  of  fi-aud 
general  right  to,  927  et  seq. 

mstances  of  plaintiff  suing  for  dissolution  in  the  alternative  in  the  case  of 
ordinary  partners,  927 

subscribers  to  bubble  companies,  &c,,  935  et  seq. 
though  plaint iti"  might  have  ascertained  the  truth,  929 
of  contracts  for  the  sale  of  shares,  942.     See  Sale  of  Shaues 
of  severable  contract,  942 

of  bargains  between  outgoing  and  continuing  partners,  931 
of  bargains  between  surviving  partners  and  the  executors  of  a  deceased 

partner,  932 
on  failure  of  consideration.    See  Consideration 

company  abortive,  118 
by  infant,  81 
And  see  Fuaud  ;  Contract;  Prospectus;  Repudiation 

RESOLUTIONS 

of  meetings,  545 

special,  567 

making  calls,  630 

of  corporation  not  equivalent  to  sealed  contract,  352,  353 

RESTRAINING  ORDER 

under  5  Vict.  cap.  5,  p.  697 

RESTRAINT 

of  trade,  857 

RETAINER 

of  solicitors,  as  evidence  of  partnership,  92  note  (») 

by  surviving  partner  executor  of  deceased,   of  balance  due  on  the  partner- 
ship account,  935 

RETIRE, 

right  of  partner  to,  935 

shareholder  to,  736 

under  Companies  act,  1862,  p.  737 
when  power  to,  is  no  answer  to  dissentient  shareholders,  602 

RETIRED  PARTNER, 

actions  by  and  against,  488 
liability  of,  to  creditors,  438  et  seq. 

not  discharged  by  creditor  continuing  to  deal  with  remaining  partners, 

438 
where  new  partner  introdiiced,  441 

when  discharged  by  creditor  continuing  to  deal  with  remaining  part- 
ners, 436,  443 
by  fraud,  445 

by  payments  made  by  the  continuing  partners,  423,  446 
consideration  for  discharge,  438 
as  to  past  acts,  417 
for  acts  done  since  his  retirement,  403 

by  holding  out,  409 
when  no  att'ected  by  notice  given  to  others,  289 
right  of,  to  indemnity  from  the  continuing  paitnras,  867 
See.  also,  Articles  of  Partnership 

1531 


1194  GENERAL   INDEX. 

KETIRED  SHAREHOLDER.    See  Past  Members 
calls  on,  667 
duration  of  liability  of,  to  creditors,  461 

when  I'etirenient  is  informal,  136 
duration  of  liability  to  contribute  to  debts,  460 
under  act  of  1862,  p.  737 
when  liable  as  a  contributoiy 

although  his  shares  have  been  forfeited,  751 

See  Fokpeiture;  Past  Members;    Surrender  of  Shares; 
Transfer  of  Shares 
RETIREMENT 

of  partner,  agreements  as  to,  840 
effect  of,  on  liability,  405 

See  Retired  Partner 
dissentient  partner  not  bound  to  retire,  602 
right  of, 

from  partnership,  735 
from  company,  736 
of  shareholder  compared  with  refusal  to  accept  shares,  741 

See  Articles  op  Partnership;  Rescission  of  Contract;  Specific 
Performance 

RETROSPECTIVE, 

articles,  effect  of,  96 
partnership,  831 

RETURN 

of  premium,  71   et  seq. 

of  subscription  to  company,  117  et  seq.,  953 

RETURNS,  OFFICIAL, 

to  be  made 

under  the  Letters  Patent  act,  153 

under  the  Life  Assurance  Companies  act  1870,  p.  814 

by  banking  companies  governed  by  7  Geo.  4,  c.  46,  p.  161 

by  companies  governed  by  act  of  1862,  p.  175 

by  bankers,  185 

of  names  of  shareholders  considered  as  evidence,  138  et  seq, 

REVENUE  LAWS, 

breach  of,  by  one  partner,  effect  of,  299 

illegality  of  partnership  infringing,  184,  189,  note  {t) 

contribution  in  cases  of  breach  of,  771 

REVOCATION 

of  broker's  authority  to  buy  shares,  731 

of  agent's  authority,  effect  of,  on  his  right  to  indemnity,  756 

of  partner's  authority,  327 

of  application  for  shares,  101,  102 

after  acceptance  posted,  too  late,  102 

of  submission  to  refer,  effect  of,  869 

RIFLE  CORPS, 

liability  of  officers  of,  for  clothing  of,  &c.,  57,  note  {p) 

RIVAL  COMPANIES, 

interference  between,  888 
action,  by  nominees  of,  888 
use  of  same  name  by,  210 
actions  between,  888 

RIVALRY 

between  partner  and  firm,  576  et  seq. 

1532 


GENERAL   INDEX.  1195 

ROLLING  STOCK 

of  railway  companies  protected  from  execution,  518,  note  (q) 

ROUGH  SHARE  BOOK 
no  evidence,  158 

RUTHERFORD, 

his  definition  of  partnership,  3 

SALARY 

varyinfr  witli  profits,  19,  2Q,  43.    See  Wages:  Propit8 

share  of  profits  in  lieu  of,  ID,  20 
partner's  rijrht  to,  for  extra  work,  774 
dii-ector's  right  to,  for  extra  work,  776 
SALE 

by  one  partner,  when  binding?  on  firm,  295 

when  actionable  by  co-partner,  1030 

by  solvent  partner.  lOoI 

when  made  after  dissolution,  411 
by  partner  to  firm,  572  et  seq. 
by  promoters  to  companies,  581 
.  creditors  of  companies  cannot  prevent  sale  of  its  assets,  658 
action  between  partners  for  share  of  produce  of,  1031 
of  business, 

effect  of,  on  vendor's  right  to  carry  on  the  business  sold,  860,  1018 
ot  company,  29o 
on  dissolution 

partner's  right  to,  1015 
decree  for.  1015 
when  dispensed  with,  1016 
agreement  as  to,  1016 
mode  of  selling,  1017 

valuation  of  unsalealsle  appointments,  1018 
directed  before  hearing  of  the  cause,  1018 
of  shares  of  partners 

what  passes  by  sale,  698 
rights  of  purchaser,  698 
causes  a  cUssolution,  229,  698 
under  Ji.fa.,  687 

may  be  by  private  contract,  689,  note  (c) 
smce  the  Judicature  acts,  692 
dutyofsherift;  638 
right  of  purchaser,  690 
position  of  execution  debtor,  691 
of  shares  in  companies 

in  banking  companies,  711 

in  liquidation  not  illegal,  714 

agr.'ements  ibr,  720 — 735 

whore  company  illegal,  198 

stamp  on,  705 

vendor's  obligations,  712,  725,  et  seq. 

duty  to  procure  transfer,  712,  726 

title  to  be  shown  by,  712 

whether  to  transfer  to  purchaser's  nominee,  715 
purchaser's  obligations,  713,  725,  et  seq. 

to  prepare  transfer,  715 
lien  of  vendor  for  unpaid  purchase  money,  716 
tender  of  transfer,  718 
transfers  in  blank,  719 
fraudulent  sales,  716,  942 
fraud  by  the  seller,  effect  of,  717 

on  the  seller,  717 

1533 


1196  GENERAL   INDEX. 

SALE — coni'mued 

of  shares  in  companies — continued. 
sale  by  auction,  718 
actions  by  vendor,  719 
actions  by  purchaser,  718 

damages  recoverable  vphen  contract  broken,  719 
specific  performance  of  contract,  720 
relief  where  directors  will  not  sanction  transfer,  720 
rescission  of,  942 
time  for  completing  transfer,  727 
right  to  indemnity,  720 
effect  of,  on  liability  to  pay  calls,  637.    See  Calls 
effect  of,  on  liability  to  be  made  contributory 
illegal  sales,  198,  710,  735 

gambling  sales,  710 
on  the  Stock  Exchange,  721  et  seq. 

rules  and  customs  regulating,  721  et  seq. 

nature  of  contract  between  the  vendor  and  purchasing  broker  or  jobber, 

723,  729  et  seq. 
jobber's  liability,  723,  729  etseq. 

for  passing  name  of  an  infant,  723,  729 
where  name  is  not  objected  to,  724,  729 
where  transferee  does  not  get  registered.  724 
where  registration  is  guaranteed,  725,  729 
broker's  liability,  723  et  seq. 
contract  between  vendor  and  his  transferee,  725  et  seq. 

privity  between  when  it  arises,  726 
position  of  vendor  and  undisclosed  and  intermediate  purchasers,  728 

et  seq. 
liability  of  beneficial  owner  to  vendor,  728,  730 
broker's  liability,  730  et  seq. 
duty  of  selling  broker,  730 
buying  broker,  731 
for  buying  what  he  is  not  directed  to  buy,  731 
revocation  of  broker's  authority,  731 
broker's  right  to  indemnity,  731 

not  if  in  default,  732 
broker's  charges,  734 
illegal  purchases  and  sales  by  brokers,  735 
director  selhng  his  own  shares  as  unallotted  shares  commits  a  fraud,  942 
See,  also,  Purchaser;  Seller  of  Shares;  Transfer  of  Shares 

■5ALT  AND  ALKALI  COMPANY 

not  bound  by  bills,  etc.,  of  its  directors,  268 

SALVAGE  COMPANY 

not  bound  by  bills,  etc.,  of  its  du-ectors,  267 

3CIRE  FACIAS, 

nature  of,  520,  523 

irregular,  524 

concurrent  against  several  shareholders,  524 

against  shareholders  when  necessary,  520,  et  seq. 

judgment  on  which  it  is  founded,  cannot  be  impeached,  526 

except  for  fraud,  527 
where  recourse  must  be  had  to  the  company  before  issuing  execution  agamst 

shareholder,  536 
applications  for  rule  for,  525 
after  elegit,  525 

by  creditor  whose  right  is  limited  to  company's  funds,  530 
fraud  by  creditor  a  defense  to,  529,  530 
fraud  by  director  no  defense  to,  528 

1534 


GENERAL    IN'DEX.  1197 

SCIRE  FACIAS— coji/;HM<'f7. 

against  shareholders  in  companies  governed  by 
7  Geo.  4  c.  4C  [)p.  521,  Wl 

7  Wm.  4  A:  1  Vict.  c.  73  pp.  521,  635 
7&8  Vict.  c.  110  p.  521 
7&8Vict.  c.  113,  p.  521 

8  <fe  9  Vict.  c.  16,  pp.  521,  536  et  seq. 
Companies  act  1802,  p.  521 

in  other  companies,  539 
against  shareholders  who  have  not  complied  with  formalities,  534 
plea  in  abatement,  524 
to  repeal  charter,  151  note  (rf) 

SCRIP, 

nature  of,  123 

calhng  in  of,  124 

calls  on  allottees  of,  625 

Bpecific  performance  of  agreement  for  sale  of,  720 

purchaser  of,  liability  of,  to  seller,  707,  note  (6) 

certificate,  123,  124 

what  is,  123 

stamp  on,  123 

may  become  transferable  by  delivery  by  usuage,  124,  709 
companies,  123 

legality  of,  194 

under  Companies  act,  1862,  p.  196 

mode  of  transferring  shares  in,  704 
holders 

calls  on,  625 

converted  into  shareholders,  124 

registry  of,  as  shareholders,  124,  159 

rights  of,  123,  124 
transfer  of,  123 

SCRIVENER 

solicitor  not,  307 

SEAL  OF  COMPANY, 

necessity  of,  to  contracts  by  companies,  352  ei  seq. 
persons  conducting  company's  business,  have  authority  to  use,  356 
when  not  necessary  to  bind  company, 
at  common  law,  352  et  seq. 
by  statute,  356  f<  seq. 

8  &  9  Vict.  c.  16.  p.  357 
Companies  act  1862,  p.  359 
contract  under,  binds  company,  though  entered  into  irregularly,  249  et  seq., 

258,  829 
removing  from  deed,  effect  of,  434 

any,  atiixed  by  proper  authority  is  sufficient,  362,  note  (e) 
mandamus  to  remove,  142,  143,  1038 
to  affix,  1038 
See  Companies  Seals  Act,  1864 
to  register,  157 
improperly  atfixed,  356 

SECRETARY 

for  tim<?  being,  actions  by,  496,  874 
contract  with,  when  binding,  248 
See  Companies  ;  Notice 

SECRETS. 

trade,  provisions  in  articles  as  to,  833 

1535 


1198  GENERAL    INDEX. 

SECRET  BENEFITS 

obtained  by  one  partner  must  be  accounted  for  to  firm,  571 

directors  must  be  accounted  for  to  company,  671  et  seq.,  587 
promoters,  580 
actions  for  account  of,  848  et  seq. 
SECRET  PARTNER 

what  constitutes,  23,  34  et  seq. 

liability  of,  23.     See  Dormant  Partner 

SECRET  RESTRICTION  OF  AUTHORITr,  325 

SECRET-SERVICE  MONEY, 

no  allowance  to  partners  or  directors  for,  779 

SECURED  CREDITORS, 

proof  debts  by,  m  administration  by  the  High  Court,  1057 
SECURITIES 

effect  of  corporation  taking  unauthorized,  250,  note  (g) 

of  firm,  effect  of  change  of  partners  on,  214 

merger  of  debt  by  taking,  370,  450 

company  liable  for  if  carelessly  lost,  300 

discharge  of  retiring  partner  by  taking,  from  continuing,  449 

position  of  secured  creditors  in  bankruptcy,  1057 

in  administration  in  the  High  Court,  1057 

consequence  of  not  taking,  from  officers  of  company,  555,  593 

shares  not,  662 

28  &  29  Vict.  c.  86,  does  not  deprive  a  lender  of  his,  45 

SECURITY  FOR  COSTS 
■     when  company  sues,  493 

SELLER  OF  SHARES, 

rights  of,  against  purchaser,  714,  718 
when  entitled  to  indemnity,  720 
liability  of 

to  purchaser,  717 

to  calls.     See  Calls 
title  to  be  shown  by,  712 
See,  too.  Sale  op  Shares  ;  Transfer  of  Shares 

SEPARATE  BUSINESS, 

profits  derived  from,  571  et  seq.,  576  etseq. 

SEPARATE  CREDITORS, 

rights  of  joint  and  separate  creditors  compared,  655,  1053,  1054 

SEPARATE  DEBTS, 

bills  given  for,  329.     See  Bills  of  Exchange 
execution  against  partners  for,  687.     See  Execution 
charging  orders  for,  694 

effect  of  partner  paying  with  money  of  the  firm,  329 
cannot  be  set  off  against  joint  debts,  504  et  seq. 

SEPARATE  ESTATE, 

what  is,  642,  648 

property  used  for  partnership  purposes  may  be,  648 

property  bought  with  money  of  firm,  649 

stock  in  trade,  649 

houses  built  on  partnership  property,  650 

appointments,  651 

land,  661,  652  _ 

conversion  of,  into  joint,  654 

by  companies,  658 

by  partner  in  administration  action,  1055 
of  married  women  partners,  liability  of,  84,  85 

1536 


GENERAL   INDEX.  1199 

SERVANT?, 

f)0\ver  of  one  partner  to  hire  and  dismiss,  296 
iiiV>ility  of  firm  for  ncylif^i'nce  of,  299 
lialtility  of  companj'  for  negligence  of.  246  et  seq. 
rii,'lit  of,  to  account,  946 
payment  of,  by  siiare  of  profits,  19,  20,  787 
sharing  profits  and  interested  in  the  capital,  20' 

SERVICE  OF  WRITS,  &c. 

on  one  partner  when  sufficient,  474 
if  firm  sued,  sei-vice  on  one  partner  sufficient,  475 
on  companies,  494,  note  (*•) 

on  late  chairman  and  secretary  of  a  defunct  company,  Gaskell  v.  Chambers, 
26  Beav.,  252 

SERVICES, 

right  of  partners  and  directors  to  compensation  for,  774 

SET-OFF 

by  and  against  partnerships,  502,  505 

combined  eft'ect  of  rules  at  law  and  in  equity,  504 

effect  of  changes  in  firm  and  assignment  of  debt  on  right  of  set-off,  505 
agreed  to  be  allowed  by  one  partner,  277,  507 
where  there  is  a  dormant  partner,  508 
cases  where  one  partner  only  has  been  dealt  with,  508 
attempt  to  avoid  by  suing  one  partner,  509 
against  assignee  of  debt  after  notice,  510  note  {b) 
by  way  of  counter-claim  what  may  be,  503 
where  there  has  been  an  assignment,  510 
legacy  to  partner  indebted  to  testator,  1076 
by  and  against  companies,  511  et  seq. 

when  a  company  sues  a  member,  511 

where  one  member  sues  another  for  a  debt  owing  by  the  company,  512 

of  calls  against  dividends,  lO^^S 

of  calls  not  due,  1034,  note  (i) 
against  holders  of  securities,  514 
joint  demands  cannot  be  set  off  against  separate  demands,  or  vice  versa,  471, 

504—507,  512 
agreement  to  set  off"  joint  debt  against  separate,  471,  507 
by  and  against  surviving  partners,  504 

SETTING  ASIDE 
judgment,  680 

releases  given  by  one  partner,  293 
See,  also.  Rescission  of  Contkact 

SETTLED  ACCOUNT.    See  Account  Stated 

SETTLEMENT 

of  shares  in  partnerships,  852 

companies,  deed  of.    See  Deeds  op  Settlement  (Companies). 

SETTLING  DAY 

obtaining  by  fraud  indictable,  710,  711,  816 

SHARE  IN  PARTNERSHIPS, 

nature  of  a  share,  600  cf  seq. 
share  a  right  to  money,  661 
transfer  of,  consent  of  all  parties  requisite  to,  697 
legacies  of,  1068,  1075 
slander  of  title  to,  675 
mortgage  of,  064 
jus  accrescciuJi  inter  mercatores  locum  non  habet,  664 

<"  1537 


j^OQQ  GENERAL   INDEX. 

SHARE  IN  PARTNERSHIP -coH<!«»^fZ. 
nature  of  a  share— continued. 

shares  are  personal  estate,  667 

not  interests  in  land,  667,  673  et  seq. 
■within  the  Mortmain  acts,  673 
or  the  4th  sec.  of  the  Statute  of  i'rauds,  674 
how  far  goods  and  chattels,  674 
forfeiture  of  to  crown,  661 
agreements  as  to.    See  Articles  op  Partnership 
amount  of  each  partner's  share,  665  et  seq. 
presumption  in  favor  of  equahty,  675 
evidence  contra,  677 
application  of  rule  to  shares  in  particular  transactions,  677 
where  one  firm  comprises  another,  678 
in  companies,  678 
action  by  partner  for.    See  Actions  between  Partners 
Hen  on  shares.     See  Lien  „     „  o  r\  ^^^ 

mode  of  taking  shares  in  execution.    See  Execution;  Charging  Order 
sale  of.    See  Sale  op  Shakes 
transfer  of.     See  Transfer  op  Shares 
forfeiture  of.     See  Forfeiture 
surrender  of.     See  Surrender 
settled,  852 

SHARES  IN  COMPANIES, 

general  nature  of,  613,  660 
value  and  amount  of,  678 

varying  the,  613 
paid  up,  614.     See  Paid  up  Shares 
certificate  of,  145.    See  Certificate 
preference,  662  ^      ^  n 

rights  of  holders  of,  796.    See  Preference  Shares 
are  not  secuiities,  662 
are  personal  estate,  667,  673 

with  reference  to  the  Mortmain  acts,  673 
and  the  Statute  of  Frauds,  674 
how  far  they  are  goods  and  chattels,  674 

are  stock  within  meaning  of  Trustee  acts,  663 
not  mere  choses  in  action,  663 
conferring  votes  for  members  of  Parhament,  67ii 
gaming  in,  710 
legacies  of,  1076.    See  Legacy 

will  pass  stock,  617,  note  {I),  1076 
issue  of  bad  for  good  punishable,  613 
void  issue  of,  holder  of  not  a  contributory,  1..49 
if  issue  is  illegal  persons  are  not  members  m  respect  ot  tliem,  loz,  loi 

no  estoppel.  134 
application  for,  101.    See  Allotment 
etiect  of  not  complying  with,  105 
applicant  for,  may  dispense  with  notice  of  allotment,  lUa 
agreement  to  take.  100 
agreed  to  be  taken,  but  not  taken,  29 

acceptance  of  evidence  of  partnership,  98  „  „  iaa 

on  conditions  not  warranted  by  the  constitution  of  the  company,  10b 
assented  to  by  persons  not  authorized,  106 
allotted  to  directors,  588,  589 

ought  not  to  be  sold  as  vmallotted,  942 
allotment  of,  on  application  for,  100—116 
when  too  late,  101,  102 

revocation  of  application  before  allotment,  101.  1<  ^ 
when  not  necessary  to  complete  the  contract,  104 
calls  on.    See,  Calls 
cancellation  of.    See  Surrender  op  Shares 

1538 


GENERAL   INDEX.  ''201 

SHARES  IN  COMPANIES— coHh'n»ecZ 
certificates  of  title  to,  14> 
deposits  on,  eflect  of  paying,  98 

recovery  back  of,  117 
forfeiture  of,  606.     See  Forfeiture 

for  non-payment  of  calls,  74? 
investing  in,  662 

when  transferable  by  delivery,  705 

not  paid  up,  cannot  be  transferable  to  bearer,  196  note  (o) 
purchase  of  not  within  powers  of  directors,  250,  261 
when  they  may  be  issued  at  a  discount,  617,  619 
trustee  of,  entitled  to  be  indemnified  against  calls,  769 
taken  as  security,  287 
payment  in  respect  of,  what  is,  614 

must  be  paid  in  cash,  when,  614 
lien  on,  683.    See  Lien 
orders  charging,  694 

relinquishment  of,  736.     See  Surrendeb 
sales  of.    See  Sale 
subdivision  of,  558,  note  (o),  567,  621 
surrender  of.    See  Surrender 
survivorship  in,  667 
transfer  of.     See  Transfer 

before  calls  are  paid,  684,  703 
See,  also,  Companies;  Contributoriep-  Register;  Shareholder 

SHAREHOLDER, 
who  is  a, 

generally,  124 

where  prescribed  formalities  have  not  been  observed,  125 

where  their  observance  has  been  waived.  128.    See  Formalities 

and  scrip-holder,  difference  between,  124 

in  equity  though  not  legally,  128 

cestui  que  trust,  127 

infant,  81 

man-ied  woman,  84  et  seq. 

corporation,  or  company,  86 
in  companies  governed  by 

7  Geo.  4,  c.  46,  p.  161 

7  Wm.  4  &  1  Vict.  c.  73,  p.  153 

7  &  8  Vict.  c.  110,  pp.  12o,  178 

7  &  8  Vict.  c.  113,  p.  178 

8  &  9  Vict.  c.  16,  p.  156 

the  acts  of  1856—1858,  p.  179 
the  cost-book  principle,  147 
under  companies  act,  1862,  p.  170 

where  company  registered  but  not  formed  unaer  act,  173 
action  against 

by  creditor,  517,  518,  694 

at  instigation  of  directors,  875 
by  officers  of  unincorporated  companies,  874 

See,  also,  Action;  Execution;  Scire  Facias 
allottees  acting  as,  effect  of,  103  note  (s) 
bankruptcy  of 
calls  on,  <tc.    See  Calls 
discovery  of,  by  creditors,  522 
exclusion  of,  from  share  of  profits,  794 
execution  against.    See  Execution;  Scire  Facias 
good  faith  required  amongst,  570 
liability  of 

at  common  law,  375 

in  particular  companies.    See  Companies;  Liability 

1539 


lOQO^  GENERAL   INDEX. 

SRAFiFAlOLDEU— continued 
liability  o?— continued. 

when  limited  to  funds  of  company,  377 

commencement  of  liability,  394 

duration  of  liability,  459 

survivor  of  joint-liolders  to  be  made  a  contributoiy,  375 

to  contribution  and  indemnity.    See  Contribution 

to  indemnify  directors,  759 

to  calls.    See  Calls 

to  be  made  contributories.     See  Contributobies 
lien  of,  on  each  other's  shares,  684 
lien  of  company  against.     See  Lien 
meetings  of,  545.     See  Meetings 
special  act,  made  so  by,  position  of,  157,  159 
registers  of,  138.    See  Register 
rights  of 

to  be  registered,  &c.,  142 

to  certificates  of  title,  145 

to  take  part  in  management  of  company,  541  et  seq. 

to  control  the  directors.     See  Directors 

to  see  company's  accounts,  809.    See  Accounts 
reimbursement  of,  by  calls,  628,  note  {b) 
set-off  in  actions  by  and  against,  511.     See  Set-DBF 

SHAREHOLDERS'  ADDRESS  BOOK,  156 

SHARE  REGISTER.    See  Register 

SHARE  WARRANTS,  176 

SHARING  PROFITS, 

quasi-partnership  by,  33-47.    See  Profits 

how' to  execute/,  fa.  for  separate  debt  of  one  partner,  688 
action  against,  for  share  of  money  received  by,  on  sale  of  partnership  prop- 
erty, 1031 
injunction  against,  at  the  suit  of  partners,  691 
See,  also,  Execution 

SHIP 

ownership  of,  644 
registration  of,  644 
part  owners  of,  66 

liability  of,  for  acts  of  each  other,  296,  note  [d) 

when  not  entitled  to  share  profits  made  by,  908 

lien  of,  684 
profits  derived  from  use  of  partners',  belong  to  firm,  576 
powers  of  one  partner  as  to,  644 
injunction  to  restrain  sailing  of,  902,  note  (j) 

SHIP'S  HUSBAND, 

partner  acting  as,  for  firm,  774,  note  («/) 

SIGNING 

minutes  of  meetings,  550 

accounts,  effect  of  omitting,  840,  848 

agreement  for  signing  parliamentary  contract,  eiiect  of,  118 

SLANDER  OF  TITLE, 

to  shares,  675 

SMUGGLERS, 

partnership  between,  182 

1540 


GENEEAL   INDEX.  1203 

SOCIETIES, 

friendly,  not  partnerships,  96 
not  having'  g-ain  for  their  object,  56 
in  which  each  member  acts  for  himself,  57 
actions  by,  495,  note  {b) 

SOLICITORS 

are  not  scriveners,  307 

not  i^art  of  his  ordinaiy  business  to  receive  money  for  investment,  303,  note 

(?).  308 
retained  by  corporations,  352  (/),  494 

retainer  under  seal,  when  presumed,  494  * 

clerk  may  be  articled  to  two  partners,  Jie  ITolInnd,  L.  R.,  7  Q.  B.,  297 
notice  to,  when  not  notice  to  the  company,  290 
to  projected  companies,  obligations  of,  586 
evidence  of,  against  their  clients,  92,  note  {p) 
summary  jurisdiction  over  partners  who  are,  303,  note  (s) 
partnei-ship  between 
when  illegal,  190 
proof  of,  92 

in  particular  transactions  only,  916 
lien  of,  elfect  of  change  in  fii-m  on,  215 
dissolution  of 

aorreements  as  to  clients''  papers  on,  858 
effect  of  on  clients'  papers,  858 
liabilitv  of,  for  each  others'  acts 
with  respect  to  bills,  239,  267 

misa])plication  of  money,  303  et  scfj. 
partner  in  firm  of,  no  authority  to  boiTOw,  269 

SOLVENCY, 

guaiantees  as  to,  when  required  to  be  written,  282,  315 

SOLVENT  PARTNERS 

actions  by,  490,491 

po\yers  of.    See  Bankruptcy 

action  against.  Court  of  Bankruptcy  cannot  restrain,  491  note  (e) 

SOME  ON  BEHALF 

of  themselves  and  others,  501,  880.    See  Parties 

SPECIAL  ACT, 

cornpanies  incorporated  by,  154 

position  of  person  made  a  member  by,  157,  159 

SPECIAL  AND  GENERAL 

meetings,  546 
partnerships,  55,  56 

SPECIAL  RESOLUTIONS 

under  Companies  act  1862,  p.  567 

SPECIALTY  DEBTS, 

calls  are,  1033,  1049 

whether  created  l)y  covenant  to  be  true  and  just,  837 

not  entitled  to  priority,  1049 

SPECIFIC  PERFORMANCE  OF  AGREEMENTS 
for  partnerships,  914 
in  partnership  articles,  &:c.,  917 
to  take  shares,  919.  922 
for  sale  of  shares,  713,  720 
to  take  share  at  valuation,  850 
where  directors  refuse  to  allow  transfer,  720 

1541 


1204  GENERAL    INDEX. 

SPECIFIC  riZRFORMANCE  OF  AGREEMENTS— continued. 
to  form  company,  918 
to  amalgamate.  919 
as  to  custody  of  partnership  books,  917 
as  to  coUectinfi:  debts,  865 
to  refer  to  arbitration,  868 
for  a  lease  after  term  has  expired,  915 
to  share  profits,  916 
by  corporations  when  not  sealed,  354 
by  directors  to  be  performed  by  the  company,  921 
between  promoters  and  companies,  921 
laches  of  plaintiff,  a  bar  to,  905 
fraud  or  unfairness  a  bar  to,  920 
in  case  of  agreements  by  promoters,  586 
breach  of  trust  when  a  defense  to  action  for,  921 

SPIRITUAL  PERSONS, 

disabilities  of,  77 

may  be  partners,  77  * 

STAKEHOLDER, 

iUegality  set  up  by,  202,  203 

STAMP 

on  advertisements  of  dissolution,  when  necessary,  416 

on  assignment  by  out-going  partner  to  continuing  partner,  866 

on  assignment  of  good-wUl.  859,  note  (r) 

on  scrip  certificates,  123 

on  proxy  paper,  549 

on  cost-book,  149,  note  lo; 

on  contracts  for  sale  of  shares,  705 

on  articles  of  association,  168 

on  authority  to  purser  to  insert  name  in  cost-book,  149 

on  letters  of  allotment,  102 

on  scrip  certificates,  123 

on  resolution  of  meeting  accepting  an  offer  imnecessary,  552 

on  transfer  of  shares,  705 

STAMP  OFFICE 

return  of  pablic  officer  to,  499,  450 

return  to,  under  7  Geo.  4,  c.  46,  pp.  161,  499,  450,  534 

STANDING  ORDERS, 

relating  to  bills  in  parliament,  154,  155 

STANNARIES.    See  Cost-book  Mining  Companies 

STATED  ACCOUNT.    See  Account  Stated 

STATEMENTS.    See  Representations  ;  Fraud 

STATUTE  OF  FRAUDS 

effect  of,  on  guarantee  by  one  partner,  282 

on  contracts  of  partnership,  87 
modified  as  regards  companies,  by  Companies  clauses  act,  358 
shares  not  within,  674 

STATUTES 

relating  to  companies 
historical  sketch  of,  5 
table  of  those  in  force,  11 
limiting  number  of  partners,  76 

STATUTES  OF  LIMITATION.    See  Limitation,  Statutes  of 

1542 


GENERAL    INDEX.  1205 

STAYING  PROCEEDINGS 

at  instance  of  one  partner,  473 
See  Injunction 

STEALING,  ^      ^  ,  ^ 

indictment  for,  by  surviving  partners,  490,  note  (o) 

STIPULATIONS 

of  partners  with  each  other,  effect  of,  on  third  persons,  326  et  seq. 

STOPK 

wrongly  sold  by  one  partner,  liability  of  firm  for,  304,  305 
gambling  in,  710 
conversion  of  capital  into,  617 

will  pass  under  a  bequest  of  shares,  617,  note  {I),  1076 
See  Capital. 

STOCK  BROKERS.    See  Brokeks 

liability  of  firm  of,  for  money  misapplied  by  one  partner,  305 

STOCK  EXCHANGE, 
rules  of,  722 

rales  of,  how  far  binding  on  persons  employing  brokers,  721 
frauds  on,  323 

STOCK-JOBBING  ACT,  710,  note  {b) 

STORAGE 

of  firm  property,  297 

STORY, 

his  definition  of  partnership,  3 

STREET  RAILWAY, 

a  partnership  may  exist  in,  88 

STYLE 

of  firm,  832.    See  Name 

SUB-DIVISION  OF  SHARES,  558,  note  (o),  567,  621 
SUBMISSIONS  TO  ARBITRATION.    See  Abbitration 

SUB-PARTNERS, 

who  are,  54 

right  of,  to  account,  946 

duration  of  partnership  between,  219 

parties  to  action  by,  878,  879 

SUB-PARTNERSHIPS,  54 
duration  of,  219  _ 
right  to  account  in,  946 
parties  to  actions  relating  to,  878,  879 

SUBROGATION, 

right  of  retuinjg  partner  to,  760 

SUBSCRIBERS 

agreement,  what  was,  155 

to  inchoate  companies  not  partners,  31 

to  companies,  who  are,  124  et  seq. 

return  of  subscriptions  to,  when  not  lawful,  117 

calls  on,  634 

actions  by  and  against,  for  recovery  of  deposits,  1019 

not  liable  for  acts  of  promoters,  241 

of  memorandum  of  association.     See  Memokandum  OF  Association 

1543 


1206  GE^'EilAL    ISDEX. 

SUBSCRIBERS— co»/m»e(Z. 
to  abortive  companies 
calls  on,  120 

right  of,  to  have  back  their  money,  117 
where  company  is  iUegal,  204 
actions  by,  for  the  recovery  of  their  subscriptions,  117,  953 
parties  to  such  actions,  879 

SUBSCRIBERS'  AGREEMENT,  154 
effect  of  undertaking  to  sign,  118 

SUBSCRIPTION 

to  company,  recovery  of.    See  Consideration  ;  Deposit 

SUBSEQUENT  PROFITS, 

account  of,  when  directed,  976,  1070  et  seq. 

SUBSTITUTION, 

of  debtors,  discharge  of  partner  by,  435,  464 

SUCCESSION  DUTY 

on  death  of  partner,  1048 

SUCCESSOR 

to  busmess,  855 

SUGGESTION  ON  RECORD.    See  Scire  Facias 

SUICIDE 

attempted,  no  ground  for  dissolution,  227,  note  {z) 

SUITS  IN  EQUITY.    See  Action 

SUPPLIES 

to  mine,  shareholders  liable  for,  273,  291 

SURCHARGING 

and  falsifying  accounts,  960 

SURETIES 

to  or  for  firm,  position  of,  on  change  in  firm,  212  et  seq. 

on  change  of  name  of  company,  214 
to  or  for  company,  position  of,  on  incorporation  or  amalgamation  of  com- 
pany, 214 
discharge  of,  by  doctrine  of  appropriation  of  payments,  425^ 
provision  of  mercantile  law  amendlnent  act,  214 

SURGEONS, 

partnership  between,  unqualified,  188 

SURPLUS  ASSETS, 

action  for  shares  of,  1032 

SURRENDER  OF  CHARTERS,  152,  606,  607 

SURRENDER  OF  SHARES, 

right  to  rehnquish  shares  in  company,  736  et  seq. 

regulated  by  Companies  clauses  act  1863,  p.  787 
Companies  act  1862,  p.  737 
in  cost-bonk  company,  738 
evidence  of  assent  to  relinquishment,  738 
directors  have  no  power  to  buy  out  shareholders,  619,  738,  741 
retirement  of  shareholder  compared  vtdth  refusal  to  accept  shares,  741 
surrender  of  shares  to  company  compared  with  a  transfer  of  them  to  the  di- 
rectors, 742 
shareholder  a  contributory  notwithstanding,  739  et  seq. 
directors  cannot  delegate  a  power  to  accept,  738 

1544 


GEXEEAL    INDEX.  1207 

SURVIVING  PARTNERS. 

rigbts  of,  as  apraiiist  the  executors  of  a  deceased  partner,  859,  800,  1044 
to  good-will,  &c.,  859,  864 
to  get  in  debts,  490,  665  and  note  {e),  1045 
as  regards  accouut,  1069 
as  regards  the  partnership  real  estate,  664 
personalty,  666 
liabilities  of 

to  creditors  of  the  finn,  665,  1045, 1051 

where  the  creditors  are  proceeding  against  the  estate  of  the  de- 
ceased, 490,  878,  1054 
to  the  executors  of  a  deceased  partner,  1046,  1047 
to  the  separate  creditors,  legatees,  and  next  of  kin  of  a  deceased  part- 
ner, 1068 
when  the  assets  of  the  deceased  are  not  got  in,  1059  ei  seq. 
when  they  are  lent  to  the  firm,  1071 
position  of,  when  also  executors,  1047 

right  of  retainer  as  against  the  estate,  935 
necessary  parties   to  suits,  by  joint  creditors  to  administer  the  estate  of  a 

deceased  pai-tner,  1053 
proper  parties  to  actions  for  same  purpose,  878 

may  be  joined  with  executors  of  deceased  partners  as  defendants,  10o9 
not  necessaiy  parties  to  actions  against  executors  of  deceased  partner  for  an 

account,*  1068 
cannot  render  the  estate  of  their  deceased  co-partner  liable  for  what  occurs 

after  his  death,  1060  , 
injunction  against,  996 

to  restrain  use  of  old  name,  1060 
rescission  of  contracts  between  sm'viving  partners  and  executors  of  deceased 

partner,  932,  933  and  note  [b) 
not  entitled  to  partnership  property,  665 
compensation  for  services,  775 
payment  of  debt  to,  discharges  payer,  665  note  {e) 

agent  of  finn  must  account  to,  490,  note  («)  •  i         e 

creditor  looking  for  payment  from,  does  not  lose  his  right  agamst  estate  of 

deceased,  446 
part  payment  of  debt  by,  effect  of  as  against  estate  of  deceased  partner, 

457 
actions  by  and  against,  490 
See  Death;  Deceased  Paktneb 

[  SURVIVORSHIP, 

'  of  the  doctrine  of,  between  partners,  664 

devolution  of  legal  estate  in  land,_664 
j  equitable  estate,  665 

'  choses  in  action,  665 

ordinary  chattels,  666 

shares,  667 

good-will,  860,  861 

TABLE 

of  statutes  relating  to  companies,  11 

of  sorts  of  partnerships  and  companies,  13,  146 

TABLE  A. 

to  Companies  act  1862,  p.  169 

TAXATION, 

of  the  individuals  composing  a  law  fimi,  207 

TEMPER,  ,  ,    ^  ^   ,  . 

interference  of  the  court  between  partners  on  tie  ground  of  bad  temper, 
227,  1011  ^ ,  .  , 

154d 


1208  GENERAL    INDEX. 

TENANT  FOR  LIFE 
of  shares,  1077 

TENANTS  IN  COMMON, 

purchases  by  persons  as,  58  et  seq. 

who  are,  and  who  are  joint  tenants,  58,  note  (s) 

remedies  between,  63  et  seq. 

action  by  one  against  the  other  for  sale  of  common  property,  1030,  1031 

are  not  partners,  58 

may  be  partners  in  profits  only,  651 

of  trade-mark,  68,  note  (l) 

when  firm  is  answerable  to  one  tenant  for  his  share,  643 

TENDER 

to  one  partner,  278 

of  transfer,  on  sale  of  shares,  715 

TERM 

partnerships  for  a,  218 

TERMINATION  OF  LIABILITY 
in  companies,  459 
in  ordinary  partnerships,  403-459 
as  to  future  acts,  403 
as  to  past  acts,  417 
by  payment,  418 
by  release,  433 

by  substitution  of  debtors  and  securities,  485 
by  lapse  of  time,  453 
See,  also,  Liabilitt 

THEATRES,  ,     ' 

illegal  partnerships  in,  191 

THIBAUT, 

his  definition  of  partnership,  3 

THIRD  PARTIES. 

partnership  as  to.    See  Holding  Out  ;  Quasi  Partnerships 

TICKET.    See  Brokers'  Ticket 

TIME 

for  making  calls,  630,  631,  1436.     See  Calls 
for  making  allotment  of  shares,  103.     See  Allotment 
■  not  accepting  offers  within  reasonable,  103 
lapse  of,  when  an  answer  to  an  action,  902 
when  a  bar  to  an  action  for  account,  963 
discharging  partners  from  liability,  453 
discharging  shareholder  from  liability,  460 
See  Laches  ;  Limitation,  Si  atute  of 

TITLE 

to  be  shown  by  vendor  of  shares,  712^ 
to  shares,   proof  of,  by  certificates,  145 

TORTS  .    .      .      , 

and  breaches  of  contract,  distinction  oetween,  373 
of  agent,  liability  of  principal  for,  264 
liability  of  firms  and  companies  for,  297 
liability  of  estate  of  deceased  partner  for,  1051 

liability  of  partner  for  torts  committed  since  his  retirement  from  firm,  407 
impose  joint  and  several  liabilities,  373 
actions  by  partners  foi",  480 
against  pai'tners  for,  485 

1546 


GENERAL    INDEX.  1209 

TOWN  CLERKS, 

partnerships  between,  190,  note  («) 

TRADE-MARK, 

name  of  linn  a,  210 

tenants  in  common  of,  68,  note  (Z) 

part  of  good  will,  863 

TRADE  SECRETS, 

agreements  as  to,  833 

TRANSFER  OF  BUSINESS.    See  Business 

of  one  company  to  another,  606 
restrained,  606 

TRANSFER  OF  DEBT 

from  account  of  old  firm  to  account  of  new  firm,  effect  of,  on  creditor,  435 

et  seq.,  438,  441,  446,  448 
from  one  account  to  another,  assent  by  one  partner,  277 

TRANSFER  OF  INTEREST 

a  ground  for  dissolution,  229 
seciis  in  companies,  233 

TRANSFER  OF  LIABILITY 

by  substituting  debtors,  435 

TRANSFER  OF  SHARES 
by  co-owners,  58 
in  ordinary  partnerships, 

necessity  of  consent  of  partners  to,  697 

to  representatives  of  deceased  partners,  697 

etfect  of,  698 

on  continuity  of  firm,  700 

as  regards  dissolution,  229 
account,  698 

where  right  to  assign,  700 
rights  of  transferee,  698 
in  mining  partnerships,  62,  700 
in  companies 

generally,  701 

legality  of,  701 

on  forged  power  of  attorney,  301 

before  calls  are  paid,  6:!8 

where  member  indebted  to  company,  (586 
consent  to 

necessity  of  701 

giving  and  withholding,  702 

by  director  of  his  own  shares,  703 

relief  in  equity  when  directoi-s  refuse,  720 

who  to  obtain  in  case  of  sale,  703,  720,  721,  726 
modes  of  transfer  of,  703 
forms  of  transf(>r,  705 
transfers  in  blank,  705,  719 
forged  transfers,  301,  707 
under  Trustee  act,  663 
fraudulent,  701 

to  escape  liability,  not  fraudulent,  702 
to  multiply  vot<^^'s  not  illegal,  548 

caimot  be  oljjected  to  by  directors,  702 
to  pauper  where  valid,  701 
to  nominee  of  purchaser,  effect  of,  715 
rights  and  duties  of  transferee,  708 
time  for  completing  transfer,  727 

1547 


I 


1210  GENEKAL    INDEX. 

TRANSFER  OF  SRAUEB— continued. 
in  companies  generally — continued. 
stamp  on,  705 

transfer  to  directors  not  the  same  as  surrender  to  company,  742 
registi-y  of  transfer,  139  et  seq. 
mandamus  to  compel,  1036 
when  company  is  being  wound  up,  709 
specific  performance  of  gratuitous  and  intended,  720 
etfect  of,  as  regards 

dissolution  of  company,  232  et  seq. 

liability  to  creditors,  459  et  seq. 

liability  to  calls.    See  Calls 
restraining  under  5  Vict.  c.  5,  p.  697 
in  particular  companies, 

in  cost-book  mining  companies,  146,  701,  704 
in  scrip  companies,  705 
in  companies  governed  by 

7  Geo.  4,  c.  46,  p.  163 

7  Wm.  4  &  1  Vict.  c.  73,  p.  153 

8  &  9  Vict.  c.  16,  pp.  161,  704 
Companies  act,  1862,  p.  704 

TRANSFERABLE  SHARES, 
when  shares  are,  701 
legality  of  companies  with,  191  et  seq. 

TRANSFEROR  OF  SHARES, 

liability   of.    See  Calls  ;  Contributories  j  Liability  j  Trai'sper  of 
Shares 

TREASURER 

for  time  being,  action  by,  874 

TREATING  CUSTOMERS, 

allowance  to  partner  for,  779 

TRESPASS 

by  one  partner  against  another,  1024 

TROUBLE, 

right  of  partners  and  directors  to  compensation  for,  774 
executors  and  surviving  partners,  1046 

TROVER 

by  one  partner  against  another,  1025, 1031 

TRUSTEE 

to  what  extent  director  is,  571,  587  et  seq. 

promoter  is,  580  et  seq. 
sharing  profits,  liabilities  of,  86 
shareholder,  127 
transfer  of  shares  of,  705 

insolvency  of,  does  not  make  cestui  que  trust  a  shareholder,  127 
ought  not  to  invest  in  shares,  662 

assignment  of  property  to,  for  sale,  injunction  against,  900,  1004 
of  unincorporated  companies  might  sue  shareholders,  874 
authorized  to  lend  money  to  firm,  209 
of  creditors'  deeds  how  far  partners,  29 
right  of,  to  indemnity,  730,  758,  759 
liability  of  for  profits  made  by  trust  fund,  978 
contract  with,  for  company  must  be  stated  in  prospectus,  115 
payment  to  one  of  several,  no  discharge,  411  note  (c) 

See  Profits,  Account  of 

See  Breach  of  Trust 

1548 


GENERAL  INDEX. 


1211 


TRUSTEE  ACT,  , 

shares  within,  663 

TRUSTEE  IN  BANKRUPTCY 

bound  by  a^oement  of  partners  as  to  their  property,  655 
to  join  solvent  partners  in  suing,  491 
to  avoid  fraudulent  preference  by  the  bankrupt,  471 
joinder  of,  when  necessary,  491 
injunction  agrainst,  997  _      _ 

receiver  appointed  against,  or  on  application  of,  1009 
of  a  bankrupt  shareholder 
as  regards  calls,  G41 

TRUST  PROPERTY 

following,  313 

liability  of  partners  for,  313.    See  Breach  OF  Trust 

TRUSTS  ... 

to  pay  d(>bts,  effect  of,  on  Statute  of  Limitations,  4o5 
breach  of,  effect  of  Statute  of  Limitations,  455,  964 
illegal,  actions  for  execution  of,  204 
See  BuEACH  of  Trust;  Trusteh 
TYLER, 

•     his  definition  of  partnership,  2 

ULTRA  VIRES, 

meaning  of,  334 

doctrine  of,  249 

acts,  which  are,  249  et  seq. 

court  will  interfere  to  prevent  acts  which  are,  %0  et  seq. 

liability  of  company  in  respect  of  acts  which  are,  334  et  seq. 

UNANIMITY.    See  Majority  .  ,   .     ,.       /,a^ 

acts  of  members  of  corporate  body  may  be  illegal  notwithstanding,  b07 

UNAUTHORIZED  ACTS, 

adoption  of,  by  firm  or  company,  7S4,  785 

indcninily  in  respect  of,  760  et  seq. 

distinguiished  from  irregular  acts,  134 

liability  of  firm  for,  325  et  seq. 

effect  of  notice  of  want  of  authority,  825 

liability  of  company  for,  334,  and  see  RATIFICATION 

UNCONCLUDED  AGREEMENT, 

partnership  not  the  result  of,  26 
to  take  shares,  104 

UNDERWRITERS. 

illegal  partnerships  between,  187, 188 

UNDISCLOSED  PRINCIPAL, 
action  by,  477 

against,  493 

UNINCORPORATED  COMPANIES.    See  Joikt  Stock  Companies  in  the  U.  S. 
when  liable  as  partners,  4,  99,  191,  369 
actions  by  and  against,  495,  500,  874.  1035 
with  transferable  shares,  legality  of,  191  et  seq, 

under  the  Bubble  act,  191,  192 

at  common  law,  191 

result  of  cases,  194,  195 
causes  of  dissolution  of,  232  et  seq. 

See  Companies;  Joint  Stock  Companies  in  the  U.  S. 

UNIVERSAL  PARTNEHSHIP,  55  ^  ^  ^ . 

1540 


1212  GENERAL   INDEX. 

UNLIMITED  LIA.BILITT, 

common  law  doctrines  as  to,  375  et  seq.    See  Limited  Liability 

UNPAID  PURCHASE  MONEY, 
lien  for,  716 

UNQUALIFIED  AND  QUALIFIED  PERSONS, 

partnerships  between.     See  Illegal  PaIitnership 
attorneys,  190 
brokers,  187 
medical  practitioners,  188 

See,  also,  Qualification 

UNREGISTERED  COMPANIES, 

number  of  persons  who  may  be  partners  in,  76 

UNSEALED  CONTRACTS, 

liability  of  corporations  under,  352 

UNSUBSCRIBED  CAPITAL.    SeeCAPiTAi. 

USAGE, 

mining  usages  to  be  proved,  148 
of  partners,  importance  of  attending  to,  822 
of  company,  regard  must  be  had  to,  822 
scrip  certificates  may  be  transferable  by,  124 

USE  AND  OCCUPATION, 

actions  against  corporations  for,  352,  note  (/) 

USUAL  COURSE  OF  BUSINESS, 

limits  partner's  implied  authority  to  act  for  firm,  286 

USURY,  ,.     ^„  ^^ 

usurious  loan  held  to  constitute  a  partnership,  22,  23 


VALUATION, 

agreements  to  take  share  at  a,  846,  850 

no  sale  where  there  is,  1016 

when  court  will  enforce,  850 
no  right  to  have  a  share  of  deceased  partner,  1046 
action  by  one  partner  against  another  for  amount  of,  1027 
of  unsaleable  property,  1018 
of  shares,  846 

VARIANCE  ,   ,    ,^  ^  -,. 

between  name  of  firm  and  name  used  on  its  behalf,  consequence  ot,  d45, 

346 
between  prospectus  and  company  as  formed,  106 

VARYING 

articles  of  partnership,  821 
company's  deed  of  settlement,  821 
prospectus  sanctioned,  106 

VENDOR 

of  share,  title  to  be  shown  by,  712 

of  shares  entitled  to  be  indemnified  by  beneficial  owner,  730 
See  Sale  of  Shares;  Seller  of  Shares 

VERDICTS 

evidence  of  partnership,  98 

1550 


GENERAL   INDEX.  1213 

VINNIUS, 

his  definition  of  partnership,  3 

VOET, 

his  definition  of  partnership,  3 

VOTING 

at  meetings,  rules  as  to,  548.     See  Meetings 

by  proxy,  549.     See  Proxy 

illegal  agreemfnts  as  to.  548 

as  to  interested  votes,  548 

transfer  to  multiply  votes  not  illegal,  548 

cannot  be  objected  to  by  directors,  702 
under  Companies  act  1862,  p.  5G6 
under  8  &  9  Vict.  c.  16,  p.  557 
as  to  voting  by  husband  of  shareholder,  549 
by  married  women,  549 

WAGES, 

effect  of  paying,  by  a  proportion  of  gross  returns,  25 
See  Profits;  Salary 

WAIVER 

of  clauses  in  partnership  articles,  &c.,  820 

of  clauses  in  companies'  deeds,  821 

of  illegality,  200 

of  right  to  rescind  for  fraud,  &c.,  924 

of  formalities,  128 

as  between  companies  and  shareholders,  130 

as  between  shareliolders  and  creditors,  136 
Sec  Formalities;  Irregularities 

WAR, 

effects  of,  on  the  rights  of  partners,  78 
a  cause  of  dissolution  of  partnership,  232 

WARRANT    OF  ATl'ORNEY, 
given  by  one  partner,  474 

WASHING  COMPANY, 

not  bound  by  bills,  &c.,  of  its  directors,  268 

WATERWORK  COMPANIES, 
shares  in, 

not  within  Mortmain  acts,  673 
not  within  Statute  of  Frauds,  674 
See  Companies  governed  by  8  (&  9  Vict.  c.  16 

WATSON. 

his  definition  of  partnership,  3 

WHALING  VOYAGES, 

contracts  between  persons  engaged  in,  25 

WIDOWS, 

agreements  as  to  annuities  to,  853 

WILLFUL  DEFAULT 

against  executors  of  partners,  1067 
against  partners,  974,  note  (d) 

WILLFUL  TORTS, 

hability  of  partners  for,  299 

WILL, 

partnerships  a\ , 
what  are.  218 

1551 


121-i  GENEEAL   INDEX. 

WILL — continued. 

partnership  at — continued. 

by  continuance  after  expiration  of  articles,  832 
actions  for  dissolution  of,  1039  et  seq. 
injunction  in  cases  of,  996 
dli-ecting  assets  to  be  employed  in  business,  effect  of,  1061 

WINDING  UP, 

of  partnerships,  1089.     See  Dissolution 

how  far  a  dissolved  partnership  continues  for  purposes  of  winding  up,  411 
corroclion  of  register  on  winding  up  company,  171 

WITNESS, 

proof  of  partnership  by,  98 

by  solicitors  of  the  partners,  92,  note  (p) 

WORK  AND  LABOR, 

action  by  one  partner  against  another  for,  1030 

WRITS, 

service  of,  474.    See  Service 

WRITTEN  CONTRACT.    See  Contracts  _ 

when  binding  on  partners  not  named  in,  338 

not  necessary  to  form  a  partnership,  87,  88 

not  necessary  to  convert  joint  property  into  separate,  or  vice  versd,  643,  644 

WRONG  DOERS, 

contribution  amongst,  770 

"552 


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